The Health Dimensions Group eNewsletter
October 2005

CMS Issues Final Regulation On August 4, 2005

Final Regulation Effective October 1, 2005

Expanded RUG Refinement to be Implemented on January 1, 2006

 

Since SNF PPS was implemented in October 1998, the Center for Medicare and Medicaid Services (CMS) has been working towards refining the Resource Utilization Group or RUGs classification system for Medicare Skilled Nursing Facility (SNF) care. In this final regulation, CMS has adopted its proposal to expand the number of RUG groups by 9 to a total of 53 RUG groups. With the implementation of the RUG refinement, the RUG add-ons that have been in place will end as of January 1, 2006. However, the 128% add-on for AIDS patients will remain in effect since the refinement did not address these types of patients.

 

The centerpiece of the final regulation is the newly expanded RUG classification system, which will go into effect on January 1, 2006. Recognizing the higher costs of SNF patients who qualify for both the extensive and rehabilitation categories of care, CMS is adding the following RUG groups:

 

¨       Rehab ultra high and extensive care, ADL 16-18

¨       Rehab ultra high and extensive care, ADL 7-15

¨       Rehab very high and extensive care, ADL 16-18

¨       Rehab very high and extensive care, ADL 7-15

¨       Rehab high and extensive care, ADL 13-18

¨       Rehab high and extensive care, ADL 7-12

¨       Rehab medium and extensive care, ADL 15-18

¨       Rehab medium and extensive care, ADL 7-14

¨       Rehab low and extensive care, 7-18   

 

Incorporated into the rates as of January 1, 2006 is an adjustment to the nursing case mix index to account for the variability in non-therapy ancillary costs.  The rates also reflect a full 3.1 percent market basket increase for the entire FY.

 

CMS is also implementing OMB’s revised definitions of Metropolitan Statistics Areas (MSAs) with Core Based Statistical Areas (CBSAs). Thus new wage indexes will replace the current wage indexes previously in use. Based upon public comment, CMS is now implementing a one year transition period of blended rates to smooth out the distributional impact of changing wage indexes. The full CBSA wage index will go into effect starting with FY 2007.

 

CMS has estimated that the cumulative changes in SNF payment will result in a $20 million increase in aggregate SNF payments in FY 2006. However in FY 2006, the first three months of the rate retain the add-ons and the remaining nine months reflect the loss of the add-on and the adoption of the refinement by CMS. Next year (FY 2007) will no longer have the add-ons and will be completely based upon the 53 group RUG system.

 

Now after many years of anticipation, the time has finally arrived for SNF providers to adapt substantial changes in the SNF PPS system, impacting both the classification of SNF patients and their associated payments. It should be noted that an aggregate increase for all SNF providers may mean an increase or decrease for individual SNFs. Each provider should develop a transition plan that projects rates for at least two years and an associated education plan that will allow optimization of the 53 group RUG system.

 

The year ahead will also bring new operational policies. Thus there will be no break for busy SNF administrators, DONs and other facility staff. CMS is paying close attention to SNF payment policies so expect a steady stream of policy changes with operational and payment impacts in the future, including… 

 

¨     An updated MDS is on the way

¨     A new Staff Time Measurement Study (STM) which may lead to the implementation of the proposed MDS changes that CMS did not implement (such as the elimination of  GRACE days and the 14 day look back period)

¨     New policies for the use of concurrent therapy

¨     The possibility of a new policy counting of observation days towards the 3 day prior hospital stay requirement

¨     Issuance of the long awaited Urban Institute Report on Alternative Approaches to SNF Classification which may lead to substantial changes in future SNF classification

¨     Active discussion of pay for performance approaches to future SNF payment

 

The most positive development on the horizon is the possibility of counting observation days towards the 3 day prior hospital stay requirement which occur in the future.

 

Finally, SNF providers should also be aware of changes in Medicare regulations for other post acute providers. The CMS implementation of the so called 75% rule for rehabilitation hospitals should restrict the admission of certain rehabilitation patients to rehabilitation hospitals and open up access to these patients to be cared for in SNFs.

 

The chart which follows will focus on the new CMS policies that will be implemented with the final regulation along with suggested action steps to be taken by your facility staff.  For implementation assistance, contact Mark MacCutcheon at info@hdgi1.com.

 Revised and New Policies in SNF PPS Final Regulation

Effective October 1, 2005

Policy

Explanation

Regulatory Citation*

Action Steps/Impact

Expanded 53 RUG Groups

From October 1, 2005, SNF providers will continue to receive the add-ons and the market basket update.

 

From January 1, 2006, SNF providers will be paid using a new 53 group RUG classification system.

 

See tables 6 and 7 for urban and rural rates using the 44 group RUG system, page 45042m

 

See tables 6a and 7a for the urban and rural rates using the expanded 53 group RUG system, page 45042.

 

Interim billing guidance provided on page 45034 under section: Implementation Issues.

Understanding new RUG Groups:

¨       Determine the number of patients that will qualify for the 9 new RUG groups and calculate rates for FY 2006 (with partial impact) and FY 2007 (with full impact, estimate future rates).

¨       Determine opportunities for capturing additional patients in the expanded RUG groups.

¨       Also consider the capture of additional rehabilitation patients with the full implementation of the 75% rule.

 

Transition Plan:

¨       Evaluate Medicare RUG optimization in light of all of the changes above.

¨       Evaluate need for ongoing education in light of new RUG groups.

¨       Develop 2 year financial impact analysis considering the partial year of the new RUGs groups (FY 2006) and the full year (FY 2007).

¨       Check with software vendor to ensure that billing software is updated.

 

Wage Index and one year Transition

Beginning on October 1, 2005, SNF provides will have a one year transition of 50/50 blended rates to the new CBSAs.

See table A for the transition wage index, page 45079.

Develop 2 year financial impact analysis to include wage index transition/CBSAs and new RUGs groups discussed above.

Nurse Practitioner and Clinical Nurse Specialist

Revised definition of indirect employment of NPs and CNPs that will allow NPs and CNPs to continue to perform certifications and recertification’s, as long as his or her employer is not entered in such an agreement.

See discussion beginning on page 45055.

Review contract if using independent contractor CNSs and CNPs to ensure compliance with revised definition of indirect employment.

OMRA

CMS is clarifying that the Assessment Reference Date (ARD) of an OMRA is required 8-10 days after the cessation of all therapy, and that therapeutic leave days are counted in determining the OMRA ARD.

See discussion on page 45036

Check to see that OMRA ARD’s are set properly and that staff responsible for completing the MDS are aware of this policy clarification.

* Refers to SNF PPS Final Regulation published in the Federal Register on August 4, 2005 on pages 45026-45127.