On July 29, 2011, the Centers for Medicare & Medicaid Services (CMS) issued its final rule for federal fiscal year 2012 to update payment rates under the prospective payment system (PPS) for skilled nursing facilities (SNFs). The following are highlights of the final rule.

Payment Rate Updates

The most significant element of the final rule relates to cuts in payment rates for FY 2012, which CMS projects to be an overall net reduction of $3.87 billion, or approximately 11.1 percent. The cuts are only applicable to RUG rates paid for rehabilitation services, equating to a decrease of roughly $70 per patient day on average. Considerations in the net reduction in payment rates include the following:

• Effective October 1, 2011, all rate categories will be updated for the full market basket increase of 2.7 percent, less a 1 percent productivity adjustment required by Section 3401(b) of the Patient Protection and Affordable Care Act (ACA), for a net increase of 1.7 percent, or approximately $600 million. There was no “forecast error” correction for FY 2012 relating to the difference between forecasted and actual market basket increases.
• The biggest component of the rate adjustments pertains to the recalibration of nursing case-mix indexes in the therapy RUG categories so that they “more accurately reflect parity in expenditures between RUG-IV and the previous case-mix classification system” (RUG-III). The result of this recalibration is a projected reduction in Medicare Part A payments to SNFs of 12.6 percent, or approximately $4.47 billion, before offsetting the increase for market basket mentioned above.
• This is CMS’ attempt to adjust for unanticipated increases in payments to SNFs resulting from the transition from MDS 2.0 and RUG-III to MDS 3.0 and RUG-IV, which occurred October 1, 2010. The FY 2011 change in assessment and payment systems was intended to be budget-neutral. Unfortunately, CMS rejected suggestions by industry associations and others to phase in payment rate reductions in lieu of implementing such a significant hit in one year.
• The 128 percent per diem rate add-on for SNF AIDS patients remains in effect for FY2012.
• CMS will continue using the inpatient hospital wage index to adjust the labor-related portion of federal rates and continue to apply the alternative urban and rural methodologies for geographic areas with no hospitals.
• SNF PPS rates and wage indices contained in the final rule apply to free-standing SNFs, rural swing-bed hospitals and hospital-based skilled nursing units. However, critical access hospitals will continue to be paid on a reasonable cost basis for SNF services furnished under a swing-bed agreement.

Group Therapy

CMS feels the current method of reporting group therapy minutes creates an inappropriate payment incentive to perform group therapy instead of providing one-on-one individual therapy, because group therapy time is currently not required to be allocated among patients participating in a group session. To compensate for anticipated increases in group therapy utilization, CMS has modified its definition of group therapy, which is now defined as therapy provided simultaneously to four patients performing similar therapy activities. In addition, the final rule requires group therapy minutes to be allocated among four group therapy participants, regardless of the actual number of patients participating in group therapy.

SNFs will continue to report the total unallocated group therapy minutes on the MDS 3.0 for each patient; however, for RUG classification, the individual’s group therapy time will be divided by four and added together with individual therapy minutes along with any allocated concurrent therapy minutes to determine total reimbursable therapy time. Group therapy continues to be limited to 25 percent of total therapy provided.

MDS 3.0 Assessment & OMRA Changes

In the final rule, CMS made several changes to the assessment process, including changing the acceptable time frame for completing assessments as well as creating new Other Medicare Required Assessments (OMRAs). Details of these changes and clarifications effective October 1, 2011, include the following:

• CMS will shorten the assessment reference date (ARD) windows and reduce the number of available grace days for the 14-day through the 90-day MDS assessment types. The table below recaps the MDS 3.0 assessment schedules:

• CMS  reiterated in the final rule an End of Therapy (EOT) OMRA must be completed once therapy services cease or were missed for three consecutive days, regardless of the reason and regardless of whether therapy services are available and offered by the SNF five days per week or seven days per week.
• The final rule creates an End of Therapy Resumption (EOT-R) OMRA. This OMRA can be used in lieu of a Start of Therapy OMRA in cases where therapy ceases and an EOT OMRA was completed, but therapy subsequently resumes within five consecutive calendar days at the same RUG classification in effect prior to the EOT OMRA. Completing the optional EOT-R eliminates the requirement for the therapist to perform a new evaluation or establish a new plan of care if the resident resumes treatment at the previous level.
• CMS also has created a new Change of Therapy (COT) OMRA, required for patients in a therapy RUG classification where the intensity of therapy changes to the extent that the recent assessment’s RUG classification no longer accurately reflects the patient’s clinical condition and intensity of therapy services. The ARD of the COT OMRA would be set for Day Seven of a COT observation period, a successive seven-day window beginning on the day following the ARD set for the most recent scheduled or unscheduled PPS assessment (or beginning the day therapy resumes in cases where an EOT-R OMRA is completed), and ending every seven calendar days thereafter. This will require providers to monitor the amount of therapy delivered and the minutes allowed to be counted toward the thresholds that determine RUG categories on a rolling seven-day window beginning the day after the ARD of the most recent PPS assessment to look for changes. CMS says a COT OMRA also is required in cases where a therapy discipline is discontinued and results in a patient no longer meeting the required number of disciplines for the current RUG category, as well as in cases where the required number of therapy days for classification in a particular RUG category has changed. A COT OMRA also would be required where changes in therapy services would result in a change in rehab RUG category, even if the patient is classified into a non-rehab RUG category due to index maximization. Note that a COT OMRA is required not only when the amount of therapy decreases to a lower RUG level but also when therapy increases to a potentially higher RUG level.

Other

Beginning in FY 2012, CMS removes the requirement that a therapy student in an SNF setting must be under the “line-of-sight” supervision of the professional therapist. Instead, CMS indicated “each SNF would determine for itself the appropriate manner of supervision of therapy students consistent with applicable state and local laws and practice standards.” However, CMS says such students must be qualified based on specific guidelines, adding the supervising therapist should have ultimate authority to determine whether the student can adequately treat patients without line-of-sight supervision. CMS also clarified, for the purpose of billing, the therapy student is treated as simply an extension of the supervising therapist rather than being counted as an additional practitioner—adding this policy change would not change the manner in which therapy minutes currently are recorded on the MDS or cause the student’s time to become separately billable.

CMS indicated a separate final rule—addressing revisions to reporting requirements SNFs must disclose at time of enrollment or when any change in ownership occurs, in accordance with ACA Section 6101—will be published in early 2012.

Effective October 1, 2011, the drug Treanda will be excluded from consolidated billing requirements.

While many aspects of the final rule, including the significant payment reduction, do not come as welcome news to skilled nursing providers, facility staff must be well-trained on the rule’s components, including changes to the assessment completion window, the additional required and optional assessments and changes in group therapy minutes, to minimize further payment reductions.

For more information on how these rules might affect your organization, contact your BKD advisor.

BKD will be hosting a webinar, “Potential Effects of the SNF PPS Final Rule,” on August 24. Click here for more information or to register.