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FY2011 Medicare Payment Update for Skilled Nursing Facilities

The Centers for Medicare & Medicaid Services (CMS) recently issued the notice Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities for FY 2011 in the July 22, 2010, Federal Register.  Following are a few highlights from this notice.

Market Basket Increase for FY2011

The notice provides for a full market basket increase of 2.3 percent beginning October 1, 2010, but CMS also calls for a reduction in Medicare Part A payments of 0.6 percent in fiscal year 2011, which is a “forecasting error” adjustment related to a difference between the forecasted and actual change in the FY2009 market basket. The net increase in Part A payments to skilled nursing facilities (SNFs) is projected to be 1.7 percent, or approximately $542 million in FY2011.

Delay of Resource Utilization Group – Version 4 (RUG-IV) But Not Minimum Data Set (MDS) 3.0

The FY2010 SNF Prospective Payment System (PPS) final rule, published in the Federal Register in August 2009, contained provisions applicable to 2011, including implementation of the new MDS version 3.0, along with the transition to the RUG-IV reimbursement system, effective October 1, 2010.  However, as previously reported, the Patient Protection and Affordable Care Act (PPACA) postpones implementation of the RUG-IV case-mix classification system by one year, to October 1, 2011.  Although RUG-IV implementation has been delayed, PPACA did not delay implementation of MDS 3.0 or certain other RUG-IV related provisions, including:

  • Limiting the capture of “look-back” services to only those provided after admission to the SNF
  • The requirement to allocate concurrent therapy minutes across patients
  • Changes in the MDS 3.0 RAI manual that eliminates section T and projected therapy minutes
  • Changes that exclude supervised therapy aide treatments from qualifying as skilled services

Although the August 2009 Federal Register called for the transition in payment for FY2011 to be “budget neutral,” the combination of full implementation of MDS 3.0 and the provisions outlined above, while delaying  the use of the  RUG-IV case-mix classification, has the potential for significant decrease in payments to SNFs for FY2011.  CMS is attempting to address this issue as follows:

Introduction of HR-III

Currently, an RUG-53 grouper that uses MDS 3.0 does not exist; MDS 3.0 was designed to be implemented in conjunction with RUG-IV, which would have 66 RUG categories. CMS further notes that “no grouper currently exists that incorporates the particular combination of features mandated by the statute:  the use of the new RUG-IV revisions on concurrent therapy and the look-back period as well the MDS 3.0, but within the overall context of the existing RUG-53 system.”

In addition, CMS has stated a modified grouper will not be ready by October 1, 2010.  Therefore, it is implementing a two-step approach:

  1. Effective October 1, 2010, CMS will pay claims on an interim basis under RUG-IV, as though it were fully implemented.
  2. Once the necessary payment system infrastructure is in place, it “will then retroactively adjust claims to reflect a ‘hybrid’ RUG-III (HR-III) system, which incorporates RUG-IV’s specific revisions on concurrent therapy and the look-back period within the framework of the existing RUG-53 system, along with the use of the MDS 3.0.”  In other words, providers will be paid on an interim basis under RUG-IV, and at some point in the future there will be retroactive settlements based on a recalculation under HR-III.

CMS further states that payments under the two systems will be “budget neutral” so that aggregate payments under either system will be approximately the same.  Please note that although aggregate payments are expected to be budget neutral, many individual providers could be negatively or positively affected by payment under RUG-IV and/or retroactive adjustment to the hybrid HR-III.

In the July 2010 Federal Register notice, CMS posted both RUG-IV and HR-III rates for urban and rural locations effective October 1, 2010, along with wage indices.  However, because of the many variables involved in the assessment, payment and settlement process, it will be difficult for individual providers to predict the ultimate impact on their reimbursement.

Looking Ahead

CMS, along with certain trade associations and stakeholders, continues to work with Congress in passing legislation that would repeal certain provisions of PPACA, so that RUG-IV can be fully implemented effective October 1, 2010.

Please contact your BKD National Health Care Group long-term care advisor to discuss your training needs and to learn more about coming changes in Medicare reimbursement.

This post was written by:

Brian, a partner with BKD National Health Care Group, has over 20 years of experience providing audit and consulting services for long-term care facilities. He assists clients with Medicare and Medicaid reimbursement consulting, including cost report preparation, review and analysis, rate component analysis and strategic planning.

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Recent Comment

  • Karen Vance says:
    This would be under §484.18 of the Conditions of Participation describing regulations for the Plan of Care. Below is the Standard that addresses your issue: "§484.18(b) - Agency professional staff promptly alert the physician to any changes that suggest a need to alter the plan of care." From the State Operations Manual (guidance for state surveyors) "The
    February 24, 2011 on Webinars

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