The Centers for Medicare & Medicaid Services (CMS) published the final FY 2015 Medicare skilled nursing facility (SNF) prospective payment system (PPS) rule on August 5, 2014 (Final Rule). The Final Rule largely adopts the proposals set forth in the FY 2015 proposed SNF PPS rule (Proposed Rule). CMS estimates that the Final Rule will result in a $750 million increase in aggregate payments to SNFs during FY 2015 as compared to FY 2014. The Final Rule will implement a market basket update of 2%, resulting from a market basket increase of 2.5 percentage points, reduced by the Multifactor Productivity Adjustment of 0.5 percentage points, as required by the Affordable Care Act (ACA). Below we discuss highlights of the Final Rule, including: (1) the adopted wage index update; (2) revised change of therapy (COT) Other Medicare Required Assessment (OMRA) policy; (3) revisions to the Civil Money Penalties (CMP) regulations; and (4) CMS’s responses to comments regarding the agency’s observations on therapy trends.

Wage Index Update

CMS is required by statute to adjust federal rates using a wage index that reflects geographic differences in wage levels. In the Final Rule, CMS modifies 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.

Despite comments requesting that CMS implement a two-year or three-year transition to the new OMB delineations, CMS will implement OMB Bulletin No. 13-01 through a one-year transition that will use a blended SNF PPS wage index for FY 2015. Under this policy, 50% of the wage index will use prior OMB delineations (the Core-Based Statistical Area geographic designations adopted in FY 2006) and 50% of the wage index will use the 2013 OMB delineations. CMS declined to accept recommendations from commenters that the agency implement the three-year transition proposed in the FY 2015 Inpatient Prospective Payment System rule, explaining that the one-year transition would “strike the best balance” and would “provide relief to the largest percentage of adversely impacted SNFs with the least impact on the rest of the facilities.”

COT OMRA Policy Update

CMS also adopted 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. In the Final Rule, CMS explains that effective October 1, 2014, a COT OMRA is permitted for patients classified into non-therapy RUGs, but only in certain limited circumstances. Specifically, the final rule now expressly permits providers to complete a COT OMRA for a resident who is not currently classified into a therapy RUG (or index maximized into a nursing RUG) if the resident had:

  1. Qualified for a therapy RUG on a prior assessment during the resident’s current Medicare Part A stay; and
  2.  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 nursing RUG and the assessment reference date of the COT OMRA that would reclassify the patient into a therapy RUG.

The Final Rule also explains that in the Proposed Rule, CMS provided an incorrect example of how this revised COT OMRA policy would apply. Specifically, the example included in the Proposed Rule was incorrect because the resident in the example is no longer in a RUG-IV therapy group, and therefore, an End of Therapy (EOT) OMRA would not be completed on the patient. As explained by commenters, this scenario would violate the rules associated with the EOT OMRA, which require that the resident be in a RUG-IV therapy group for this assessment to be completed.

CMS also explains that if providers previously misinterpreted the COT OMRA policy, they should “immediately address any assessments that were completed inappropriately.” Notably, however, until the Proposed Rule, CMS never stated in written guidance that COT OMRAs were prohibited in the circumstances set forth in the “new” policy above.


The Final Rule modifies 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 contended in the Proposed Rule 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. In the Final Rule, CMS adopts modifications 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. The Final Rule, at 42 C.F.R. § 488.433(e), specifically requires that a state obtain formal CMS approval of all plans for the effective use of CMPs. In addition, the Final Rule mandates that states make certain CMP-related information publicly available on a state website. Such information includes the dollar amount awarded for approved projects, the grantee or the contract recipients, the results of projects, and other “key information.” CMS states in preamble that it will post a report on approved CMP projects on an annual basis. CMS also will publish further operational details for states related to this regulation in the State Operations Manual.

Agency’s Observations on Therapy Utilization Trends

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

In the Final Rule, CMS responded to comments regarding the Proposed Rule’s discussion of therapy utilization trends. CMS observed that “given the comments highlighting the lack of medical evidence related to the appropriate amount of therapy in a given situation, it is all the more concerning that practice patterns would appear to be as homogenized as the data would suggest.” CMS also notes that it finds certain commenters’ explanations for the therapy trends “troubling and entirely inconsistent with the intended use of the SNF benefit.” In a separate discussion in the Final Rule, CMS states that it is currently working with contractors to “identify potential alternatives to the existing methodology used to pay for therapy services received under the SNF PPS,” but such research, and the potential, subsequent implementation of a new payment model, has no set timeframe.