Bringing PPS Up to Date - prospective payment systems - Brief Article

Nursing Homes, August, 2001 by Rena R. Shephard

A report from the American Association of Nurse Assessment Coordinators (AANAC)

In recent months, the Health Care Financing Administration (HCFA) (now known as the Centers for Medicare and Medicaid Services [CMS]) has reaffirmed its commitment to the RUG-III payment system, to the MDS 2.0 and to monitoring for abuse of the system. In its annual SNF PPS Update and Proposed Rule published in the May 10 Federal Register, HCFA also published the proposed rule updating SNF PPS payment rates and proposed to implement SNF PPS for swing-bed facilities.

Payment Rate Updates. In calculating the new payment rates for SNFs, HCFA used 1997 total cost data, the most recent available, to update the 1995 data that had been used. Another major change is that because the current fiscal year is the last in the four-year SNF PPS transition period, the proposed updated rates reflect the full federal rate without any adjustment related to facility-specific rates.

The updated rates take into account a variety of increases and add-ons mandated by Congress, including provisions from the Balanced Budget Refinement Act of 1999 and the Benefits Improvement and Protection Act of 2000, as well as updates to the wage index and to the market basket index. When all facilities are considered together, a 2.1% increase in payment rates is projected. Some areas, such as New England and Mid-Atlantic urban areas, will fare much better than that.

The net effect is not all good news, though. The transition to federal rates will result in a decrease in reimbursement for facilities that have not already fully transitioned to the federal rate. In addition, urban, hospital-based facilities can expect a 5.1% decrease in rates, and their rural counterparts will see a 1% decrease. There will also be geographic variations.

RUG-III and the MDS 2.0. While acknowledging the need for improvements in the payment system, the update noted, "We are not aware of any substantive findings that demonstrate, as has been suggested at recent MedPAC [Medicare Payment Advisory Commission] meetings, that the RUG-III system has proven to be unworkable." HCFA said that active efforts are continuing in this area and that the expectation is that case-mix refinements will be developed over the next 12 months.

"We plan to look broadly for alternative refinement approaches that will improve the payment system's ability to account for the variation in resources associated with SNF patients generally, as well as medically complex patients and non-therapy ancillary services more specifically," HCFA said. Some possible approaches might use information related to service use, function, diagnosis and comorbidities.

Referring to the MDS 2.0 as an accurate and effective assessment tool, HCFA asserted that it "meets program objectives related to its major purposes of supporting quality of care and providing patient status and treatment information needed to support payment." HCFA acknowledged, however, that the potential for inappropriate upcoding exists in any prospective payment system that uses clinical information as the basis for determining payment. Because of that risk, fiscal intermediaries (FIs) will continue to be on the alert for abuse, assessing the MDS and the resident's chart to validate the appropriateness of the RUG category billed.

HCFA took the opportunity to warn providers about a specific area of abuse that has vexed a number of therapists and MDS nurses, as well as HCFA: Routine use of concurrent therapy. Defined by HCFA as "rehabilitation therapy that is being provided in SNFs in a manner that conflicts with Medicare coverage guidelines," concurrent therapy is treatment provided by one therapist to several residents at the same time when the treatments are unrelated to each other. (Group therapy is a different matter: It is permitted when all of the residents in the group are receiving the same treatment. The group is limited to four residents per therapist and may account for no more than 25% of the therapy per discipline in a seven-day period.)

According to HCFA, "If the therapist or therapy assistant can provide distinct services to several beneficiaries at once, then it is unlikely that the services are sufficiently complex and sophisticated to qualify" for Medicare coverage. HCFA's statement expressed concern that facility management personnel are dictating the routine use of concurrent therapy, thereby usurping the clinician's professional judgment.

PPS Implementation for Swing-Bed Facilities. All rural hospital swing beds must be paid under SNF PPS starting with cost reporting periods beginning on October 1, 2001 (although Critical Access Hospitals with swing beds continue to be PPS-exempt). SNF PPS is to be implemented essentially intact in swing-bed facilities, including use of the MDS 2.0 for Medicare-required assessments. Since swing beds remain exempt from clinical assessments, a new reason for an Other Medicare Required Assessment (OMRA) assessment will be added to the MDS for swing beds only.