Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities
Federal RegisterMay 12, 1998
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SUMMARY: This interim final rule implements provisions in section 4432
of the Balanced Budget Act of 1997 related to Medicare payment for
skilled nursing facility services. These include the implementation of
a Medicare prospective payment system for skilled nursing facilities,
consolidated billing, and a number of related changes. The prospective
payment system described in this rule replaces the retrospective
reasonable cost-based system currently utilized by Medicare for payment
of skilled nursing facility services under Part A of the program.
DATES: These regulations are effective July 1, 1998.
Comments will be considered if we receive them at the appropriate
address, as provided below, no later than 5 p.m. on July 13, 1998.
ADDRESSES: Mail an original and 3 copies of written comments to the
following address:
Health Care Financing Administration, Department of Health and Human
Services, Attention: HCFA-1913-IFC, P.O. Box 26688, Baltimore, MD
21207-0488
If you prefer, you may deliver an original and 3 copies of your
written comments to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, D.C. 20201,
or
Room C5-09-26, 7500 Security Boulevard, Baltimore, Maryland 21244-1850.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code HCFA-1913-IFC. 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,
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(phone: (202) 690-7890).
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FOR FURTHER INFORMATION CONTACT:
Laurence Wilson, (410) 786-4603 (for general information). John Davis,
(410) 786-0008 (for information related to the Federal rates).
Dana Burley, (410) 786-4547 (for information related to the case-mix
classification methodology).
Steve Raitzyk, (410) 786-4599 (for information related to the facility-
specific transition payment rates).
Bill Ullman, (410) 786-5667 (for information related to consolidated
billing and related provisions).
SUPPLEMENTARY INFORMATION: To assist readers in referencing sections
contained in this document, we are providing the following table of
contents.
Table of Contents
I. Background
A. Current System for Payment of Skilled Nursing Facility Services
Under Part A of the Medicare Program
B. Requirement of the Balanced Budget Act of 1997 for a Prospective
Payment System for Skilled Nursing Facilities
C. Summary of the Development of the Medicare Prospective Payment
System for Skilled Nursing Facilities
D. Skilled Nursing Facility Prospective Payment System--General
Overview
1. Payment Provisions--Federal Rate
2. Payment Provisions--Transition Period
3. Payment Provisions--Facility-Specific Rate
4. Implementation of the Prospective Payment System (PPS)
E. Consolidated Billing for Skilled Nursing Facilities
II. Prospective Payment System for Skilled Nursing Facilities
A. Federal Payment Rates
1. Cost and Services Covered by the Federal Rates
2. Data Sources Utilized for the Development of the Federal
Rates
a. Cost Report Data
b. Estimate of Part B Payments
c. Hospital Wage Index
d. Case-Mix Indices
e. MEDPAR Case-Mix Analog
(1) Rehabilitation Category
(2) Non-Rehabilitation Categories
(3) Case-Mix Using the Analog
f. Skilled Nursing Facility Market Basket Index
3. Methodology Used for the Calculation of the Federal Rates
a. Per Diem Costs
b. Updating the Data
c. Standardization of Cost Data
d. Computation of National Standardized Payment Rates
B. Design and Methodology for Case-Mix Adjustment of Federal Rates
1. Background on the Resource Utilization Groups (RUGs) Patient
Classification System
2. The RUG-III Classification System
3. Use of RUG-III ``Grouper'' Software
4. Determining the Case-Mix Indices
5. Application of the RUG-III System
6. Use of the Resident Assessment Instrument--Minimum Data Set
(MDS 2.0)
7. Required Schedule for Completing the MDS
8. The Relationship Between Payment and the MDS
9. Assessments and the Transition to the Prospective Payment
System
a. Medicare Beneficiaries Receiving Part A Benefits Admitted
Within the Past 30 Days
b. Medicare Beneficiaries Receiving Part A Benefits Admitted
Over 30 Days Prior
c. Medicare Part A Beneficiaries With Less Than 14 Days of
Medicare Eligibility Remaining
10. Late Assessments
11. The Default Rate
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12. Case-Mix Adjusted Federal Payment Rates
C. Wage Index Adjustment to Federal Rates
D. Updates to the Federal Rates
E. Relationship of RUG-III Classification System to Existing Skilled
Nursing Facility Level of Care Criteria
III. Three-Year Transition Period
A. Determination of Facility-Specific Per Diem Rates
1. Part A Cost Determination
a. Freestanding Skilled Nursing Facilities
(1) Skilled Nursing Facilities Without an Exception for Medical
and Paramedical Education (Sec. 413.30(f)(4)) or a New Provider
Exemption in the Base Year
(2) Skilled Nursing Facilities With an Exception for Medical and
Paramedical Education in the Base Year
(3) Skilled Nursing Facilities With New Provider Exemptions From
the Cost Limits in the Base Year
b. Hospital-Based Skilled Nursing Facilities
(1) Skilled Nursing Facilities Without an Exception for Medical
and Paramedical Education or a New Provider Exemption
(2) Skilled Nursing Facilities With an Exception for Medical and
Paramedical Education in the Base Year
(3) Skilled Nursing Facilities With Exemptions From the Cost
Limits in the Base Year
c. Medicare Low Volume Skilled Nursing Facilities Electing
Prospectively Determined Payment Rate (Fewer Than 1500 Medicare
Days)
(1) Providers Filing HCFA-2540-S-87
(2) Providers Filing HCFA-2540 or HCFA-2552
d. Providers Participating in the Multistate Nursing Home Case-
Mix and Quality Demonstration--Calculation of the Prospective
Payment System Rate
e. Base Period Cost Reports That Are Adjusted for Exception
Amounts or Other Post Settlement Adjustments
B. Determination of the Part B Estimate
C. Calculation of the Facility-Specific Per Diem Rate
D. Computation of the Skilled Nursing Facility Prospective Payment
System Rate During the Transition
IV. The Skilled Nursing Facility Market Basket Index
A. Rebasing and Revising of the Skilled Nursing Facility Market
Basket
1. Background
2. Rebasing and Revising of the Skilled Nursing Facility Market
Basket
B. Use of the Skilled Nursing Facility Market Basket Percentage
1. Facility-Specific Rate Update Factor
a. Short Period in Base Year
b. Short Period in Initial Period
c. Short Period Between Base Year and Initial Period
2. Federal Rate Update Factor
V. Consolidated Billing
A. Background of the Skilled Nursing Facility Consolidated Billing
Provision
B. Skilled Nursing Facility Consolidated Billing Legislation
1. Specific Provisions of the Legislation
2. Types of Services That Are Subject to the Provision
3. Facilities That Are Subject to the Provision
4. Skilled Nursing Facility ``Resident'' Status for Purposes of
This Provision
5. Effects of This Provision
C. Effective Date for Consolidated Billing
VI. Changes in the Regulations
VII. Response to Comments
VIII. Waiver of Proposed Rulemaking
IX. Regulatory Impact Statement
A. Background
B. Impact of This Interim Final Rule
1. Budgetary Impact
2. Impact on Providers and Suppliers
C. Rural Hospital Impact Statement
X. Collection of Information Requirements
Regulations Text
Appendix A--Technical Features of the 1992 Skilled Nursing Facility
Total Cost Market Basket Index
I. Synopsis of Structural Changes Adopted in the Revised and Rebased
1992 Skilled Nursing Facility Total Cost Market Basket
II. Methodology for Developing the Cost Category Weights
III. Price Proxies Used To Measure Cost Category Growth
In addition, because of the many terms to which we refer by
acronym in this rule, we are listing these acronyms and their
corresponding terms in alphabetical order below:
ADLs Activities of daily living
AHEs Average Hourly Earnings
BBA 1997 Balanced Budget Act of 1997
BEA [U.S.] Bureau of Economic Analysis
BLS [U.S.] Bureau of Labor Statistics
CAH Critical access hospital
CFR Code of Federal Regulations
CPI Consumer Price Index
CPI-U Consumer Price Index for All Urban Consumers
CPT [Physicians'] Current Procedural Terminology
ECI Employment Cost Index
FI Fiscal intermediary
HCFA Health Care Financing Administration
HCPCS HCFA Common Procedure Coding System
ICD-9-CM International Classification of Diseases, Ninth Edition,
Clinical Modification
MDS Minimum Data Set
MEDPAR Medicare provider analysis and review file
MSA Metropolitan Statistical Area
NECMA New England County Metropolitan Area
PCE Personal Care Expenditures
PPI Producer Price Index
PPS Prospective payment system
RAI Resident Assessment Instrument
RAPs Resident Assessment Protocol Guidelines
RUG Resource Utilization Group
SNF Skilled nursing facility
STM Staff time measure
I. Background
A. Current System for Payment of Skilled Nursing Facility Services
Under Part A of the Medicare Program
Under the present payment system, Medicare skilled nursing facility
(SNF) services are paid according to a retrospective, reasonable cost-
based system. Under Medicare payment principles set forth in section
1861 of the Social Security Act (the Act) and part 413 of the Code of
Federal Regulations (CFR), SNFs receive payment for three major
categories of costs: routine costs, ancillary costs, and capital-
related costs.
In general, routine costs are the costs of those services included
by the provider in a daily service charge. Routine service costs
include regular room, dietary, nursing services, minor medical
supplies, medical social services, psychiatric social services, and the
use of certain facilities and equipment for which a separate charge is
not made. Ancillary costs are costs for specialized services, such as
therapy, drugs, and laboratory services, that are directly identifiable
to individual patients. Capital-related costs include the costs of
land, building, equipment, and the interest incurred in financing the
acquisition of such items.
Under Medicare rules, the reasonable costs of ancillary services
and capital-related expenses are paid in full. Routine operating costs
are also paid on a reasonable cost basis, subject to per diem limits.
Sections 1861(v)(1) and 1888 of the Act authorize the Secretary to set
limits on the allowable routine costs incurred by an SNF.
In addition, section 1888(d) of the Act gives low Medicare volume
SNFs the option of receiving a single prospectively determined payment
rate for routine operating and capital-related costs in lieu of the
normal reasonable cost reimbursement method. A SNF may elect this
payment method only if it had fewer than 1,500 Medicare covered
inpatient days in its immediately preceding cost reporting period. An
SNF's prospective payment rate under section 1888(d) of the Act,
excluding capital-related costs, cannot exceed its routine service cost
limits. Under this payment method, ancillary costs are still a pass-
through cost.
B. Requirement of the Balanced Budget Act of 1997 for a Prospective
Payment System for Skilled Nursing Facilities
Section 4432(a) of the Balanced Budget Act of 1997 (BBA 1997)
(Public Law 105-33), enacted on August 5, 1997, amended section 1888 of
the Act by adding subsection (e). This
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subsection requires implementation of a Medicare SNF prospective
payment system (PPS) for all SNFs for cost reporting periods beginning
on or after July 1, 1998. Under the PPS, SNFs will be paid under a PPS
applicable to all covered SNF services. These payment rates will
encompass all costs of furnishing covered skilled nursing services
(that is, routine, ancillary, and capital-related costs) other than
costs associated with operating approved educational activities.
Covered SNF services include posthospital SNF services for which
benefits are provided under Part A (the hospital insurance program) and
all items and services (other than services excluded by statute) for
which, prior to July 1, 1998, payment may be made under Part B (the
supplementary medical insurance program) and which are furnished to SNF
residents during a Part A covered stay.
Section 1888(e)(4) of the Act provides the basis for the
establishment of the per diem Federal payment rates applied under the
PPS. It sets forth the formula for establishing the rates as well as
the data on which they are based. In addition, this section requires
adjustments to such rates based on geographic variation and case-mix
and prescribes the methodology for updating the rates in future years.
Section 1888(e)(2) sets forth a requirement applicable to most
providers for a transition phase covering the first three cost
reporting periods under the PPS. During this transition phase, SNFs
will receive a payment rate comprised of a blend between the Federal
rate and a facility-specific rate based on historical costs. Section
1888(e)(3) prescribes the methodology for computing the facility-
specific rates.
In addition to the payment methodology, section 4432(a) of the BBA
1997 added several other provisions to the Act related to the
implementation and administration of the PPS.
Section 1888(e)(8) prohibits judicial or administrative review on
matters relating to the establishment of the Federal rates. This
includes the methodology used in the computation of the Federal rates,
the case-mix methodology, and the development and application of the
wage index. This limitation on judicial and administrative review also
extends to the establishment of the facility-specific rates, except the
determinations of reasonable cost in the fiscal year 1995 cost
reporting period used as the basis for these rates.
In addition, section 1888(e)(7) requires the application of the PPS
to extended care services furnished in hospital swing bed units.
However, this requirement is to be implemented no earlier than cost
reporting periods beginning on July 1, 1999 and no later than for cost
reporting periods beginning in the 12-month period starting on July 1,
2001. Accordingly, we are not revising the payment regulations for
swing-bed hospitals (42 CFR 413.114) at this time, but will do so at a
later date.
Finally, section 4432(c) of the BBA 1997 requires the Secretary to
establish a medical review process to examine the impact of the PPS,
consolidated billing, and other related changes set forth in this rule
on the quality of SNF services provided to Medicare beneficiaries. This
medical review process will place a particular emphasis on the quality
of non-routine covered ancillary and physician services.
C. Summary of the Development of the Medicare Prospective Payment
System for Skilled Nursing Facilities
The prospective payment system described in the following sections
is the culmination of substantial research efforts beginning as early
as the 1970s, focusing on the areas of nursing home payment and
quality. In addition, it is based on a foundation of knowledge and work
by a number of States that have developed and implemented similar
payment methodologies for their Medicaid nursing home payment systems.
Over the last 20 years, approximately 25 nursing home case-mix payment
systems have been implemented by such States as New York, Ohio, West
Virginia, and Texas.
Building on earlier research, the Health Care Financing
Administration (HCFA) funded the development of the Multistate Nursing
Home Case-Mix and Quality Demonstration in 1989. The purpose of this
project was to design, implement, and evaluate a Medicare nursing home
prospective payment and quality monitoring system across several
States. These States were Kansas, Maine, Mississippi, New York, South
Dakota, and Texas. The 3-year demonstration was implemented in 1995.
The current focus in the development of State and Federal payment
systems for nursing home care rests on explicit recognition of the
differences among residents, particularly in the utilization of
resources. Recognition of these differences ensures that payment levels
are adequate to support quality and access to care, especially for more
costly resource intensive patients. In a case-mix adjusted payment
system, the amount of payment given to the nursing home for care of a
resident is tied to the intensity of resource use (for example, hours
of nursing or therapy time needed per day) and/or other relevant
factors (for example, requirement for a ventilator). The focus of the
demonstration was on the development and testing of such a case-mix
PPS.
A case-mix system measures the intensity of care and services
required for each resident and then translates it into a payment level.
As discussed above, a number of States do have case-mix prospective
payment systems for their Medicaid nursing home benefits. However, most
of these payment systems were not readily transferrable to Medicare due
to the relative differences in the resident populations served by each
program. While naturally there is overlap, Medicare generally serves a
more postacute resident population while Medicaid generally serves a
longer-term custodial care population.
As a result of these differences, the development phase of the
Multistate demonstration was devoted to developing a case-mix
classification system appropriate for the Medicare population. The
demonstration, like the national PPS set forth in this rule, utilized
information from the Minimum Data Set (MDS) resident assessment
instrument to classify residents into resource utilization groups
(RUGs), which account for the relative resource use of different
patient types. This classification system and its relationship to the
MDS and the PPS are described in detail elsewhere in this rule.
D. Skilled Nursing Facility Prospective Payment--General Overview
As described above, the BBA 1997 requires implementation of a
Medicare SNF PPS for cost reporting periods beginning on or after July
1, 1998. Under the PPS, SNFs are no longer paid in accordance with the
present reasonable cost-based system but rather through per diem
prospective case-mix adjusted payment rates applicable to all covered
SNF services. These payment rates cover all the costs of furnishing
covered skilled nursing services (that is, routine, ancillary, and
capital-related costs) other than costs associated with operating
approved educational activities. Covered SNF services include
posthospital SNF services for which benefits are provided under Part A
and all items and services for which, prior to July 1, 1998, payment
had been made under Part B (other than physician and certain other
services specifically excluded under the BBA 1997) but furnished to SNF
residents during a Part A covered stay.
[[Page 26255]]
1. Payment Provisions--Federal Rate
The PPS utilizes per diem Federal payment rates based on mean SNF
costs in a base year updated for inflation to the first effective
period of the system. We develop the Federal payment rates using
allowable costs from hospital-based and freestanding SNF cost reports
for reporting periods beginning in fiscal year 1995. The data used in
developing the Federal rates also incorporate an estimate of the
amounts payable under Part B for covered SNF services furnished during
fiscal year 1995 to individuals who were residents of a facility and
receiving Part A covered services. In developing the rates, we update
costs to the first effective year of the PPS (15-month period beginning
July 1, 1998) using a SNF market basket index, and standardize for
facility differences in case-mix and for geographic variations in
wages. Providers that received ``new provider'' exemptions from the
routine cost limits are excluded from the data base used to compute the
Federal payment rates. In addition, costs related to payments for
exceptions to the routine cost limits are excluded from the data base
used to compute the Federal payment rates. In accordance with the
formula prescribed in the BBA 1997, we set the Federal rates at a level
equal to a weighted mean of freestanding costs plus 50 percent of the
difference between the freestanding mean and a weighted mean of all SNF
costs (hospital-based and freestanding) combined. We compute and apply
separately payment rates for facilities located in urban and rural
areas.
The Federal rate also incorporates adjustments to account for
facility case-mix using a resident classification system that accounts
for the relative resource utilization of different patient types. This
classification system, Version III of the Resource Utilization Groups
(RUGs-III), utilizes resident assessment data (from the Minimum Data
Set or MDS) completed by SNFs to assign residents into one of 44
groups. SNFs complete these assessments according to an assessment
schedule specifically designed for Medicare payment (that is, on the
5th, 14th, 30th, 60th, and 90th days after admission to the SNF). For
Medicare billing purposes, there are revenue codes associated with each
of the 44 RUG-III groups, and each assessment applies to specific days
within a resident's SNF stay. SNFs that fail to perform assessments
timely are paid a default payment for the days of a patient's care for
which they are not in compliance with this schedule. In addition, we
adjust the portion of the Federal rate attributable to wage-related
costs by a wage index.
For the initial period of the PPS, beginning on July 1, 1998 and
ending on September 30, 1999, the payment rates are contained in this
interim final rule. For each succeeding fiscal year, we will publish
the rates in the Federal Register before August 1 of the year preceding
the affected Federal fiscal year. For fiscal years 2000 through 2002,
we will increase the rates by a factor equal to the SNF market basket
index amount minus 1 percentage point. For subsequent fiscal years, we
will increase the rates by the applicable SNF market basket index
amount.
2. Payment Provisions--Transition Period
Beginning with a provider's first cost reporting period beginning
on or after July 1, 1998, there is a transition period covering three
cost reporting periods. During this transition phase, SNFs receive a
payment rate comprised of a blend between the Federal rate and a
facility-specific rate based on each facility's fiscal year 1995 cost
report. We exclude SNFs that received their first payment from Medicare
on or after October 1, 1995, from the transition period, and we make
payment according to the Federal rates only.
For SNFs that qualify for the transition, the composition of the
blended rate varies depending on the year of the transition. For the
first cost reporting period beginning on or after July 1, 1998, we make
payment based on 75 percent of the facility-specific rate and 25
percent of the Federal rate. In the next cost reporting period, the
rate consists of 50 percent of the facility-specific rate and 50
percent of the Federal rate. In the following cost reporting period,
the rate consists of 25 percent of the facility-specific rate and 75
percent of the Federal rate. For all subsequent cost reporting periods,
we base payment entirely on the Federal rate.
3. Payment Provisions--Facility-Specific Rate
We compute the facility-specific payment rate utilized for the
transition using the allowable costs of SNF services for cost reporting
periods beginning in fiscal year 1995 (cost reporting periods beginning
on or after October 1, 1994 and before October 1, 1995). Included in
the facility-specific per diem rate is an estimate of the amount
payable under Part B for covered SNF services furnished during fiscal
year 1995 to individuals who were residents of the facility and
receiving Part A covered services. In contrast to the Federal rates,
the facility-specific rate includes amounts paid to SNFs for exceptions
to the routine cost limits. In addition, we also take into account
``new provider'' exemptions from the routine cost limits but only to
the extent that routine costs do not exceed 150 percent of the routine
cost limit.
We update the facility-specific rate for each cost reporting period
after fiscal year 1995 to the first cost reporting period beginning on
or after July 1, 1998 (the initial period of the PPS) by a factor equal
to the SNF market basket percentage increase minus 1 percentage point.
For the fiscal years 1998 and 1999, we update this rate by a factor
equal to the SNF market basket index amount minus 1 percentage point,
and, for each subsequent year, we update it by the applicable SNF
market basket index amount.
4. Implementation of the Prospective Payment System (PPS)
As discussed above, the PPS is effective for cost reporting periods
beginning on or after July 1, 1998. This is in contrast to the
consolidated billing provision, which is effective for items and
services furnished on or after July 1, 1998. Accordingly, we will
require a number of SNFs to implement consolidated billing prior to
migrating to the PPS.
E. Consolidated Billing for Skilled Nursing Facilities
Section 4432(b) of the BBA 1997 sets forth a consolidated billing
requirement applicable to all SNFs providing Medicare services. SNF
Consolidated Billing is a comprehensive billing requirement (similar to
the one that has been in effect for inpatient hospital services for
well over a decade), under which the SNF itself is responsible for
billing Medicare for virtually all of the services that its residents
receive. As with hospital bundling, the SNF consolidated billing
requirement does not apply to the services of physicians and certain
other types of medical practitioners. In a related provision, section
4432(b)(3) of the BBA 1997 requires the use of fee schedules and
uniform coding specified by the Secretary for SNF Part B bills. These
provisions are effective for services furnished on or after July 1,
1998.
II. Prospective Payment System for Skilled Nursing Facilities
A. Federal Payment Rates
This interim final rule with comment period sets forth a schedule
of Federal prospective payment rates applicable to Medicare Part A SNF
services for cost
[[Page 26256]]
reporting periods beginning on or after July 1, 1998. This schedule
incorporates per diem Federal rates designed to provide payment for all
the costs of services furnished to a Medicare resident of an SNF. This
section describes the components of the Federal rates and the
methodology and data used to compute them.
1. Cost and Services Covered by the Federal Rates
The Federal rates apply to all costs (that is, routine, ancillary,
and capital-related costs) of covered skilled nursing services other
than costs associated with operating approved educational activities as
defined in 42 CFR 413.85. Under section 1888(e)(2) of the Act, covered
SNF services include posthospital SNF services for which benefits are
provided under Part A (the hospital insurance program) and all items
and services (other than services excluded by statute) for which, prior
to July 1, 1998, payment may be made under Part B (the supplementary
medical insurance program) and which are furnished to SNF residents
during a Part A covered stay. (These excluded service categories are
discussed in greater detail in section V.B.2., in the context of the
SNF Consolidated Billing provision.)
2. Data Sources Utilized for the Development of the Federal Rates
The methodology utilized by HCFA in developing the Federal rates
combines a number of data sources. These sources include cost report
data, claims data, case-mix indices, a wage index, and a market basket
inflation index. This section describes each of these data sources
while the following section describes the methodology that combines
them to produce the Federal rates.
a. Cost report data. In accordance with sections 1888(e)(3)(A)(i)
and (e)(4) of the Act, the primary data source for developing the cost
basis of the Federal rates was the cost reports for hospital-based and
freestanding SNFs for reporting periods beginning in fiscal year 1995
(that is, beginning on or after October 1, 1994 through September 30,
1995). Only those cost reports for periods of at least 10 months but
not more than 13 months were included in the data base. We excluded
shorter and longer periods on the basis that such data may not be
reflective of a normal cost reporting period and, therefore, may
distort the rate computation.
In accordance with section 1888(e)(4)(A) of the Act, providers that
were exempted from the limits in the base year under Sec. 413.30(e)(2)
were excluded from the data base to compute the Federal rates; in
addition, allowable costs related to exceptions payments were excluded.
Finally, costs related to approved educational activities were excluded
from the data base.
In calculating the Federal rates, we utilized fiscal year 1995 cost
report data, including both settled and as-submitted cost reports. In
accordance with section 1888(e)(4)(A) of the Act, adjustment factors
were applied separately to routine and ancillary costs from as-
submitted cost reports to make the data reflect the average adjustments
that would result from the cost report settlement process. Routine
costs were adjusted downward by 1.31 percent, and ancillary costs were
adjusted downward by 3.26 percent.
These adjustment factors were developed through comparisons of cost
data from as-submitted and settled cost reports for providers contained
in the data base from 1995. The factors represent the percent change of
cost elements used in the PPS rate setting methodology between
submission and settlement of the cost reports. These factors were
validated by examining the relationship between as-submitted and
settled cost reports for SNF cost reports beginning in the three
preceding Federal fiscal years (that is, 1992, 1993, and 1994) as well.
This comparison showed an overall consistency in the relationship
between as-submitted and settled cost reports for the SNF cost elements
utilized in the PPS rate development methodology.
b. Estimate of Part B payments. Section 1888(e)(4)(A)(ii) of the
Act, as added by the BBA 1997, requires that in developing the Federal
rates, the Secretary estimate the amounts that would be payable under
Part B for covered SNF services furnished to SNF residents.
Accordingly, it was necessary to examine the Part B allowable charges
(including coinsurance) associated with the SNFs contained in the cost
report data base. To estimate the Part B allowable charges, we matched
100 percent of the Medicare Part B SNF claims associated with Part A
covered SNF stays to the SNF cost reports described above. The matched
Part B allowable charges were incorporated at a facility level by the
appropriate cost report cost center (for example, laboratory services,
medical supplies) with the cost report data.
c. Hospital wage index. Section 1888(e)(4) requires that we both
standardize the Federal rates and provide for appropriate adjustments
to account for area wage differences ``using an appropriate wage index
as determined by the Secretary.'' We cannot use a wage index based on
SNF wage data because the industry-specific data necessary to compute a
wage index for SNFs are not yet available. However, under section 106
of the Social Security Act Amendments of 1994 (Public Law 103-432),
HCFA was required to begin collecting data no later than October 31,
1995, on employee compensation and paid hours of employment in SNFs for
the purpose of constructing an SNF wage index adjustment. Until this
data collection effort is completed and the data are analyzed, we
believe that the hospital wage data provide the best available measure
of comparable wages that would also be paid by SNFs. We believe that
the use of the hospital wage data results in an appropriate adjustment
to the labor portion of the costs based on an appropriate wage index as
required under section 1888(e) of the Act.
For the rates effective with this rule, we are using wage index
values that are based on hospital wage data from cost reporting periods
beginning in fiscal year 1994--the most recent hospital wage data in
effect before the effective date of this rule (see Table 2.I).
Accordingly, the wage index values used in this rule are based on the
same wage data as used to compute the FY 1998 wage index values for the
hospital PPS.
d. Case-mix indices. As discussed in section I, section 1888(e)(4)
of the Act requires us to make adjustments to the Federal rates to
account for the relative resource use of different patient types (that
is, case-mix). In addition, the law requires us to standardize the cost
data used in developing the Federal rates for case-mix.
The goal of a case-mix payment system is to measure the intensity
of care and services required for each patient and translate it into an
appropriate payment level. Accordingly, in making this adjustment, the
Federal rates will incorporate a patient classification system based on
intensity of resource use with corresponding payment weights.
As discussed previously, the patient classification system utilized
under this PPS is RUG-III. RUG-III, a 44-group patient classification
system, provides the basis for the case-mix payment indices used both
for standardization of the Federal rates and subsequently to establish
the case-mix adjustments to the rates for patients with different
service use. These indices reflect the weight or value of each of the
44 RUG-III groups relative to all the groups. A full discussion of the
design and structure of RUG-III is presented later in this section.
These payment indices are
[[Page 26257]]
based on staff time measure (STM) studies conducted in 1995 and 1997
that measured the nursing and therapy staff time required to care for
groups of residents. The STM is based on a 24-hour period for nursing
and therapy services. Accordingly, there are separate case-mix payment
indices for nursing and related services and for therapy services.
The STM studies were conducted in 12 States across 154 SNFs and
2,900 residents. These States were Kansas, Maine, Mississippi, South
Dakota, Texas, California, Colorado, Maryland, Florida, Ohio,
Washington, and New York. The study utilized a stratified sample of
SNFs, including both freestanding and hospital-based SNFs and those
with different care delivery models. The resulting indices were
adjusted to account for the relative salary differences between
different types of nursing staff (registered nurses, licensed practical
nurses, and aides) and the different therapy disciplines (occupational
therapy, physical therapy, and speech pathology). The adjustment to the
nursing index for relative salary differences in nursing staff was
based on data from the American Health Care Association's 1995 study of
national nursing home salaries. The adjustment to the therapy index for
relative salary differences among disciplines was based on data from
several different sources. These sources were surveys from the American
Health Care Association, the National Association for the Support of
Long-Term Care, the Bureau of Labor Statistics, the American
Rehabilitation Association, the University of Texas, Mutual of Omaha,
and the Maryland Health Cost Review Commission. They were used in
HCFA's ``best estimate'' approach in the development of rehabilitation
therapy salary equivalency guidelines. The schedule detailing the
national case-mix payment indices is presented later in this section
(see Tables 2.E and 2.F).
e. MEDPAR case-mix analog. Section 1888(e)(4)(C) requires that the
data used in developing the Federal payment rates be standardized to
remove the effects of geographic variation in case-mix. Standardization
ensures that the aggregate impact of the case-mix adjustments on the
Federal rates does not alter the aggregate payments that would occur in
the absence of such an adjustment. In order to fulfill this
requirement, it is necessary to have data on the average case-mix of
each SNF in our data base for its cost reporting period beginning in
fiscal year 1995. Because a national source of MDS derived case-mix
data does not exist for this period, it was necessary to utilize
existing data sources. Accordingly, to provide national case-mix data
on SNFs in our data base, we constructed a crosswalk between the RUG-
III categories and the data from all Medicare claims in our Medicare
Provider Analysis and Review file (MEDPAR).
The MEDPAR file is an analytical file created from Part A Medicare
hospital and SNF claims and maintained by HCFA. These claims are the
basis of the interim payments made by fiscal intermediaries and contain
information on SNF stays paid for by Medicare Part A nationwide.
Although Medicare claims information does not include all the data
elements necessary to classify SNF patients exactly as they are in RUG-
III, it does contain sufficient information to assign Medicare SNF
patients to RUG-III categories at a general level. Classification into
a RUG-III category is based on detailed clinical information from the
patient assessment performed in the SNF. The claims in the MEDPAR file
do not have the level of clinical detail required for classification
into the RUG-III categories but do have basic clinical information that
has been required on the claim for payment in the cost-based Medicare
payment system. By using the clinical information in the MEDPAR file to
crosswalk to the RUG-III grouping specifications, we were able to model
how the national Medicare SNF population will classify into RUG-III
categories. The model is referred to as the ``MEDPAR analog.'' The
value of the MEDPAR analog is that it provides a means to use available
data to examine the case-mix of Medicare SNF patients nationally.
In order to examine case-mix based on the MEDPAR file data, it was
necessary to recognize certain limitations of this file, identify where
crosswalks could be made between the data contained in the MEDPAR file
and that needed to assign an SNF patient to a RUG-III group, and
establish proxy criteria where feasible to make more case
classifications possible.
One limitation of the analog results from the Medicare coverage
rules for physical, occupational, and speech rehabilitation therapy
services. Rehabilitation therapy provided in the SNF is covered under
Part A (and thereby will have claims data in MEDPAR), unless the
services are provided by an independent agency, in which case they may
be billed under Part B (although our analysis of Part B supplier bills
indicated relatively few rehabilitation therapy services being billed
in this way). In addition, a small number of facilities do not detail
rehabilitation therapy charges in their claims. For these reasons, the
MEDPAR proxy may not be a complete record of all the services a patient
in the SNF may receive during the course of a beneficiary's stay.
In spite of these limitations, MEDPAR is a reasonable tool to use
in approximating the RUG-III categories related to Medicare SNF claims
and appropriate for use in rate standardization. The file contains ICD-
9-CM (International Classification of Diseases, Ninth Edition, Clinical
Modification) diagnosis and procedure codes that provide a partial
clinical profile of the patient supplemented by lengths of stay,
revenue codes that represent types of services provided during each
nursing home stay, and limited admission and discharge information. In
addition, some of the facilities report rehabilitation charge
information, making it possible for us to approximate frequency and
duration of rehabilitation therapies, as well as to directly reproduce
which discipline provided services.
The analog was first created in 1993, using the 1990 MEDPAR SNF
file and an earlier version of the Minimum Data Set (MDS), the MDS+. We
updated that work for the national implementation analyses, using
instead the 1997 MEDPAR SNF file and the MDS 2.0. As stated above, the
MDS 2.0 collects extensive patient information that includes
demographic information, diagnoses, medication use, nursing
rehabilitation services, activities of daily living (ADL) capabilities,
and minutes per day of rehabilitative services provided. This
information is the basis for assignment to a particular RUG-III group.
Thus, in the creation of the MEDPAR analog, MDS+ (and now, MDS 2.0)
definitions formed the key against which MEDPAR diagnosis and revenue
service codes were matched.
The RUG-III classification system is a hierarchy of major patient
types, organized into seven major categories. The categories are
Rehabilitation, Extensive Services, Special Care, Clinically Complex,
Impaired Cognition, Behavior Problems, and Reduced Physical Function.
Each of these categories is further differentiated to yield the 44
specific patient groups used for payment.
The categories and groups within them are based on the research
findings of staff time measurement studies performed in 1990, 1995, and
1997, described in detail below. Through analyses of the patient
characteristics recorded on the MDS and the staff time associated with
caring for patients in nursing homes, clinical criteria were identified
that were predictive of resource use, and categories were
[[Page 26258]]
formed that would group patients according to resource use. The
criteria for each category were derived from the actual staff time
measurement study data.
The information contained in the MEDPAR file is not adequate to
enable differentiation to the 44 groups, however. Therefore, the analog
classifies patients only to the category level.
There are seven RUG-III categories: Rehabilitation, Extensive
Services, Special Services, Clinically Complex, Impaired Cognition,
Behavior, and Physical. The Rehabilitation category has five sub-
categories, based on the number of minutes therapy is provided and the
number of disciplines providing service. The sub-categories are: Ultra
High, Very High, High, Medium, and Low. Using the crosswalk model, we
were able to classify the claims in the MEDPAR file into the five
rehabilitation therapy sub-categories and four of the remaining six
categories: Extensive Services, Special Services, Clinically Complex,
and Impaired Cognition. There were no available data elements in the
MEDPAR to crosswalk for classification into the Behavior or Physical
categories.
(1) Rehabilitation category. This is the most complex RUG-III
category to crosswalk using the MEDPAR data base. A patient classifies
into the Rehabilitation category based on the minutes per week of
rehabilitation therapy services received. We also considered whether
more than one of the rehabilitation disciplines provided services.
MEDPAR data do not include minutes of service, but do reflect types of
service provided. We, therefore, used charges as a proxy for minutes in
approximating the amounts of service each beneficiary received. Since
service patterns had to be approximated using ranges of rehabilitation
therapy charges, great attention was paid to developing decision rules
that would yield the most accurate description possible using Medicare
claims. In addition, there are five levels of intensity within the
Rehabilitation category. Using research study findings (Marsteller,
Jill A. and Korbin Liu, ``High End Therapy Patients: How Many and How
Much?'' Washington, DC, The Urban Institute, May 1994) and consultation
with rehabilitation professionals, upper and lower charge limits were
set to create groupings like each of the five RUG-III Rehabilitation
categories.
As previously mentioned, nursing home case-mix is not a direct
function of diagnosis. Diagnosis obviously has a role in determining
what services a patient receives, but it is the services themselves,
with the staff time required to provide them, that determine case-mix
in nursing homes. Thus, for the Rehabilitation categories, the RUG-III
system uses measures of staff time and service frequency, variety, and
duration to classify patients. The criteria are in the form of minimum
numbers of minutes of therapy per day or per week, minimum frequencies
of therapy sessions over a week, and minimum numbers of therapy
disciplines used per patient. While the MEDPAR analog can directly
reproduce the variety of therapy given, frequency and duration can only
be approximated using Part A covered charges for skilled therapy
thought to be commensurate with certain patterns of service.
The five Rehabilitation sub-categories for the MEDPAR analog were
determined using ranges of covered charges per day to approximate the
RUG-III criteria. The ranges of covered charges used to classify the
MEDPAR cases were based on an average charge of $300 per day for
rehabilitation services. This amount is based on the covered charges
for rehabilitation therapy in the MEDPAR file. To group cases using the
MEDPAR file, the following ranges of covered charges were used: the Low
Rehabilitation sub-category ranges from $150 per day and below in any
combination of types of skilled therapy; the Medium Rehabilitation sub-
category ranges from $150 to $199 per day in any combination of
therapies; the High Rehabilitation sub-category ranges from $200 to
$299 per day in any combination of therapies; the Very High
Rehabilitation sub-category ranges from $300 to $399 per day in any
combination of therapies (or $400 per day and above if only one
therapy); and the Ultra High Rehabilitation sub-category range
encompasses any case with covered charges higher than $400 per day in
at least two of the three therapies. Refer to Table 2.C for comparison
of these charge ranges to the number of minutes per day and per week
required by the RUG-III system.
We set a threshold at $1,000 of covered charges for rehabilitation
therapy services as a minimum for classification into any of the
rehabilitation sub-categories. We based this on our finding, based on
claims in the National Claims History file, that $400 is a common
charge for an initial evaluation and $250 is a common charge for
treatment by licensed therapists. Thus, we determined this threshold
amount as representative of patients who received an evaluation by a
professional rehabilitative therapist but no substantial course of
rehabilitative therapy. That is, claims for patients with total therapy
charges less than $1,000 were identified as having received an initial
evaluation to determine the need for therapy but generally received no
more than 1 week of rehabilitative therapy services.
Using the MEDPAR file, there was no way to approximate the nursing
rehabilitation component of the RUG-III Low Rehabilitation sub-
category. It was possible, however, to model rehabilitative therapy (of
less than 5 days per week) using therapy charges that parallel such a
pattern of treatment.
The Ultra High Rehabilitation sub-category is intended to apply
only to the most complex cases requiring rehabilitative therapy well
above the average amount of service time. This translates into higher
charges for therapy services, both because treatment is more frequent
and complex, and because length of stay is longer than for other
skilled rehabilitation groups. In line with the intended complexity of
this classification group, the lowest charge that the Ultra High sub-
category includes is $400 per day in at least two of the three
therapies.
The RUG-III criteria for Ultra High Rehabilitation are:
Two of the three rehabilitation therapy disciplines are
represented.
At least 720 minutes of treatment per week across the
three disciplines.
One discipline providing services at least 5 days per
week.
The remaining three sub-categories, Very High, High, and Medium
Rehabilitation are not driven by a specific number of disciplines
represented. All three require at least 5 days per week of skilled
rehabilitative therapy, but they are split according to weekly
treatment time. The Very High cases must be receiving 500 minutes per
week and must be receiving at least one of the disciplines all 5 days;
any additional disciplines will count toward the total time, but no
other disciplines are required for assignment to this sub-category.
Similarly, those in the High sub-category must be receiving a minimum
of 325 minutes per week and this time must include one of the
rehabilitation disciplines being provided daily (at least 5 days per
week). Cases in the Medium sub-category must be receiving at least 150
minutes of skilled rehabilitation in any combination of disciplines
over the minimum 5 days (or five 30-minute sessions).
(2) Non-rehabilitation categories. As stated above, MEDPAR contains
ICD-9-CM codes as the variables describing patient diagnoses and
procedures. This numerical coding system is used by hospitals to report
patient information,
[[Page 26259]]
and nursing homes use these codes on a more limited basis for
reporting. The MDS 2.0 has many of the most prevalent diagnoses found
in this patient population listed for check-off by the nurse performing
the assessment, with a section elsewhere on the form available to write
in any relevant additional ICD-9-CM codes. The analog for the non-
rehabilitation categories was created by matching the ICD-9-CM codes in
the MEDPAR file to as much of the specific clinical criteria on the MDS
2.0 used to classify residents into the Extensive Services, Special
Care, Clinically Complex, and Impaired Cognition categories.
Certain RUG-III criteria could not be satisfactorily coded by an
ICD-9-CM code. Although we could capture the clinical characteristics
of the patients, many of the items used to assign patients to specific
RUG-III groups are not included in the ICD-9-CM coding scheme. In the
Clinically Complex category, for example, the number of physician
visits or order changes is a qualifying factor that cannot be captured
by an ICD-9-CM code, and will not be reported in the MEDPAR file.
Similarly, we could not capture the patient's ADL capabilities.
For the lower categories, Impaired Cognition, Behavior Only, and
Physical Function Reduced, our ability to match the MDS 2.0 items to
those likely to be reported on the MEDPAR was greatly diminished. We
were able to identify a few codes with which to group some of the cases
that would fall into the Cognitively Impaired category, but there were
no ICD-9-CM codes that describe the patients who meet the criteria for
the remaining two categories. Therefore, the analog only groups
patients into the top five categories, leaving all other cases as
unclassified.
(3) Case-mix using the analog. As explained above, in the RUG-III
system, the case-mix index is a function of the distribution of
residents in each of the categories, further detailed across the ADL
index, and then by service counts, depression, or nursing
rehabilitation services. ADLs, nursing rehabilitation, depression, and
service counts could not be modeled using MEDPAR. For the analog, the
nursing and nursing/therapy weights could not be applied to the second
and third levels of the RUG-III system. In the Rehabilitation category,
weights for the five sub-categories were combined.
f. Skilled Nursing Facility market basket index. Section 1888(e)(4)
of the Act requires the Secretary to establish an 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. The SNF
market basket index is used to develop the Federal rates and also to
update the Federal rates on an annual basis beginning in fiscal year
2000. We have developed an SNF market basket index that consists of the
most commonly used cost categories for SNF routine services, ancillary
services, and capital-related expenses. A complete discussion
concerning the design and application of the SNF market basket index
and the factors used in developing the payment rates is presented in
section IV of this rule.
3. Methodology Used for the Calculation of the Federal Rates
The methodology used to compute the per diem standardized Federal
rates was a multi-step process combining each of the data sources
described above. This section details each of these steps. The schedule
of Federal rates (Tables 2.G and 2.H) that results from this
methodology is presented later in this section.
a. Per diem costs. In developing the per diem costs of SNFs, the
cost data (including the estimate of Part B costs) for each facility
are separated in components based on their relationship to the case-mix
indices described above. This facilitates both the standardization of
costs for case-mix and, similarly, the application of appropriate case-
mix adjustment to the Federal rates. Costs related to nursing
(excluding nurse management) and social services salaries (including
benefits) and total costs (after allocation) of non-therapy ancillary
services are grouped in the component related to the nursing index. Our
analysis of patient level charges for these non-therapy ancillary
services indicates a correlation between the RUG-III classification
system and these services.
Occupational, physical, and speech therapy costs (after allocation)
are grouped in the component related to the therapy index. The majority
of SNF therapy costs are included in this therapy component of the per
diem rate. As can be seen in the schedule of rates presented in Tables
2.E and 2.F, the therapy component of the per diem rates is only
applicable to the 14 RUG-III therapy groups. However, through our
analysis of Medicare claims and other data, we observed a low level of
therapy services being utilized by patients that would not be
classified into a RUG-III therapy group. These therapy services would
include evaluations for rehabilitation in one or more of the therapy
disciplines. Therefore, in order to provide more appropriate payment
levels in the non-therapy RUG-III groups, we estimated therapy costs in
our data base associated with non-therapy RUG-III groups. These costs
were grouped into the non-case-mix component of costs but, as can be
seen in the rate schedule, are only applicable to the non-therapy RUG
III groups.
This estimate was determined using the percentage of therapy
charges by discipline for each facility in our data base associated
with the non-therapy RUG-III RUG categories as determined by the MEDPAR
Analog. This percentage was applied by discipline to the therapy costs
in each facility's cost report data. The results of this calculation
are presented in Tables 2.A and 2.B. All other costs are grouped in the
non-case-mix related component.
For each facility in the data base, components are converted to a
per diem by dividing the costs by Medicare days. For the therapy
component, costs are divided by the number of Medicare days related to
patients receiving therapy. For the remaining components, costs are
divided by total Medicare days. For each component of cost, an outlier
elimination process is performed to eliminate aberrant values.
Facilities with per diem amounts greater than three standard deviations
from the geometric mean are determined to be outliers and are
eliminated from the calculation of the per diem cost for that
component.
As required by section 1888(e)(4)(E)(i) of the Act, all costs are
updated from the base year to the initial period of the PPS (that is,
the 15-month period beginning July 1, 1998 and ending September 30,
1999) using the SNF market basket index described in section IV of this
rule (see Tables 4.D. and 4.E). As required by the statute, this update
is determined using the annual SNF market basket percentage minus 1
percentage point.
b. Updating the data. The SNF market basket index is used to adjust
each per diem amount forward to reflect cost increases occurring
between the midpoint of the cost reporting period represented in the
data and the midpoint of the initial period (beginning July 1, 1998 and
ending September 30, 1999) to which the payment rates apply. In
accordance with section 1888(e)(4)(B) of the Act, the cost data are
updated for each year between the cost reporting period and the initial
period by a factor equivalent to the annual market basket index
percentage minus 1 percentage point.
c. Standardization of cost data. Section 1888(e)(4)(C) of the Act
requires that the Secretary standardize the updated cost data for each
facility for the effects of case-mix and geographic
[[Page 26260]]
differences in wage levels. In order to standardize for wage
differences, the proportion of labor related and non-labor related
components of SNF costs must be identified. These proportions are based
on the relative importance of the different components of the SNF
market basket index (see Table 4.C). Accordingly, the labor-related
portion of costs is 75.888 percent of costs while the non-labor portion
is 24.112 percent. Costs are standardized for geographic differences in
wage levels using the hospital wage index (described earlier in this
section).
To standardize the cost data for the effects of case-mix, we used
the MEDPAR Analog on claims data applicable to the fiscal year 1995
cost reporting periods in the data base. This allowed us to classify
each SNF's residents into one of 10 RUG-III categories produced by the
analog. By applying the case mix indices applicable to the RUG-III
categories assigned by the analog, we were able to develop average
case-mix index values (nursing and therapy) for each facility. As
described below, these index values were used in standardizing SNF
costs for case-mix.
As discussed earlier in this rule, a MEDPAR Analog is used to
standardize for case-mix because actual MDS data are not available on a
national level. However, in order to correct for systematic differences
between the case-mix estimates produced by the analog method and the
method that will be used under this PPS (that is, based on MDS data), a
sensitivity analysis of the analog was performed. This analysis
involved a comparison of case-mix values (based on the application of
the case-mix indices) generated by the analog and corresponding values
generated from actual MDS resident assessments for a sample of SNFs and
patients. While the availability of such comparative data is limited,
we were able to draw a sample from the States participating in the
Multistate Nursing Home Demonstration that included patients from
approximately 100 SNFs in five States. The sample contained 13,354
Medicare claims covering 139,766 days of care. On average, case-mix
values based on MDS data are 3 percent higher than analog-based values
for the nursing index and 28 percent higher for the therapy index. This
variance produced by the analog in the assignment of case-mix values is
factored into the standardization methodology to ensure the rates are
set at the appropriate level.
Each urban and rural component of per diem cost is standardized for
differences in wage levels and case-mix by dividing total
unstandardized cost by a standardization factor that reflects each
facility's wage level and case-mix. This factor is based in part on
each facility's wage adjustment (.7588 times its wage index plus .2412)
multiplied by the appropriate case-mix value and number of days of
care. These facility values are summed to obtain the standardization
factor. The standardized cost is divided by the appropriate total days
to obtain the standardized per diem cost.
This process equates per diem standardized cost (per diem cost
adjusted for individual facility wage and case-mix differences) to per
diem unstandardized cost. In this manner, standardization accounts for
the application of individual facility wage index and case-mix
adjustments to the per diem payment rates without altering the
aggregates of the per diem cost data used to construct the per diem
payment rates.
d. Computation of national standardized payment rates. Section
1888(e)(4)(D)(iii) of the Act authorizes the Secretary to compute
separate payment rates for SNFs in urban and rural areas as defined in
section 1886(d)(2)(D). Under the statute, urban areas are those defined
by the Office of Management and Budget as metropolitan statistical
areas (MSAs) or New England County Metropolitan Areas (NECMAs). All
other areas are considered rural areas. Table 2.I showing the wage
index indicates all areas considered urban for purposes of establishing
these rates.
Using the data described above and the formula prescribed in
section 1888(e)(4)(E) of the Act, we calculated the national average
per diem standardized payment rates separately for urban and rural SNFs
using the following steps. The unadjusted Federal rates resulting from
this calculation are presented in Tables 2.A and 2.B below.
(1) As required by section 1888(e)(4)(D)(ii) of the Act, for each
of the four components of cost, we computed the mean based on data from
freestanding SNFs only. This mean was weighted by the total number of
Medicare days of the facility.
(2) As required by section 1888(e)(4)(D)(i) of the Act, for each of
the four components of cost, we computed the mean based on data from
both hospital-based and freestanding SNFs. Again, this mean was
weighted by the total number of Medicare days of the facility.
(3) As required by section 1888(e)(4)(E)(i) of the Act, for each of
the four components of cost, we calculated arithmetic mean of the
amounts determined under steps (1) and (2) above.
(4) The unadjusted Federal rate for the initial period is
calculated differently depending on the RUG-III case-mix grouping. For
the 14 RUG-III therapy groups, the unadjusted Federal rate is the sum
of the nursing case-mix, non-case-mix and therapy case-mix components.
For other RUG-III groups, the unadjusted Federal rate is the sum of the
nursing case-mix, non-case-mix and therapy non-case-mix components.
Table 2.A.--Unadjusted Federal Rate Per Diem
[Urban]
----------------------------------------------------------------------------------------------------------------
Nursing-- Therapy-- Therapy--
Rate component case mix case mix non-case mix Non-case mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount......................................... $109.48 $82.67 $10.91 $55.88
----------------------------------------------------------------------------------------------------------------
Table 2.B.--Unadjusted Federal Rate Per Diem
[Rural]
----------------------------------------------------------------------------------------------------------------
Nursing-- Therapy-- Therapy--
Rate Component case mix case mix non-case mix Non-case mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount......................................... $104.88 $95.51 $11.66 $56.95
----------------------------------------------------------------------------------------------------------------
[[Page 26261]]
B. Design and Methodology for Case-Mix Adjustment of Federal Rates
As indicated earlier, section 1888(e)(4)(G) of the Act requires
that the Federal rates be adjusted for case-mix (the relative resource
utilization of patients). The RUG-III classification is a patient
classification system that accounts for the relative resource
utilization of different patient types. To adjust for case-mix, care
provided directly to, or for, a patient is represented by an index
score (case-mix index) that is based on the amount of staff time,
weighted by salary levels, associated with each group. That is, each
RUG-III group is assigned an index score that represents the amount of
nursing time and rehabilitation treatment time associated with caring
for the patients who qualify for the group. The nursing weight includes
both patient-specific time spent daily on behalf of each patient type
by registered nurses, licensed practical nurses, and aides, as well as
patient non-specific time spent by these staff members on other
necessary functions such as staff education, administrative duties, and
other tasks associated with maintenance of the care giving environment.
The case-mix indices are applied to the unadjusted rates presented
above resulting in 44 separate rates, each corresponding with one of
the 44 RUG-III classification groups. To determine the appropriate
payment rate, SNFs are required to classify patients into a RUG-III
group based on assessment data from the MDS 2.0. The design and
structure of RUG-III and the methodology and Federal policy associated
with the classification of patients into RUG-III groups, including the
completion of assessments (MDS 2.0) for Medicare patients, under this
PPS, are described in the following pages.
1. Background on the Resource Utilization Groups (RUGs) Patient
Classification System
As part of the Nursing Home Case-Mix and Quality demonstration
project, Version III of the Resource Utilization Groups (RUG-III) case-
mix classification system was developed to capture resource use of
nursing home patients and to provide an improved method of tracking the
quality of their care.
RUG-III is a 44-group model for classifying nursing home patients
into homogeneous groups according to the amount and type of resources
they use. The RUG-III groups are the basis for the payment indices used
to establish equitable prospective payment levels for patients with
different service use. Care provided directly to, or for, a patient is
represented by an index score that is based on the amount of staff
time, weighted by salary levels, associated with each group. That is,
each RUG-III group is assigned an index score that represents the
amount of nursing time and rehabilitation treatment time associated
with caring for the patients who qualify for the group. The nursing
weight includes both patient-specific time spent daily on behalf of
each patient type by registered nurses, licensed practical nurses, and
aides, as well as patient non-specific time spent by these staff
members on other necessary functions such as staff education,
administrative duties, and other tasks associated with maintenance of
the care giving environment.
The principal goal of case-mix measurement is to identify patient
characteristics associated with measured resource use. In nursing
homes, no adequate models have been found for using length of stay or
episode cost to explain resource use. Thus, the RUG-III nursing home
case-mix system explains patient resource use on a daily basis.
The classification system was designed using resident
characteristic information and measures of wage-weighted staff time.
Information regarding a patient's characteristics and care needs is
derived from the MDS, a set of core screening and assessment items and
item definitions. The MDS is part of a standardized, comprehensive
patient assessment instrument (the Resident Assessment Instrument or
RAI) that all long term care facilities that are certified to
participate in Medicare or Medicaid are required to use to develop
individualized plans of care for each individual in the facility. The
staff time measure (STM) study captured the amount of nursing staff
time required to care for groups of residents over a 24-hour period and
over the span of a week for therapy services.
Patient assessment and staff time data used to develop the initial
version of the RUG-III classification system were collected from March
to December 1990 for 7,648 patients in 202 nursing facilities in
Kansas, Maine, Mississippi, South Dakota, Nebraska, Texas, and New
York. Since then, two more staff time data collections have been
performed on 154 Medicare certified units of hospital and freestanding
facilities in 12 States (California, Colorado, Florida, Kansas, Maine,
Maryland, Mississippi, New York, Ohio, South Dakota, Texas, and
Washington). Only units that were judged to be providing adequate care
were considered for participation in the study. Of these, States were
asked to select facilities that included 35 percent Medicare certified
units, 25 percent hospital units, and two Alzheimer's units. ``Unit''
was defined as a nursing center such as a corridor or a floor,
controlled from one nursing station. The remainder of the sample was
selected by the State's demonstration project staff to represent the
characteristics of the State's nursing homes.
The sample was purposefully targeted toward residents needing
complex care and/or with cognitive impairments. This assured that
sufficient numbers of patients with rare types of complex care needs
were included in the sample. Facilities with special care units (for
example, Alzheimer's or Rehabilitation units) that participated in the
study were also asked to provide data from a non-specialized unit.
During the data collection, personnel on the study units
electronically recorded all of the time in their work days: time
providing services directly to patients; in activities related to
specific patients, such as charting or consultation with family members
or other members of the patient care team; as well as time that is not
attributable to any particular patient, like that spent in meetings, in
training, on breaks, etc. The time was allocated according to whether
or not it was directly related to a particular patient, and was
categorized as either patient specific time or non-patient specific
time.
Those data have been used to modify the classification system to
create the current RUG-III and establish updated average staff times to
be salary-weighted. Analyses of the staff time data in conjunction with
the patient MDS information identified three main predictors of a
patient's resource utilization: (1) clinical characteristics; (2)
limitations in the activities of daily living (ADLs); and (3) skilled
services received. The RUG-III classification system uses these three
types of variables to describe SNF patients for the purposes of
determining the relative cost of caring for different types of patients
(case-mix).
Analysis of the data indicated that patients with serious clinical
conditions such as dehydration and respiratory infections, as well as
patients who were very dependent in ADLs, require more nursing time
than patients without complicating conditions. The RUG-III
classification system resulting from the analyses is hierarchical. The
clinical characteristics of patients, as identified by the MDS, that
were associated with the greatest utilization of nursing time and
rehabilitative therapy time, were used to categorize patients into the
highest case-mix classification groups.
[[Page 26262]]
Similarly, the clinical characteristics associated with the lowest
utilization of nursing time were used to categorize patients into the
lowest case-mix classification group. Not all clinical characteristics
are recognized separately by the classification system. Only those
characteristics that were predictive of resource use and that would not
introduce incentives that are considered to be negative, or not
compatible with high quality patient care, are used to classify
patients into RUG-III groups.
Table 2.C shows the mutually exclusive, layered categories of the
RUG-III classification system. The table describes which patient
clinical characteristics, levels of assistance used in performing ADLs,
and services are used to assign the patient to a RUGs group. Clinical
characteristics include the patient diagnoses, conditions, and
comorbidities. ADLs include bed mobility, toilet use, transfer from bed
to chair, and eating. Patients receive a single RUG-III ADL score that
measures the patient's ability to perform these activities (scores
range from 4-18; higher scores represent greater functional dependence
and a need for more assistance). Finally, treatments and services
include respiratory therapy, amount of rehabilitation received, and
treatments such as suctioning and intravenous medication
administration.
Table 2.C.--Crosswalk of MDS 2.0 Items and RUG III Groups
----------------------------------------------------------------------------------------------------------------
Category ADL index End splits MDS RUG III codes
----------------------------------------------------------------------------------------------------------------
REHABILITATION
----------------------------------------------------------------------------------------------------------------
ULTRA HIGH............................ 16-18 Not Used................ RUC
Rx 720 minutes/week minimum........... 9-15 Not Used................ RUB
At least 2 disciplines, one at least 5 4-8 Not Used................ RUA
days/week.
VERY HIGH............................. 16-18 Not Used................ RVC
Rx 500 mins. a wk. minimum............ 9-15 Not Used................ RVB
At least 1 discipline--5 days......... 4-8 Not Used................ RVA
HIGH.................................. 13-18 Not Used................ RHC
Rx 325 mins. a wk. minimum............ 8-12 Not Used................ RHB
1 discipline 5 days a week............ 4-7 Not Used................ RHA
MEDIUM................................ 15-18 Not Used................ RMC
Rx 150 mins. a wk. minimum............ 8-14 Not Used................ RMB
5 days across 3 disciplines........... 4-7 Not Used................ RMA
LOW--Rx 45 minutes/week over at least 14-18 Not Used................ RLB
3 days.
Nursing rehabilitation 6 days/week, 2 4-13 Not Used................ RLA
activities.
EXTENSIVE SERVICES--(Adlsum =10, 17-18 Not Used................ SSC
Resp. Ther.=7 days.
Tube fed and aphasic; Radiation 15-16 Not Used................ SSB
tx; Rec'g tx for surgical wnds/
lesions or ulcers (2=sites, any
stg; 1 site stg 3 or 4).
Fever with Dehy., Pneu., Vomit., 7-14 Not Used................ SSA
Weight Loss, or Tube Fed. (Extensive =10, 12-16D Signs of depression..... CB2
Chemotherapy, Dialysis.
No. of Days in last 14--Phys. Visits/ 12-16 ........................ CB1
makes order changes:.
visits>=1 and chng.>=4; or 4-11D Signs of depression..... CA2
visits>=2 and chng.>=2.
Diabetes with injection 7 days/wk and 4-11 (Special =2 days.
IMPAIRED COGNITION:
Score on MDS2.0 Cognitive......... 6-10 Nursing rehabilitation IB2
not receiving.
Performance Scale >=3............. 6-10 ........................ IB1
(Score of ``6'' will be Clin. 4-5 Nursing rehabilitation IA2
Comp. or PE2-PD1). not receiving. IA1
BEHAVIOR ONLY:
Code on MDS 2.0 items............. 6-10 Nursing rehabilitation BB2
not receiving.
4+ days a week.................... 6-10 ........................ BB1
wandering, physical or verbal 4-5 ........................ BB2
abuse.
inappropriate behavior or resists 4-5 ........................ BA1
care.
or hallucinations, or delusions... 4-5 ........................ BA1
PHYSICAL FUNCTION REDUCED:
No clinical variables used........ 16-18 Nursing rehabilitation PE2
16-18 not receiving. PE1
11-15
Nursing Rehab. Activities >=2, at 11-15 Nursing rehabilitation PD2
least 6 days a wk. not receiving. PD1
Passive or Active ROM, amputation 9-10 Nursing rehabilitation.. PC2
care, splint care.
Training in dressing or grooming, 9-10 not receiving........... PC1
eating or swallowing.
transfer, bed mobility or walking, 6-8 Nursing rehabilitation PB2
communication, scheduled 6-8 not receiving. PB1
toileting program or bladder 4-5 Nursing rehabilitation PA2
retraining. 4-5 not receiving. PA1
[[Page 26263]]
Default
----------------------------------------------------------------------------------------------------------------
Source: Analysis of the 1995 Medicare Units Staff Time.
Study: Update of RUG III Classification MDS.
2. The RUG-III Classification System
In the RUG-III classification system, patient characteristic and
health status information from the MDS, such as ``diagnoses,''
``ability to perform ADLs,'' and ``treatments received,'' will be used
to assign the patient to a resource group for payment. The RUG-III
system is a hierarchy of major patient types. RUG-III consists of seven
major categories that are the first level of patient classification.
The major categories, in hierarchical order, are Rehabilitation,
Extensive Services, Special Care, Clinically Complex, Impaired
Cognition, Behavior Problems, and Reduced Physical Function. These
major categories are further differentiated into 44 more specific
patient groupings. Except for Rehabilitation and Extensive Services,
these categories are first subdivided into groups based on the
patient's ADL score. The next level of subdivision is based on nursing
rehabilitation services and signs of depression.
The initial subdivision of the Rehabilitation category is based on
minutes per week of rehabilitative therapy services. The second level
of subdivision uses ADL score. The Extensive Services category does not
use ADL limitations except as a threshold for assignment into the
category. Rather, services that require more technical clinical
knowledge and skill are the variables used for assignment of patients
into this category. Examples of these services are intravenous feeding
or medications and tracheostomy care.
For example, the Special Care category includes patients with
quadriplegia, multiple sclerosis, surgical wound(s), open lesions,
fever with vomiting, dehydration, pneumonia, tube feedings, or weight
loss, those who are aphasic and need to be tube fed, those receiving
treatment for 2 or more skin ulcers, and patients who are receiving
radiation therapy. Any patient with one or more of these conditions,
who is not receiving rehabilitation services, will be assigned to this
category. The patient's assignment to one of the three groups within
this category is dependent on the patient's ADL score.
The Rehabilitation category is organized differently than the
clinical categories that follow in the hierarchy. Within this category,
there are five sub-categories (Ultra High, Very High, High, Medium, and
Low) that are then further split into the individual groups for
payment. The sub-categories are defined by minutes per week of
rehabilitation received by the patient, number of rehabilitation
disciplines providing service, and the number of days per week on which
rehabilitation services were provided. Assignment into a specific
payment group is based on the patient's ability to perform certain of
the activities of daily living as represented by his ADL score. As
stated elsewhere, the patient is assessed on his ability to perform
independently all of the activities of daily living and is assigned an
ADL sum score that represents performance of the four ``late loss''
ADLs. The ``late loss'' ADLs used in the MDS ADL sum score are: eating;
toileting; bed mobility; and transferring.
A brief description of the respective RUG-III categories follows.
Rehabilitation: This category includes patients who, if they were
not receiving rehabilitation therapy, would qualify for one of the
other RUG-III skilled care categories. This category is divided into
subcategories based on the number of minutes of rehabilitative services
received in a week, combinations of rehabilitation disciplines
providing services, receipt of nursing rehabilitative services, and the
patient ADL scores. The range of rehabilitation therapy minutes per day
represented in the Rehabilitation category varies from a low of 45
minutes per week to a high of more than 720 minutes per week. Patients
who qualify for assignment to the Ultra High Rehabilitation sub-
category receive at least 720 minutes per week of rehabilitation
therapies. At least two disciplines must be providing services: one of
the disciplines must provide services 5 days each week, and the other
must provide services at least 3 days each week. In contrast, patients
assigned to the lowest rehabilitation sub-category, Low Rehabilitation,
must receive at least 45 minutes of rehabilitative therapy services
across at least 3 days each week, in addition to 6 days per week of
nursing rehabilitation in two activities.
Extensive Services: To qualify for this category, patients must
have, in the past 14 days, received intravenous medications,
tracheostomy care, required a ventilator/respirator, required
suctioning, or must have, in the past 7 days, received intravenous
feeding. In addition, the patients assigned to this category will have
an ADL score that is at least 7.
Each patient in the extensive services category is assigned a score
of 0-5 based on five criteria. The score is used to classify the
patient to one of the three RUG-III groups in this category--0 or 1
will classify into the SE1 group, those with scores of 2 or 3 will go
to SE2, and those with 4 or 5 will group to SE3.
For the following five criteria, the patient receives one point for
each criterion that applies to him or her. The first three criteria are
presence of a clinical condition that qualifies the patient for
classification to the Special Care category, Clinically Complex
category, or the Cognitively Impaired category. The fourth and fifth
criteria are whether the patient is receiving intravenous feeding or
whether the patient is receiving intravenous medication.
For example, a person who qualifies for both the Cognitively
Impaired and Special Care categories will be assigned a score of 2 and
will be classified into the SE2 group. Similarly, a patient who is
ventilator dependent and requires suctioning will be assigned a score
of 0 and will be classified into SE1.
Special Care: Patients who are assigned to this category have at
least one of the following: multiple sclerosis, cerebral palsy,
quadriplegia with an ADL score of 10 or more, or receive respiratory
therapy 7 days per week; have, and receive treatment for, pressure or
stasis ulcers on 2 or more body sites; have a surgical wound(s) or open
lesions; be tube fed with at least 26 percent of daily calorie
requirements and at least 501 ml of fluid through the tube per day, and
aphasic; receive radiation therapy; or have a fever in combination with
dehydration, pneumonia, vomiting, weight loss, or tube feedings.
Clinically Complex: Patients qualify for this category if they are
comatose, have burns, septicemia, pneumonia, internal bleeding,
dehydration, dialysis, hemiplegia in combination with an ADL
[[Page 26264]]
score of 10 or more, receive chemotherapy, tube feedings that comprise
at least 26 percent of daily calorie requirements and at least 501 ml
of fluid through the tube per day, treatments for foot wounds, or
transfusions. Also included in this category are diabetics who receive
injections 7 days per week and who have two or more physician order
changes in the past 14 days as well as patients who have received
oxygen therapy in the past 14 days. In order to assure inclusion of
patients with unstable conditions, we also use a combination of
physician visits and order changes as qualifying criteria for this
category. This is a proxy measure for the amounts of skilled nursing
observation, care planning, and monitoring usually required by this
type of patient. The qualifying combinations of physician visit/order
changes that must occur within the 14-day observation period to qualify
for this category are: one or more visits with at least four order
changes, or two or more visits with two or more order changes.
Impaired Cognition: Patients in this category and the following two
categories frequently will not qualify for Medicare coverage although
some may, due to specific circumstances. The patients in this category
will have scores on the MDS 2.0 Cognition Performance Scale of 3, 4, or
5, and for two of the groups in this category will be receiving nursing
rehabilitation services 6 days per week. Some patients with Alzheimer's
disease or other types of dementia who have been acutely ill will
classify to this category for Medicare. Under the SNF coverage
guidelines, these patients could qualify based on the need for skilled
nursing rehabilitation.
Behavior Only: These are patients who, in 4 of the last 7 days,
exhibited behaviors that include resisting care, being combative, being
physically and/or verbally abusive, wandering, and who have
hallucinations or delusions.
Physical Function Reduced: The patients in this category are those
who do not have any of the conditions or characteristics identified
above. However, some have been documented as receiving ``skilled
nursing'' and have been covered by Medicare in the past. With proper
documentation and justification regarding the need for skilled care,
Medicare may continue to cover SNF services.
3. Use of RUG-III ``Grouper'' Software
As discussed at the beginning of this section, all data necessary
to classify a patient to one of the RUG-III categories is contained on
the MDS 2.0. Under this PPS, SNFs are required to use the MDS 2.0 as
the data source for classification of patients for case-mix. The
software programs that use the MDS 2.0 to assign patients to the
appropriate groups, called groupers, are available from many software
vendors. The version we use is available at no cost from our web site
at: http://www.hcfa.gov/medicare/ hsqb/mds20.
The logic used in the groupers is based on the hierarchical nature
of the RUG-III system. This means that the patient is first assigned to
the highest category for which the patient qualifies, and then, using
relevant additional criteria, as explained above (ADL score, nursing
rehabilitation, etc.), the patient is assigned to one of the groups
within that category.
The grouper assigns patients to the highest-weighted group rather
than to the highest group in the hierarchy. This is important because
there may be rare instances in which a case would qualify for a group
that, although higher in the hierarchy, has a lower payment index than
a group that is lower in the hierarchy.
4. Determining the Case-Mix Indices
Care provided directly to, or for, a patient is represented by an
index score that is based on the amount of staff time, weighted by
salary levels, associated with each group. That is, each RUG-III group
is assigned an index score that represents the amount of nursing time
and rehabilitation treatment time associated with caring for the
patients who qualify for the group. The nursing weight includes both
patient-specific time spent daily on behalf of each patient type by
registered nurses, licensed practical nurses, and aides, as well as
patient non-specific time spent by these staff members on other
necessary functions such as staff education, administrative duties, and
other tasks associated with maintenance of the care giving environment.
As explained above (in section II.B.1), measures of the staff time
required to care for nursing home patients were collected and used to
identify specific clinical characteristics that are predictive of
patient resource use. In order to do this, characteristics of the
patients in the STM study and the time it took to care for them were
combined and analyzed. In addition, the ratio of salaries for nursing
staff and rehabilitative therapy staff were computed in order to
calculate nursing and therapy weights for each RUG-III category. These
analyses were then used to identify the patient characteristics that
best explain weighted patient specific time. From this, the 44 groups
and an index for each was calculated. The basic calculation performed
for each group was to take the minutes spent providing patient care and
multiply them by the weight that represents the staff person's salary.
Thus, the registered nurse's minutes were multiplied by 1.41, whereas
those of the aide were multiplied by 0.59. The therapy weights include
physical therapist (1.32), occupational therapist (1.23), and speech
pathologist (1.16) time plus licensed physical therapy assistant
(0.87), licensed occupational therapy assistant (0.81), and therapy
aide (0.61) time, on a weekly basis. The nursing and therapy weights
are multiplied by the number of patients in each group to yield an
array of 44 nursing case-mix index scores and 5 therapy case-mix index
scores. These indices are shown later in this section (see Tables 2.E
and 2.F).
5. Application of the RUG-III System
Following are some illustrative case studies to illustrate how the
RUG-III classification system would compare patients with similar
descriptions but disparate classifications.
Example 1. Ms. A was recently hospitalized with a stroke. She has
several comorbidities that include cardiac dysrhythmia, hypertension,
and diabetes mellitus, and experienced a urinary tract infection within
the last 30 days. In addition, she has lost voluntary movement in her
left arm and leg, and has an unsteady gait, pain almost daily, and some
localized edema, but is continent when toileted at regular intervals.
She can see, hear, understand, and make herself understood. She tires
easily and carries out ADLs slowly. Her mood is frequently tearful, and
she expresses sadness about the loss of past life roles. She is
concerned about her health and views herself, and is viewed by staff,
as having potential for rehabilitation.
Her memory is good, although she does have some difficulty making
decisions in new situations. She is involved in the daily life of the
nursing home, interacts well with others, and is able to set her own
goals. She spends some time in her own room in self-initiated
activities.
Ms. A requires the assistance of one person to accomplish her
personal hygiene, dressing, toileting (RUG-III ADL index score=4), bed
mobility and transferring (ADL scores=4 each), and locomotion and
eating (ADL score=2). She uses pressure-relieving chair and bed pads
and receives special attention for her skin. She undergoes physical
therapy and occupational therapy for 1 hour each, 5 days per week. Ms.
A
[[Page 26265]]
receives daily restorative/rehabilitative follow-up nursing care and
skill training for eating, active and passive range of motion,
transferring, dressing, grooming, and locomotion, and participates in a
bowel and bladder retraining program. Discharge from the facility is
planned within the next 3 months.
As a stroke patient receiving two therapies five times a week, Ms.
A is classified in the Very High Rehabilitation category. She has an
ADL index score of 14 (4+4+4+2) and will therefore be classified into
the RVB group. In case-mix calculations, her case receives a nursing
weight of 1.04 and a therapy weight of 1.41.
Example 2, a non-rehabilitation patient. Ms. B has multiple
sclerosis. At the present time she is recovering from a bout of
pneumonia. She also had a urinary tract infection within the last 30
days. She has lost some voluntary movement in her extremities and
cannot balance herself well in a standing position. She is not bedfast,
however, and is in a wheelchair during the day. She has a history of
pressure sores, but none are present at this time. There is stiffness
in her hips, hands, feet, and shoulders. She complains of constipation
and is sometimes incontinent of the bladder. She is able to see, hear,
fully understand what is said, and is understood.
Her memory is good, and she is independent in her decision making.
Her mood, however, is tearful, and she expresses distress. She grieves
for her past life as a professional musician, and she is often
withdrawn and has been verbally abusive to her roommate during the past
week.
Ms. B uses extensive assistance with transferring (RUG-III ADL
index score=4), locomotion, and toileting (ADL score=4), and limited
assistance with bed mobility (ADL score=3), personal hygiene, and
dressing. As she has had a history of pressure sores, she uses bed and
chair pressure prevention pads and receives special skin care,
positioning, and turning regularly over the day. Her intake and output
are monitored, and the nursing staff provides passive and active range
of motion and skill training for transferring with a trapeze while
encouraging active range of motion where possible. She also began a
bowel and bladder retraining program last week. Any discharge plan for
Ms. B is uncertain at this time.
With multiple sclerosis and a high level of ADL dependency, Ms. B
is classified into the Special Care category. Her ADL score is at least
12 (4+3+4+1). Service counts and mental state are not used in the
Special Care category, so her depressed mood does not factor into her
assignment into a RUG group, although it influences her plan of care.
She will be classified to the SSA group in the Special Care category.
In RUG-III case-mix calculations, Ms. B is assigned a nursing weight of
1.01 and a therapy weight of 0 since she did not receive occupational,
physical, or speech therapy in the last 7 days. Note that these weights
are lower than those assigned to Ms. A in example 1, despite the
similarities in their clinical descriptions.
6. Use of the Resident Assessment Instrument--Minimum Data Set (MDS
2.0)
The requirements for patient assessment found at Sec. 483.20 apply
to all patients in a Medicare or Medicaid certified long term care
facility, regardless of the patient's age, diagnoses, length of stay,
or payer source. Certified facilities are required to use the RAI
specified by the State to assess patients. Each State's RAI consists of
HCFA's MDS at a minimum. The RUG-III classification system and,
subsequently, the Medicare SNF prospective payment, are based on the
Minimum Data Set (MDS). The MDS contains a core set of screening,
clinical, and functional status elements, including common definitions
and coding categories, that form the basis of a comprehensive
assessment.
In order to receive Medicare payment under PPS, in addition to
completion of the uniform MDS as set forth at Sec. 483.20, the facility
will be required to complete two additional sections of the MDS:
Sections T and U. Section U is currently an optional section of the MDS
used to collect information on medication. However, completion of this
section is required for States participating in HCFA's Nursing Home
Case-Mix and Quality (NHCMQ) demonstration and several other States as
well. Although collection of medication information on Section U will
be required for Medicare patients under this PPS, we will not require
completion and transmission of this information until October 1, 1999.
In the interim, we will examine the potential for refining Section U in
a way that would streamline data collection, reduce opportunities for
error, and thereby maximize the accuracy and usefulness of the data.
Section T provides information on special treatments and therapies
not reported elsewhere in the patient assessment. In section T, the
facility must record the rehabilitative therapy services (physical
therapy, occupational therapy, and speech therapy) that have been
ordered and are scheduled to occur during the early days of the
patient's SNF stay. As rehabilitation services often are not initiated
until after the first MDS assessment's observation period ends, we
believe that allowing the patient time for transition is appropriate.
Section T provides an overall picture of the amount of rehabilitation
that a patient will likely receive through the 15th day from admission.
This information on the MDS will make possible an accurate
classification of the patient for whom rehabilitation is planned into
the appropriate RUG-III group. SNFs must complete this section for
services furnished on or after July 1, 1998.
Section T also provides information needed to evaluate a patient's
response to therapy. For example, by assessing a patient's ability to
walk at his most self-sufficient level, small increments of improvement
can be measured. This level of detail is not contained in other areas
of the MDS in contrast with the information recorded elsewhere in the
MDS, regarding the patient's walking ability most of the time.
Assessment of the patient's ``most self sufficient'' can be used to
evaluate the effectiveness of physical therapy and nursing
rehabilitation, the continued need for therapy and nursing
rehabilitation, and maintenance of walking ability immediately after
therapy is discontinued.
7. Required Schedule for Completing the MDS
Under section 1888(e)(6) of the Act, SNFs must ``provide the
Secretary, in a manner and within the timeframes prescribed by the
Secretary, the resident assessment data necessary to develop and
implement the rates under this subsection.'' We are requiring that SNFs
perform patient assessments by the 5th day (although there is a grace
period that allows performance by the 8th day) of the SNF stay, again
by the 14th day, by the 30th day, and every 30 days thereafter as long
as the patient is in a Medicare Part A stay. A full MDS must be
submitted by facilities at each of these timeframes during a patient's
Medicare Part A stay. Each Medicare patient is classified in a RUG-III
group for each assessment period for which he is in a Part A SNF stay.
The group to which the patient classifies is based on the information
about his clinical resource needs as recorded on the MDS assessment.
Facilities will send each patient's MDS assessments to the State
and claims for Medicare payment to the fiscal intermediary on a 30-day
cycle.
[[Page 26266]]
Payment will be made according to the RUG-III group(s) recorded on the
claim sent to the fiscal intermediary. For the first 30 days in an SNF,
a Medicare patient will be assessed three times (at 5 days, 14 days,
and 30 days) and perhaps more often, if the patient's needs change
requiring additional MDS assessments and care plan modifications. Any
of the assessments performed may result in a RUG-III classification
change.
Each patient is to be assessed using full or comprehensive
assessments according to the stated schedule. The State's RAI
constitutes a ``comprehensive'' assessment, which is required at
various timeframes according to Federal regulations found at
Sec. 483.20. In the following schedule, ``full'' assessment refers to
completion of the entire MDS, and ``comprehensive'' refers to
completion of the Resident Assessment Protocols (RAPs) in addition to
the entire MDS. The SNF provider should adhere to the following
assessment schedule for newly admitted and readmitted beneficiaries
whose stays are expected to be covered by Medicare during the first 30
days of admission/readmission to the SNF.
Day 0 Represents the period prior to admission
Day 1 Patient admission day and notification of ``Non-coverage''
Day 5 Last day for Assessment Reference Date for the Medicare 5 Day
Assessment
Day 14 Last day for Assessment Reference Date for the Medicare 14
day Assessment (In accordance with Federal requirements at
Sec. 483.20, RAPS must be completed with the 5 day or the 14 day
assessment)
Day 29 Last day for Assessment Reference Date for the Medicare 30
day assessment (RAPs not required for Medicare unless a Significant
Change in Status has occurred)
Day 59 Last day for Assessment Reference Date for the Medicare 60
day assessment (RAPs not required for Medicare unless a Significant
Change in Status has occurred)
Day 89 Last day for Assessment Reference Date for Medicare 90 day
assessment (RAPs not required for Medicare unless a Significant
Change in Status has occurred)
Day 100 Last possible day of Medicare coverage. Staff should return
to the State-required MDS assessment schedule.
This schedule applies to Medicare beneficiaries during Part A Medicare
nursing home stays.
Note that historically, instructions for completing the RAI, as in
the Long Term Care Resident Assessment Instrument User's Manual, state
that ``when calculating when the Resident Assessment Instrument (RAI)
is due, the day of admission is counted as day zero.'' Counting the day
of admission as day zero has allowed the maximum flexibility in terms
of time to complete the RAI. For case-mix reimbursement purposes,
however, States that participated in HCFA's Nursing Home Case-Mix and
Quality Demonstration (NHCMQ) project have required that the day of
admission be counted as day one. The use of the day of admission as day
one is continued under the PPS rules for reimbursement scheduling. In
support of this scheduling, in the future, HCFA will provide
instructions for RAI completion counting the day of admission as day
one.
In order to be in compliance with the requirements of Medicare and
Medicaid certification, facilities must complete an Initial Admission
assessment, including RAPs, within 14 days of a patient's admission to
the facility. Within approximately the same time, the requirements for
PPS specify that facilities must complete two assessments for each
patient in a Medicare-covered Part A stay. These include a Medicare 5-
day and a Medicare 14-day assessment. According to the rules for PPS,
the RAPs must be completed with either the 5-day or the 14-day
assessment, and the facility may choose with which of these assessments
to complete the RAPs.
In order to minimize burden on facility staff, in some instances,
the same assessment that is completed and electronically submitted to
the State to meet the clinical requirements at Sec. 483.20 may also be
used to meet the PPS requirements. For example, the facility may use
either the Medicare 5-day or the Medicare 14-day assessment (whichever
one included the RAPs) to meet both the requirements for PPS, as well
as the clinical requirements for completing and transmitting an Initial
Admission assessment. In this case, the ``Reason for Assessment'' item
on the MDS would be coded both as an Initial Admission assessment and
as a Medicare 5-day or 14-day assessment. There is no grace period for
the Initial Admission assessment to correspond with the grace period
that the PPS rules allow for the Medicare 14-day assessment. Therefore,
if a facility is using the Medicare 14-day assessment to also meet the
requirement for the Initial Admission assessment, the assessment must
be completed by day 14, and the grace period does not apply.
In order to be in compliance with the requirements for Medicare and
Medicaid certification, facilities must perform the HCFA Standard
Quarterly Review assessment for each resident in the facility at least
every 92 days. The requirements for PPS specify that a Medicare 90-day
assessment be completed for each patient whose stay is still covered
under Medicare. To minimize burden on facility staff, the Medicare 90-
day assessment that is completed to meet PPS requirements may also be
used to meet the clinical requirements at Sec. 483.20 for completion of
a Quarterly Review assessment. In this case, the ``Reason for
Assessment'' item on the assessment would be coded both as a
``Quarterly Review'' assessment, and as a Medicare 90-day assessment.
Although the PPS rules allow a 5-day grace period in completing the
Medicare 90-day assessment, the Quarterly Review assessment must be
completed within 92 days of completion of the last assessment.
Therefore, if a facility is using the Medicare 90-day assessment to
also meet the requirement for the Quarterly Review assessment, the
assessment must be completed within 92 days of completion of the prior
assessment, and only 2 days of the 5-day grace period could apply.
Facilities must also adhere to Federal regulations that require a
comprehensive reassessment if the patient experiences a significant
change in status. A significant change is a major change in a patient's
status that is not self-limiting, affects more than one area of his
health status, and requires interdisciplinary review. Accordingly, a
patient must be reassessed whenever significant improvement or decline
is consistently noted by facility staff. The current guidelines for
determining a significant change in the patient's status are listed in
the Long Term Care Resident Assessment Instrument User's Manual. These
include, for example, a change in the patient's decision-making
abilities from 0 or 1 to 2 or 3 on item B4 of the MDS 2.0. As a
complement to these standard guidelines, we are requiring under PPS,
that a comprehensive assessment be performed when a patient's
rehabilitation service is discontinued unless the patient is physically
discharged from the facility. For those rare instances in which a
Significant Change in Status assessment is not clinically warranted,
but rehabilitative services are discontinued, we are requiring a
comprehensive assessment to be coded as ``Other Medicare Required
Assessment.''
The assessment reference date for this assessment may be no earlier
than 8 days after the conclusion of all rehabilitative therapies and no
later than 10 days after the conclusion of such services. If the
patient expires or is discharged from the facility, no
[[Page 26267]]
assessment is required. This assessment will result in a new case-mix
classification for the patient and a new rate of payment. The new
classification and payment rate will be effective as of the assessment
reference date of this comprehensive assessment. If the resulting new
classification is below those groups deemed covered by Medicare in the
RUG-III hierarchy and the patient would not be covered by the existing
administrative criteria for making SNF level of care determinations, a
``continued stay'' denial notice should be issued.
A Significant Change in Status assessment or Other Medicare
Required Assessment that falls during the assessment window of a
Medicare mandated assessment may take the place of one of the regularly
scheduled assessments. If the assessment reference date of an Other
Medicare Required Assessment or a Significant Change in Status
assessment coincides with the range of days allowable for use as the
assessment reference date for a regularly scheduled Medicare
assessment, a single assessment may be coded as both a Significant
Change in Status or Other Medicare Required Assessment and as a
regularly scheduled Medicare assessment. For example, a Significant
Change in Status assessment completed on day 28 of the patient's
nursing home stay would replace the 30-day scheduled assessment.
However, a significant change that occurs on day 40 would not replace
any scheduled assessment. Table 2.D below presents the schedule for MDS
completion related to days covered and payment.
Table 2.D.--Medicare Assessment Schedule
----------------------------------------------------------------------------------------------------------------
Number of days
Reason for Assessment reference authorized for Applicable medicare
Medicare MDS assessment type assessment date coverage and payment days
(AA8b code) payment
----------------------------------------------------------------------------------------------------------------
5 day.......................... 1 Days 1-8*.............. 14 1 through 14.
14 day......................... 7 Days 11-14**........... 16 15 through 30.
30 day......................... 2 Days 21-29............. 30 31 through 60.
60 day......................... 3 Days 50-59............. 30 61 through 90.
90 day......................... 4 Days 80-89............. 10 91 through 100.
----------------------------------------------------------------------------------------------------------------
* If a patient expires or transfers to another facility before day 8, the facility will still need to prepare an
MDS as completely as possible for the RUG-III classification and Medicare payment purposes. Otherwise the days
will be paid at the default rate.
**-RAPs follow Federal rules; RAPs must be performed with either the 5-day or 14-day assessment.
SNFs must submit the RAPs with either the 5-day or 14-day
assessment. As noted above, RAPs must be completed as part of any
Significant Change in Status assessments and Other Medicare Required
Assessments that are appropriate. SNFs should consult the current
version of the Long Term Care Resident Assessment Instrument User's
Manual for more specific information regarding the RAPs.
The first MDS assessment for Medicare eligible beneficiaries should
be completed by day 5 of the patient's SNF stay. The admission day
counts as day 1. The Assessment Reference Date for the 5-day assessment
may be any day between days 1 and 5 (although there is a 3-day grace
period to day 8).
As stated in the note following Table 2.D, if a patient expires or
transfers to another facility before day 8, the facility will still
need to prepare an MDS as completely as possible for RUG-III
classification and Medicare payment purposes. Otherwise, the days will
be paid at the default group rate.
Subsequent to the 5-day assessment, the SNF must complete
assessments for each coverage period in accordance with the Medicare
assessment schedule. The staff must use the time periods as specified
in the current Long Term Care Resident Assessment Instrument User's
Manual and must include the assessment reference date/last day of the
observation period to judge the patient's condition except for the
change items found at the end of particular MDS sections. The change
items in Sections B, C, E, G, and H are assessed by referring back to
the reference day of the last MDS completed.
The nurse coordinating the care of a Medicare Part A covered
patient has considerable leeway in determining the reference date for
all assessments after the initial MDS. This should be helpful in making
the assessment schedule required for Medicare coincide with Significant
Change in Status, and Other Medicare Required Assessments that may be
necessary, or in avoiding scheduling or service delivery problems
during holiday periods. The following is an example: Ms. Smith was
admitted on March 21, 1997. The assessment reference date for Ms.
Smith's 14-day assessment was April 2, 1997. The nurse coordinator has
selected April 16, 1997 as the assessment reference date for her 30-day
assessment. In this case, the instructions for the change items should
be interpreted as the period between the assessment reference date of
April 2, 1997 (the 14-day assessment) and the assessment reference date
of April 16, 1997 (the 30-day assessment).
8. The Relationship Between Payment and the MDS
As explained above, each Medicare patient is classified in a RUG-
III group for each assessment period for which he is in a Part A SNF
stay. The group to which the patient classifies is based on the
information about his clinical resource needs as recorded on the MDS
assessment.
Facilities will send each patient's MDS assessments to the State
and claims for Medicare payment to the fiscal intermediary on a 30-day
cycle. Payment will be made according to the RUG-III group(s) recorded
on the claim sent to the fiscal intermediary. For the first 30 days in
an SNF, a Medicare patient will be assessed three times (at 5 days, 14
days, and 30 days) and perhaps more often, if the patient's needs
change requiring additional MDS assessments and care plan
modifications. Any of the assessments performed may result in a RUG-III
classification change.
For example, a facility may have a patient whose first (5-day) MDS
results in assignment to a Special Care group, but whose second
assessment (14-day) indicates an assignment to a High Rehabilitation
group. The facility must record these groups on its claim and will
receive payment at the Special Care group rate for 14 days and then at
the High Rehabilitation group rate for the
[[Page 26268]]
15th through 30th days. If a third MDS is performed during that 30 days
indicating a change in the patient's condition that results in
assignment to yet a third RUG-III group, the facility must record three
groups on its claim to the fiscal intermediary and will receive payment
accordingly for the days in the third RUG-III group. Table 2.D shows
the relationship of the billing cycle to the MDS submissions.
9. Assessments and the Transition to the Prospective Payment System
For Medicare patients already in the nursing home during the
facility's transition into the PPS, we are providing several
alternative assessment schedule options from which to choose.
a. Medicare beneficiaries receiving Part A benefits admitted within
the past 30 days. For a Medicare patient in a Part A covered stay,
admitted in the 30 days before the SNF became subject to PPS, who has
had an MDS completed during those 30 days, facility staff may choose to
use the most recent full MDS assessment completed (within the past 30
days) for RUG-III classification. This classification would be
effective on the first day the SNF joins PPS and determines the payment
the SNF receives for the patient for the first 14 days the facility is
in the new system. The next assessment must be completed by the 14th
calendar day of the month the facility entered the PPS.
Another option is for the facility staff to choose to treat the
beneficiary as a ``new'' admission on the first day of the facility's
billing period. In this instance, a Medicare 5-day assessment must be
performed as if the day the facility enters the PPS is day 1 of the
patient's Part A nursing home stay, and then the assessment schedule
followed as it would be for a new admission, as detailed above. There
is no change in the patient's Medicare eligibility or coverage.
Further, no additional days are added to Medicare's 100-day limit.
b. Medicare beneficiaries receiving Part A benefits admitted over
30 days prior. If a Medicare beneficiary was receiving Medicare Part A
benefits for the past 30 days and has not had a full MDS assessment
completed within the past 30 days, the beneficiary is considered a new
admission to the PPS and follows the assessment schedule presented
above (paragraph (a)). The new admission status is only for Medicare
MDS assessment scheduling. There is no change in the patient's Medicare
eligibility or coverage. Further, no additional days are added to
Medicare's 100-day limit.
c. Medicare Part A beneficiaries with less than 14 days of Medicare
eligibility remaining. If the patient has less than 14 days of Medicare
eligibility remaining when the SNF becomes subject to PPS, the facility
has the option of completing an Other Medicare Required assessment or
using the most recent assessment to classify the resident.
These guidelines are intended to maximize the beneficiary's
opportunity to receive Medicare Part A benefits during the facility's
transition from one payment system to another, provided that the
Medicare Part A eligibility rules and coverage guidelines are met.
Facility staff are able to utilize the RUG-III clinical categories to
determine coverage for this group of beneficiaries.
10. Late Assessments
We recognize that the effect on revenue for missing an assessment
can be great. To allow facilities flexibility and to minimize their
revenue loss, we will permit an assessment to be completed as quickly
as possible. Once a late assessment is conducted, the facility should
return to the regular Medicare assessment schedule.
Frequent late assessments may result in an on-site review of
assessment scheduling practices for the facility. Also, facilities need
to be aware that assessments not completed within Federal timeframes
established at Sec. 483.20 may be cited as evidence of regulatory
noncompliance.
Late 5-day assessments. As discussed above, the assessment
reference date for a 5-day assessment may be set as early as day 1 or
as late as day 5 of the patient's stay. However, in the event of a late
5-day assessment, a facility will be allowed to use up to and including
day 8 as the assessment reference date with no financial penalty. This
means that the facility may set an assessment reference date that is up
to 3 days beyond the regular schedule and still receive the RUG-III
rate calculated from the late assessment for the entire 14-day period
of service covered by the 5-day assessment.
A 5-day assessment with an assessment reference date of day 9 or
later will be paid at the RUG-III default rate for all 8 or more days
of service provided before the assessment reference date of the late or
missed assessment. The RUG-III rate calculated from the late assessment
will be paid starting on the assessment reference date entered on the
late assessment through day 14.
Late 14-day assessments. In order for an SNF to be in compliance
with the requirements for Medicare or Medicaid certification, a
comprehensive assessment must be performed for each patient in the
facility by day 14. Therefore, unless the 5-day assessment included the
RAPs, the 14-day assessment must include RAPs and must be completed by
day 14. If the RAPs were completed with the 5-day assessment, then this
assessment counts as the admission assessment and should be coded as
both a Medicare 5-day assessment and as the admission assessment. When
the 5-day assessment is the admission assessment (that is, it includes
the RAPs), then no RAPs are required with the 14-day assessment, and
the 14-day assessment may have an assessment reference date through day
19, and a 5-day grace period like that allowed for the 30- and 60-day
assessments.
Late 30-day, 60-day, or 90-day assessments. A 5-day grace period is
permitted for late 30- or 60-day assessments with no financial penalty.
This means that the facility may set an assessment reference date that
is up to 5 days beyond the regular schedule and still receive the RUG-
III rate calculated from the late assessment for the entire period of
service covered by the assessment.
To be in compliance with the requirements for Medicare and Medicaid
certification, facilities must perform assessments quarterly. For this
reason, the 90-day assessment grace period is only 2 days, in agreement
with that allowed by the certification requirement. The latest that the
first quarterly assessment may be completed is on day 92. The 90-day
assessment should be coded both as a Medicare 90-day assessment and a
quarterly review assessment.
Assessments that have an assessment reference date that is 6 or
more days beyond the regular schedule will result in a payment at the
RUG-III default rate for those 5 or more days of service without a
current assessment. The RUG-III rate calculated from the late
assessment will be paid starting on the day of the assessment reference
date entered on the late assessment.
In the case of an error on an MDS that has been locked (in
accordance with the requirements set forth at Sec. 483.20(f)), the
facility must follow the normal MDS correction procedures. These
procedures may require that the facility perform a Significant Change
in Status assessment or a ``significant correction'' assessment. If
appropriate, the facility must perform a new assessment with a new
assessment reference period and then submit this new assessment.
Payment will be based on the new assessment reference date if
appropriate.
[[Page 26269]]
11. The Default Rate
As described above, assessments are completed by SNFs according to
an assessment schedule specifically designed for Medicare payment, and
each assessment applies to specific days within a resident's SNF stay
for purposes of making that payment. Compliance with this assessment
schedule is critical to ensure that the appropriate level of payment is
made by Medicare and the quality of Medicare SNF services is maintained
under the PPS. Accordingly, SNFs that fail to perform assessments
timely are to be paid a RUG-III default rate for the days of a
patient's care for which they are not in compliance with this schedule
(assuming that they submit sufficient documentation in lieu of a
completed assessment to enable the fiscal intermediary to establish
coverage under the existing administrative criteria used for this
purpose, as discussed in section II.D of this rule). The RUG-III
default rate takes the place of the otherwise applicable Federal rate
(it does not supersede the facility-specific portion of the blended
rate used for the transition period--see section III of this rule).
The RUG-III default rate may be lower than the Federal rate that
would have been paid for a patient had an SNF submitted an assessment
in accordance with the prescribed assessment schedule. For the initial
period of the PPS, the RUG-III default rate is $117.15 per day for
urban SNFs and $116.85 per day for rural SNFs. This rate equals the
lowest Federal rate category (PA1) listed in Tables 2.G and 2.H. and is
subject to the wage index adjustment.
12. Case-Mix Adjusted Federal Payment Rates
Application of the case-mix indices to the per diem Federal rates
presented in Tables 2.A and 2.B result in 44 separate case-mix adjusted
payment rates corresponding to the 44 separate RUG-III classification
groups described above (see Tables 2.E and 2.F). The case-mix adjusted
payment rates are listed separately for urban and rural SNFs (44 each)
in Tables 2.E and 2.F below along with the corresponding case-mix index
values. The rates are listed in total and by component. The application
of the wage index, described later in this section, is the final
adjustment applied to the Federal rates.
BILLING CODE 4120-01-P
[[Page 26270]]
[GRAPHIC] [TIFF OMITTED] TR12MY98.000
[[Page 26271]]
[GRAPHIC] [TIFF OMITTED] TR12MY98.001
[[Page 26272]]
[GRAPHIC] [TIFF OMITTED] TR12MY98.002
[[Page 26273]]
[GRAPHIC] [TIFF OMITTED] TR12MY98.003
BILLING CODE 4120-01-C
[[Page 26274]]
C. Wage Index Adjustment to Federal Rates
Section 1888(e)(4)(G)(ii) of the Act requires that we provide for
adjustments to the Federal rates to account for differences in area
wage levels using ``an appropriate wage index as determined by the
Secretary.'' As discussed elsewhere in this rule, for the rates
effective with this rule, we are using wage index values that are based
on hospital wage data from cost reporting periods beginning in fiscal
year 1994--the most recent hospital wage data in effect before the
effective date of this rule. Accordingly, the wage values used in this
rule are based on the same wage data as used to compute the wage index
values for the hospital prospective payment system for discharges
occurring in fiscal year 1998. To compute the SNF wage index values,
HCFA groups wage data from all hospitals by urban (MSA) and rural area.
Total wages and hours are summed for all hospitals in each area. An
average hourly wage is computed for each area by dividing the total
wages by the total hours. Wage index values are computed for each area
by comparing the area specific average hourly wage to the national
average hourly wage (computed in a similar manner). (A detailed
description of the methodology used to compute the hospital prospective
payment wage index is set forth in the final rule published in the
Federal Register on August 29, 1997 (62 FR 45966).)
The SNF wage index values are based on the Metropolitan Statistical
Area (MSA) designations in effect prior to publication of this rule.
For purposes of computing SNF wage index values, we are not taking into
account changes in geographic classification for certain rural
hospitals required under section 1886(d)(8)(B) of the Act or geographic
reclassifications based on decisions of the Medicare Geographic
Classification Review Board or the Secretary under section 1886(d)(10)
of the Act. For SNF routine cost limits established under section
1888(a) of the Act and in effect for cost reporting periods beginning
prior to July 1, 1998, HCFA has always applied a hospital wage index
that does not reflect geographic reclassifications. Changing the basis
of the wage index now would likely have a distributional impact on
payments. In consideration of this and the fact that HCFA may be
changing to a SNF wage index in the near future (which could also have
distributional effects), we find it appropriate to employ a hospital
wage index that does not reflect these reclassifications. Accordingly,
we continue to believe that the MSA (or non-MSA) designation provides
the best method for determining the wage index values used for SNF
payments and the physical location of hospitals is the appropriate
basis upon which to construct the wage index.
Table 2.I at the end of this section presents the wage indices
applicable to urban and rural areas for use in making geographic
adjustments to the Federal rates. Similar to the methodology described
earlier relating to the standardization of the cost data for geographic
differences in wage levels, the wage index adjustment is applied to the
labor-related portion of the Federal rate, which is 75.888 percent of
the total rate. The schedule of Federal rates below shows the Federal
rates by labor-related and non-labor related components. Instructions
and an example related to the application of the wage index to the
case-mix adjusted rates are provided following the table.
In addition, section 1888(e)(4)(G) of the Act requires that the
wage index adjustment to the Federal rates be made in a manner that
does not result in aggregate payments that are greater or less than
those that would otherwise be made if the rates were not adjusted by
the wage index. In the initial year of the PPS, this requirement is
addressed through the standardization methodology, described earlier,
which ensures that the application of the wage index has no effect on
the level of aggregate payments (that is, any effects are purely
distributional). In future years, HCFA must make wage index budget
neutrality adjustment in updating the payment rates.
Table 2.G.--Case Mix Adjusted Federal Rates for Urban SNFs by Labor and Non-Labor Component
----------------------------------------------------------------------------------------------------------------
Total
RUGs III category Labor- Non-labor Federal
related related rate
----------------------------------------------------------------------------------------------------------------
RUC...................................................................... $291.57 $92.64 $384.21
RUB...................................................................... 262.50 83.40 345.90
RUA...................................................................... 248.37 78.91 327.28
RVC...................................................................... 224.74 71.41 296.15
RVB...................................................................... 217.27 69.03 286.30
RVA...................................................................... 198.16 62.96 261.12
RHC...................................................................... 206.06 65.47 271.53
RHB...................................................................... 189.45 60.19 249.64
RHA...................................................................... 173.66 55.18 228.84
RMC...................................................................... 202.88 64.46 267.34
RMB...................................................................... 181.27 57.60 238.87
RMA...................................................................... 170.47 54.17 224.64
RLB...................................................................... 161.60 51.35 212.95
RLA...................................................................... 135.85 43.16 179.01
SE3...................................................................... 191.93 60.98 252.91
SE2...................................................................... 166.17 52.80 218.97
SE1...................................................................... 147.89 46.99 194.88
SSC...................................................................... 144.57 45.93 190.50
SSB...................................................................... 137.92 43.82 181.74
SSA...................................................................... 134.59 42.77 177.36
CC2...................................................................... 143.74 45.67 189.41
CC1...................................................................... 132.94 42.24 175.18
CB2...................................................................... 126.29 40.13 166.42
CB1...................................................................... 120.47 38.28 158.75
CA2...................................................................... 119.65 38.01 157.66
CA1...................................................................... 113.00 35.90 148.90
IB2...................................................................... 108.01 34.32 142.33
[[Page 26275]]
IB1...................................................................... 106.35 33.79 140.14
IA2...................................................................... 98.04 31.15 129.19
IA1...................................................................... 94.72 30.09 124.81
BB2...................................................................... 107.18 34.06 141.24
BB1...................................................................... 104.69 33.26 137.95
BA2...................................................................... 97.21 30.89 128.10
BA1...................................................................... 90.56 28.78 119.34
PE2...................................................................... 116.32 36.96 153.28
PE1...................................................................... 114.66 36.43 151.09
PD2...................................................................... 110.51 35.11 145.62
PD1...................................................................... 108.85 34.58 143.43
PC2...................................................................... 104.69 33.26 137.95
PC1...................................................................... 103.86 33.00 136.86
PB2...................................................................... 93.05 29.57 122.62
PB1...................................................................... 92.23 29.30 121.53
PA2...................................................................... 91.40 29.04 120.44
PA1...................................................................... 88.90 28.25 117.15
----------------------------------------------------------------------------------------------------------------
Table 2.H.--Case Mix Adjusted Federal Rates for Rural SNFs by Labor and Non-Labor Component
----------------------------------------------------------------------------------------------------------------
Total
RUGs III category Labor- Non-labor Federal
related related rate
----------------------------------------------------------------------------------------------------------------
RUC...................................................................... $309.77 $98.42 $408.19
RUB...................................................................... 281.92 89.57 371.49
RUA...................................................................... 268.39 85.27 353.66
RVC...................................................................... 235.35 74.78 310.13
RVB...................................................................... 228.20 72.50 300.70
RVA...................................................................... 209.88 66.69 276.57
RHC...................................................................... 211.64 67.24 278.88
RHB...................................................................... 195.72 62.18 257.90
RHA...................................................................... 180.60 57.38 237.98
RMC...................................................................... 206.48 65.60 272.08
RMB...................................................................... 186.78 59.03 244.81
RMA...................................................................... 175.43 55.74 231.17
RLB...................................................................... 162.73 51.71 214.44
RLA...................................................................... 138.06 43.86 181.92
SE3...................................................................... 187.38 59.53 246.91
SE2...................................................................... 162.70 51.69 214.39
SE1...................................................................... 145.19 46.13 191.32
SSC...................................................................... 142.00 45.12 187.12
SSB...................................................................... 135.63 43.10 178.73
SSA...................................................................... 132.45 42.09 174.54
CC2...................................................................... 141.21 44.87 186.08
CC1...................................................................... 130.86 41.58 172.44
CB2...................................................................... 124.49 39.56 164.05
CB1...................................................................... 118.92 37.79 156.71
CA2...................................................................... 118.13 37.53 155.66
CA1...................................................................... 111.76 35.51 147.27
IB2...................................................................... 106.99 33.99 140.98
IB1...................................................................... 105.39 33.49 138.88
IA2...................................................................... 97.43 30.96 128.39
IA1...................................................................... 94.25 29.95 124.20
BB2...................................................................... 106.19 33.74 139.93
BB1...................................................................... 103.80 32.98 136.78
BA2...................................................................... 96.64 30.70 127.34
BA1...................................................................... 90.27 28.68 118.95
PE2...................................................................... 114.95 36.52 151.47
PE1...................................................................... 113.35 36.02 149.37
PD2...................................................................... 109.37 34.75 144.12
PD1...................................................................... 107.78 34.25 142.03
PC2...................................................................... 103.80 32.98 136.78
PC1...................................................................... 103.00 32.73 135.73
PB2...................................................................... 92.66 29.44 122.10
PB1...................................................................... 91.86 29.19 121.05
PA2...................................................................... 91.07 28.93 120.00
PA1...................................................................... 88.68 28.17 116.85
----------------------------------------------------------------------------------------------------------------
[[Page 26276]]
For any RUG-III group, to compute a wage adjusted Federal payment
rate applicable to the initial period of the PPS, the labor related
portion of the payment rate is multiplied by the SNF's appropriate wage
index factor listed in Table 2.I. The product of that calculation is
added to the corresponding non-labor related component. The resulting
amount is the Federal rate applicable to a patient in that RUG-III
group for that SNF. See the example below.
ABC SNF is located in State College, Pennsylvania. The per diem
Federal rate applicable to an Ultra High Rehabilitation `A' patient
(RUA) is calculated using the rates listed in Table 2.G and the wage
index factor found in Table 2.I. Accordingly, the computation of the
adjusted per diem rate is made as follows:
(248.37 x .9635)+78.91=$318.21 per diem.
This Federal rate will be applicable to all patients in the RUA
category for Happy Valley SNF for the initial period of the PPS (July
1, 1998 through September 30, 1999).
D. Updates to the Federal Rates
For the initial period of the PPS beginning on July 1, 1998 and
ending on September 30, 1999, the payment rates are those contained in
this interim final rule. In accordance with section 1888(e)(4)(H) of
the Act, for each succeeding fiscal year, we will publish the rates in
the Federal Register before August 1 of the year preceding the affected
Federal fiscal year.
For fiscal years 2000 through 2002, section 1888(e)(4)(E)(ii) of
the Act requires that the rates be increased by a factor equal to the
SNF market basket index change minus 1 percentage point. In addition,
for subsequent fiscal years, this section requires the rates to be
increased by the applicable SNF market basket index change.
Section 1888(e)(4)(F) of the Act provides that the Secretary
``may'' adjust the unadjusted Federal per diem rates if the Secretary
``determines that the adjustments under subparagraph (G)(i) for a
previous fiscal year (or estimates that such adjustments for a future
fiscal year) did (or are likely to) result in a change in aggregate
payments'' during the fiscal year because of changes in the aggregate
case-mix of the Medicare patient population that are not related to
actual patient condition (that is, ``case-mix creep''). HCFA is
currently developing a methodology to implement this adjustment.
In addition, since enactment of the BBA 1997, various suggestions
have been made relating to adjustments to the rates promulgated in this
interim final regulation. Some have suggested that the rates should be
increased to reflect such factors as additional nursing care, the
future growth of subacute care practices, specific services, and other
items that may not be accurately reflected in the rates, etc. Other
suggestions have related to downward adjustments to the rates to
reflect the presence of inappropriate care or payments in the 1995 cost
data used to establish the rates promulgated in this rule. For example,
concerns have been raised regarding whether these data are inflated,
reflecting medically unnecessary care and/or improper payments related
to therapies and other ancillary services and that the inclusion of
such costs results in inappropriately high payments to SNFs under the
PPS. Studies by the Office of the Inspector General (OIG) and HCFA
program integrity activities have found that incorrect payments have
been made to SNFs in the past. One way to remove such costs from the
data is the application of adjustments to the 1995 data base and
recomputing the payment rates. However, the magnitude of these
incorrect payments is not definitively known at this time. Therefore,
the OIG, in conjunction with HCFA, is proposing to examine the extent
to which the base period costs reflect costs that were inappropriately
allowed. If this examination reveals excessive inappropriate costs, we
would address this issue in a future proposed rule, or perhaps seek
legislation to adjust future payment rates downward.
Table 2.I.--Wage Index for Urban Areas
------------------------------------------------------------------------
Wage
Urban Area (Constituent counties or county equivalents) index
------------------------------------------------------------------------
0040 Abilene, TX............................................. 0.8287
Taylor, TX
0060 Aguadilla, PR........................................... 0.4188
Aguada, PR
Aguadilla, PR
Moca, PR
0080 Akron, OH............................................... 0.9772
Portage, OH
Summit, OH
0120 Albany, GA.............................................. 0.7914
Dougherty, GA
Lee, GA
0160 Albany-Schenectady-Troy, NY............................. 0.8480
Albany, NY
Montgomery, NY
Rensselaer, NY
Saratoga, NY
Schenectady, NY
Schoharie, NY
0200 Albuquerque, NM......................................... 0.9309
Bernalillo, NM
Sandoval, NM
Valencia, NM
0220 Alexandria, LA.......................................... 0.8162
Rapides, LA
0240 Allentown-Bethlehem-Easton, PA.......................... 1.0086
Carbon, PA
Lehigh, PA
Northampton, PA
0280 Altoona, PA............................................. 0.9137
Blair, PA
0320 Amarillo, TX............................................ 0.9425
Potter, TX
Randall, TX
0380 Anchorage, AK........................................... 1.2842
Anchorage, AK
0440 Ann Arbor, MI........................................... 1.1785
Lenawee, MI
Livingston, MI
Washtenaw, MI
0450 Anniston, AL............................................ 0.8266
Calhoun, AL
0460 Appleton-Oshkosh-Neenah, WI............................. 0.8996
Calumet, WI
Outagamie, WI
Winnebago, WI
0470 Arecibo, PR............................................. 0.4218
Arecibo, PR
Camuy, PR
Hatillo, PR
0480 Asheville, NC........................................... 0.9072
Buncombe, NC
Madison, NC
0500 Athens, GA.............................................. 0.9087
Clarke, GA
Madison, GA
Oconee, GA
0520 Atlanta, GA............................................. 0.9823
Barrow, GA
Bartow, GA
Carroll, GA
Cherokee, GA
Clayton, GA
Cobb, GA
Coweta, GA
De Kalb, GA
Douglas, GA
Fayette, GA
Forsyth, GA
Fulton, GA
Gwinnett, GA
Henry, GA
Newton, GA
Paulding, GA
Pickens, GA
Rockdale, GA
Spalding, GA
Walton, GA
0560 Atlantic City-Cape May, NJ.............................. 1.1155
Atlantic City, NJ
Cape May, NJ
0600 Augusta-Aiken, GA-SC.................................... 0.9333
Columbia, GA
McDuffie, GA
Richmond, GA
Aiken, SC
Edgefield, SC
0640 Austin-San Marcos, TX................................... 0.9133
[[Page 26277]]
Bastrop, TX
Caldwell, TX
Hays, TX
Travis, TX
Williamson, TX
0680 Bakersfield, CA......................................... 1.0014
Kern, CA
0720 Baltimore, MD........................................... 0.9689
Anne Arundel, MD
Baltimore, MD
Baltimore City, MD
Carroll, MD
Harford, MD
Howard, MD
Queen Annes, MD
0733 Bangor, ME.............................................. 0.9478
Penobscot, ME
0743 Barnstable-Yarmouth, MA................................. 1.4291
Barnstable, MA
0760 Baton Rouge, LA......................................... 0.8382
Ascension, LA
East Baton Rouge, LA
Livingston, LA
West Baton Rouge, LA
0840 Beaumont-Port Arthur, TX................................ 0.8593
Hardin, TX
Jefferson, TX
Orange, TX
0860 Bellingham, WA.......................................... 1.1221
Whatcom, WA
0870 Benton Harbor, MI....................................... 0.8634
Berrien, MI
0875 Bergen-Passaic, NJ...................................... 1.2156
Bergen, NJ
Passaic, NJ
0880 Billings, MT............................................ 0.9783
Yellowstone, MT
0920 Biloxi-Gulfport-Pascagoula, MS.......................... 0.8415
Hancock, MS
Harrison, MS
Jackson, MS
0960 Binghamton, NY.......................................... 0.8914
Broome, NY
Tioga, NY
1000 Birmingham, AL.......................................... 0.9005
Blount, AL
Jefferson, AL
St Clair, AL
Shelby, AL
1010 Bismarck, ND............................................ 0.7695
Burleigh, ND
Morton, ND
1020 Bloomington, IN......................................... 0.9128
Monroe, IN
1040 Bloomington-Normal, IL.................................. 0.8733
McLean, IL
1080 Boise City, ID.......................................... 0.8856
Ada, ID
Canyon, ID
1123 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH........ 1.1506
Bristol, MA
Essex, MA
Middlesex, MA
Norfolk, MA
Plymouth, MA
Suffolk, MA
Worcester, MA
Hillsborough, NH
Merrimack, NH
Rockingham, NH
Strafford, NH
1125 Boulder-Longmont, CO.................................... 1.0015
Boulder, CO
1145 Brazoria, TX............................................ 0.9341
Brazoria, TX
1150 Bremerton, WA........................................... 1.0999
Kitsap, WA
1240 Brownsville-Harlingen-San Benito, TX.................... 0.8740
Cameron, TX
1260 Bryan-College Station, TX............................... 0.8571
Brazos, TX
1280 Buffalo-Niagara Falls, NY............................... 0.9272
Erie, NY
Niagara, NY
1303 Burlington, VT.......................................... 1.0142
Chittenden, VT
Franklin, VT
Grand Isle, VT
1310 Caguas, PR.............................................. 0.4459
Caguas, PR
Cayey, PR
Cidra, PR
Gurabo, PR
San Lorenzo, PR
1320 Canton-Massillon, OH.................................... 0.8961
Carroll, OH
Stark, OH
1350 Casper, WY.............................................. 0.9013
Natrona, WY
1360 Cedar Rapids, IA........................................ 0.8529
Linn, IA
1400 Champaign-Urbana, IL.................................... 0.8824
Champaign, IL
1440 Charleston-North Charleston, SC......................... 0.8807
Berkeley, SC
Charleston, SC
Dorchester, SC
1480 Charleston, WV.......................................... 0.9142
Kanawha, WV
Putnam, WV
1520 Charlotte-Gastonia-Rock Hill, NC-SC..................... 0.9710
Cabarrus, NC
Gaston, NC
Lincoln, NC
Mecklenburg, NC
Rowan, NC
Stanly, NC
Union, NC
York, SC
1540 Charlottesville, VA..................................... 0.9051
Albemarle, VA
Charlottesville City, VA
Fluvanna, VA
Greene, VA
1560 Chattanooga, TN-GA...................................... 0.8658
Catoosa, GA
Dade, GA
Walker, GA
Hamilton, TN
Marion, TN
1580 Cheyenne, WY............................................ 0.7555
Laramie, WY
1600 Chicago, IL............................................. 1.0860
Cook, IL
De Kalb, IL
Du Page, IL
Grundy, IL
Kane, IL
Kendall, IL
Lake, IL
McHenry, IL
Will, IL
1620 Chico-Paradise, CA...................................... 1.0429
Butte, CA
1640 Cincinnati, OH-KY-IN.................................... 0.9474
Dearborn, IN
Ohio, IN
Boone, KY
Campbell, KY
Gallatin, KY
Grant, KY
Kenton, KY
Pendleton, KY
Brown, OH
Clermont, OH
Hamilton, OH
Warren, OH
1660 Clarksville-Hopkinsville, TN-KY......................... 0.7852
Christian, KY
Montgomery, TN
1680 Cleveland-Lorain-Elyria, OH............................. 0.9804
Ashtabula, OH
Cuyahoga, OH
Geauga, OH
Lake, OH
Lorain, OH
Medina, OH
1720 Colorado Springs, CO.................................... 0.9316
El Paso, CO
1740 Columbia, MO............................................ 0.9001
Boone, MO
1760 Columbia, SC............................................ 0.9192
Lexington, SC
Richland, SC
1800 Columbus, GA-AL......................................... 0.8288
Russell, AL
Chattanoochee, GA
Harris, GA
Muscogee, GA
1840 Columbus, OH............................................ 0.9793
Delaware, OH
Fairfield, OH
Franklin, OH
Licking, OH
Madison, OH
Pickaway, OH
1880 Corpus Christi, TX...................................... 0.8945
Nueces, TX
San Patricio, TX
1900 Cumberland, MD-WV....................................... 0.8822
Allegany, MD
Mineral, WV
1920 Dallas, TX.............................................. 0.9703
Collin, TX
Dallas, TX
Denton, TX
Ellis, TX
Henderson, TX
Hunt, TX
Kaufman, TX
Rockwall, TX
[[Page 26278]]
1950 Danville, VA............................................ 0.8146
Danville City, VA
Pittsylvania, VA
1960 Davenport-Moline-Rock Island, IA-IL..................... 0.8405
Scott, IA
Henry, IL
Rock Island, IL
2000 Dayton-Springfield, OH.................................. 0.9584
Clark, OH
Greene, OH
Miami, OH
Montgomery, OH
2020 Daytona Beach, FL....................................... 0.8375
Flagler, FL
Volusia, FL
2030 Decatur, AL............................................. 0.8286
Lawrence, AL
Morgan, AL
2040 Decatur, IL............................................. 0.7915
Macon, IL
2080 Denver, CO.............................................. 1.0386
Adams, CO
Arapahoe, CO
Denver, CO
Douglas, CO
Jefferson, CO
2120 Des Moines, IA.......................................... 0.8837
Dallas, IA
Polk, IA
Warren, IA
2160 Detroit, MI............................................. 1.0825
Lapeer, MI
Macomb, MI
Monroe, MI
Oakland, MI
St Clair, MI
Wayne, MI
2180 Dothan, AL.............................................. 0.8070
Dale, AL
Houston, AL
2190 Dover, DE............................................... 0.9303
Kent, DE
2200 Dubuque, IA............................................. 0.8088
Dubuque, IA
2240 Duluth-Superior, MN-WI.................................. 0.9779
St Louis, MN
Douglas, WI
2281 Dutchess County, NY..................................... 1.0632
Dutchess, NY
2290 Eau Claire, WI.......................................... 0.8764
Chippewa, WI
Eau Claire, WI
2320 El Paso, TX............................................. 1.0123
El Paso, TX
2330 Elkhart-Goshen, IN...................................... 0.9081
Elkhart, IN
2335 Elmira, NY.............................................. 0.8247
Chemung, NY
2340 Enid, OK................................................ 0.7962
Garfield, OK
2360 Erie, PA................................................ 0.8862
Erie, PA
2400 Eugene-Springfield, OR.................................. 1.1435
Lane, OR
2440 Evansville-Henderson, IN-KY............................. 0.8641
Posey, IN
Vanderburgh, IN
Warrick, IN
Henderson, KY
2520 Fargo-Moorhead, ND-MN................................... 0.8837
Clay, MN
Cass, ND
2560 Fayetteville, NC........................................ 0.8734
Cumberland, NC
2580 Fayetteville-Springdale-Rogers, AR...................... 0.7461
Benton, AR
Washington, AR
2620 Flagstaff, AZ-UT........................................ 0.9115
Coconino, AZ
Kane, UT
2640 Flint, MI............................................... 1.1171
Genesee, MI
2650 Florence, AL............................................ 0.7551
Colbert, AL
Lauderdale, AL
2655 Florence, SC............................................ 0.8711
Florence, SC
2670 Fort Collins-Loveland, CO............................... 1.0248
Larimer, CO
2680 Ft Lauderdale, FL....................................... 1.0448
Broward, FL
2700 Fort Myers-Cape Coral, FL............................... 0.8788
Lee, FL
2710 Fort Pierce-Port St. Lucie, FL.......................... 1.0257
Martin, FL
St. Lucie, FL
2720 Fort Smith, AR-OK....................................... 0.7769
Crawford, AR
Sebastian, AR
Sequoyah, OK
2750 Fort Walton Beach, FL................................... 0.8765
Okaloosa, FL
2760 Fort Wayne, IN.......................................... 0.8901
Adams, IN
Allen, IN
De Kalb, IN
Huntington, IN
Wells, IN
Whitley, IN
2800 Forth Worth-Arlington, TX............................... 0.9979
Hood, TX
Johnson, TX
Parker, TX
Tarrant, TX
2840 Fresno, CA.............................................. 1.0607
Fresno, CA
Madera, CA
2880 Gadsden, AL............................................. 0.8815
Etowah, AL
2900 Gainesville, FL......................................... 0.9616
Alachua, FL
2920 Galveston-Texas City, TX................................ 1.0564
Galveston, TX
2960 Gary, IN................................................ 0.9633
Lake, IN
Porter, IN
2975 Glens Falls, NY......................................... 0.8386
Warren, NY
Washington, NY
2980 Goldsboro, NC........................................... 0.8443
Wayne, NC
2985 Grand Forks, ND-MN...................................... 0.8745
Polk, MN
Grand Forks, ND
2995 Grand Junction, CO....................................... 0.9090
Mesa, CO
3000 Grand Rapids-Muskegon-Holland, MI....................... 1.0147
Allegan, MI
Kent, MI
Muskegon, MI
Ottawa, MI
3040 Great Falls, MT......................................... 0.8803
Cascade, MT
3060 Greeley, CO............................................. 1.0097
Weld, CO
3080 Green Bay, WI........................................... 0.9097
Brown, WI
3120 Greensboro-Winston-Salem-High Point, NC................. 0.9351
Alamance, NC
Davidson, NC
Davie, NC
Forsyth, NC
Guilford, NC
Randolph, NC
Stokes, NC
Yadkin, NC
3150 Greenville, NC.......................................... 0.9064
Pitt, NC
3160 Greenville-Spartanburg-Anderson, SC..................... 0.9059
Anderson, SC
Cherokee, SC
Greenville, SC
Pickens, SC
Spartanburg, SC
3180 Hagerstown, MD.......................................... 0.9681
Washington, MD
3200 Hamilton-Middletown, OH................................. 0.8767
Butler, OH
3240 Harrisburg-Lebanon-Carlisle, PA......................... 1.0187
Cumberland, PA
Dauphin, PA
Lebanon, PA
Perry, PA
3283 Hartford, CT............................................ 1.2562
Hartford, CT
Litchfield, CT
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