The Centers for Medicare & Medicaid Services (CMS) published the fiscal year (FY) 2015 proposed skilled nursing facility (SNF) prospective payment system (PPS) rule on May 6, 2014 (Proposed Rule). CMS estimates that the Proposed Rule’s implementation would result in a $750 million increase in aggregate payments to SNFs during FY 2015 as compared to FY 2014. The Proposed Rule anticipates a market basket update of 2%, resulting from a market basket increase of 2.4 percentage points, reduced by the Multifactor Productivity Adjustment of 0.4 percentage points, as required by the Affordable Care Act (ACA). We discuss highlights of the Proposed Rule below, including: (1) the proposed wage index update; (2) a proposed policy change to the change of therapy (COT) Other Medicare Required Assessment (OMRA); (3) proposed revisions to the Civil Money Penalties (CMP) regulations; (4) CMS’s request for public comment on services excluded from consolidated billing; (5) CMS’s observations on therapy trends; and (6) CMS’s discussion regarding electronic health record (EHR) use in SNFs. CMS will accept public comments regarding the Proposed Rule until June 30, 2014.

Proposed Wage Index Update

CMS is required by statute to adjust federal rates using a wage index that reflects geographic differences in wage levels.  CMS proposes modifying the SNF PPS wage index to conform with a February 28, 2013 Office of Management and Budget (OMB) bulletin (OMB Bulletin No. 13-01)  that made changes to the delineation of Metropolitan Statistical Areas, Micropolitan Statistical Areas, Combined Statistical Areas, and the guidance on uses of these delineations.

CMS proposes to implement OMB Bulletin No. 13-01 through a one-year transition that would use a blended SNF PPS wage index for FY 2015.  Under this policy, 50% of the wage index would use prior OMB delineations (the Core-Based Statistical Area geographic designations adopted in FY 2006) and 50% of the wage index would use the 2013 OMB delineations.  CMS also proposes using OMB delineations to identify whether a SNF is urban or rural for rate purposes.  CMS estimates that 15% of providers would have a higher wage index under the proposed new labor market area delineations, while 22% would have a lower wage index.

COT OMRA Policy Update

CMS also proposes revisions to the COT OMRA policy, which is used to classify a resident into a new resource utilization group (RUG) due to changes in therapy use, to address industry-wide confusion regarding CMS’s current policy.  While CMS has addressed this policy during industry calls, until the proposed rule, CMS had not formalized what the agency says is its current standard that “the resident must be classified into a RUG-IV therapy category or into a nursing RUG because of index maximization (while receiving a level of therapy sufficient for classification into a RUG-IV therapy category) in order for the COT OMRA requirements to apply.”  In the Proposed Rule, CMS proposes that a COT OMRA would be permitted for patients classified into non-therapy RUGs, but only in certain circumstances.  Specifically, if a SNF patient were previously classified into a therapy-RUG and had no discontinuation of therapy services between Day 1 of the COT observation period for the COT OMRA that classified the resident into his/her current non-therapy RUG and the assessment reference date of the COT OMRA that reclassified the patient into a therapy RUG, a SNF could complete a COT OMRA even though the patient was in a non-therapy RUG.


The Proposed Rule would modify 42 C.F.R. § 488.433 to clarify certain statutory provisions established by Section 6111 of the ACA regarding how states may use CMPs and how states must obtain approval for CMP use from CMS.  While the current regulations specify that CMS must approve states’ use of CMP funds and that CMPs “must be used entirely for activities that protect or improve the quality of care for residents,” CMS contends that states have used CMP funds without CMS approval, have used CMP funds even though CMS disapproved the state’s intended use, and/or have not used CMP funds at all.  As a consequence, CMS proposes modifications to § 488.433 to strengthen the regulations, provide more guidance to states regarding the approval process and the permissible uses of CMPs, and increase state accountability with respect to CMP funds.

CMS Request for Additional Services to Be Excluded from Consolidated Billing

The Proposed Rule also discusses the statutory consolidated billing provisions applicable to SNFs, which require that, with the exception of certain delineated services, SNFs submit consolidated bills to Medicare Administrative Contractors for all of the services SNF patients receive during a Medicare Part A-covered stay.  SNF consolidated billing excludes a number of services, such as those furnished by physicians and other practitioners, and certain “high-cost, low probability” services within certain specific categories.  In the Proposed Rule, CMS invites comments on whether the agency should exclude any additional services from consolidated billing within the four service categories excluded under the statute:  (1) chemotherapy items; (2) chemotherapy administrative services; (3) radioisotope services; and (4) customized prosthetic devices.  The current list of excluded services, listed by HCPCS codes, is available here.

Agency’s Observations on Therapy Utilization Trends

In the Proposed Rule, CMS observes that the percentage of SNF residents classified into an Ultra-High Rehabilitation groups has increased “rather steadily” (according the agency, from 44.8% in FY 2011 to over 50% in FY 2013).  CMS also notes that many patients are receiving the minimum minutes of therapy to qualify for a given therapy RUG.  CMS states that it will continue to follow and analyze these trends and requests comments regarding such “observations.”

Accelerating Health Information Exchange in SNFs

In the Proposed Rule, CMS emphasizes the government’s favorable view of health information exchange through the SNFs’ use of EHR, while acknowledging that SNFs are not eligible for EHR incentive payments.  The comment period affords industry an opportunity to suggest to CMS how the government could accelerate the adoption of EHR among SNFs.