42 U.S.C. § 1395yy : US Code - Section 1395YY: Payment to skilled nursing facilities for routine service costs

Search 42 U.S.C. § 1395yy : US Code - Section 1395YY: Payment to skilled nursing facilities for routine service costs

(a) Per diem limitations
The Secretary, in determining the amount of the payments which
may be made under this subchapter with respect to routine service
costs of extended care services shall not recognize as reasonable
(in the efficient delivery of health services) per diem costs of
such services to the extent that such per diem costs exceed the
following per diem limits, except as otherwise provided in this
section:
(1) With respect to freestanding skilled nursing facilities
located in urban areas, the limit shall be equal to 112 percent
of the mean per diem routine service costs for freestanding
skilled nursing facilities located in urban areas.
(2) With respect to freestanding skilled nursing facilities
located in rural areas, the limit shall be equal to 112 percent
of the mean per diem routine service costs for freestanding
skilled nursing facilities located in rural areas.
(3) With respect to hospital-based skilled nursing facilities
located in urban areas, the limit shall be equal to the sum of
the limit for freestanding skilled nursing facilities located in
urban areas, plus 50 percent of the amount by which 112 percent
of the mean per diem routine service costs for hospital-based
skilled nursing facilities located in urban areas exceeds the
limit for freestanding skilled nursing facilities located in
urban areas.
(4) With respect to hospital-based skilled nursing facilities
located in rural areas, the limit shall be equal to the sum of
the limit for freestanding skilled nursing facilities located in
rural areas, plus 50 percent of the amount by which 112 percent
of the mean per diem routine service costs for hospital-based
skilled nursing facilities located in rural areas exceeds the
limit for freestanding skilled nursing facilities located in
rural areas.
In applying this subsection the Secretary shall make appropriate
adjustments to the labor related portion of the costs based upon an
appropriate wage index, and shall, for cost reporting periods
beginning on or after October 1, 1992, on or after October 1, 1995,
and every 2 years thereafter, provide for an update to the per diem
cost limits described in this subsection, except that the limits
effective for cost reporting periods beginning on or after October
1, 1997, shall be based on the limits effective for cost reporting
periods beginning on or after October 1, 1996.
(b) Excess overhead allocations for hospital-based facilities
With respect to a hospital-based skilled nursing facility, the
Secretary may not recognize as reasonable the portion of the cost
differences between hospital-based and freestanding skilled nursing
facilities attributable to excess overhead allocations.
(c) Adjustments in limitations; publication of data
The Secretary may make adjustments in the limits set forth in
subsection (a) of this section with respect to any skilled nursing
facility to the extent the Secretary deems appropriate, based upon
case mix or circumstances beyond the control of the facility. The
Secretary shall publish the data and criteria to be used for
purposes of this subsection on an annual basis.
(d) Access to skilled nursing facilities
(1) Subject to subsection (e) of this section, any skilled
nursing facility may choose to be paid under this subsection on the
basis of a prospective payment for all routine service costs
(including the costs of services required to attain or maintain the
highest practicable physical, mental, and psychosocial well-being
of each resident eligible for benefits under this subchapter) and
capital-related costs of extended care services provided in a cost
reporting period if such facility had, in the preceding cost
reporting period, fewer than 1,500 patient days with respect to
which payments were made under this subchapter. Such prospective
payment shall be in lieu of payments which would otherwise be made
for routine service costs pursuant to section 1395x(v) of this
title and subsections (a) through (c) of this section and capital-
related costs pursuant to section 1395x(v) of this title. This
subsection shall not apply to a facility for any cost reporting
period immediately following a cost reporting period in which such
facility had 1,500 or more patient days with respect to which
payments were made under this subchapter, without regard to whether
payments were made under this subsection during such preceding cost
reporting period.
(2)(A) The amount of the payment under this section shall be
determined on a per diem basis.
(B) Subject to the limitations of subparagraph (C), for skilled
nursing facilities located -
(i) in an urban area, the amount shall be equal to 105 percent
of the mean of the per diem reasonable routine service and
capital-related costs of extended care services for skilled
nursing facilities in urban areas within the same region,
determined without regard to the limitations of subsection (a) of
this section and adjusted for different area wage levels, and
(ii) in a rural area the amount shall be equal to 105 percent
of the mean of the per diem reasonable routine service and
capital-related costs of extended care services for skilled
nursing facilities in rural areas within the same region,
determined without regard to the limitations of subsection (a) of
this section and adjusted for different area wage levels.
(C) The per diem amounts determined under subparagraph (B) shall
not exceed the limit on routine service costs determined under
subsection (a) of this section with respect to the facility,
adjusted to take into account average capital-related costs with
respect to the type and location of the facility.
(3) For purposes of this subsection, urban and rural areas shall
be determined in the same manner as for purposes of subsection (a)
of this section, and the term "region" shall have the same meaning
as under section 1395ww(d)(2)(D) of this title.
(4) The Secretary shall establish the prospective payment amounts
for cost reporting periods beginning in a fiscal year at least 90
days prior to the beginning of such fiscal year, on the basis of
the most recent data available for a 12-month period. A skilled
nursing facility must notify the Secretary of its intention to be
paid pursuant to this subsection for a cost reporting period no
later than 30 days before the beginning of that period.
(5) The Secretary shall provide for a simplified cost report to
be filed by facilities being paid pursuant to this subsection,
which shall require only the cost information necessary for
determining prospective payment amounts pursuant to paragraph (2)
and reasonable costs of ancillary services.
(6) In lieu of payment on a cost basis for ancillary services
provided by a facility which is being paid pursuant to this
subsection, the Secretary may pay for such ancillary services on a
reasonable charge basis if the Secretary determines that such
payment basis will provide an equitable level of reimbursement and
will ease the reporting burden of the facility.
(7) In computing the rates of payment to be made under this
subsection, there shall be taken into account the costs described
in the last sentence of section 1395x(v)(1)(E) of this title
(relating to compliance with nursing facility requirements and of
conducting nurse aide training and competency evaluation programs
and competency evaluation programs).
(e) Prospective payment
(1) Payment provision
Notwithstanding any other provision of this subchapter, subject
to paragraphs (7), (11), and (12), the amount of the payment for
all costs (as defined in paragraph (2)(B)) of covered skilled
nursing facility services (as defined in paragraph (2)(A)) for
each day of such services furnished -
(A) in a cost reporting period during the transition period
(as defined in paragraph (2)(E)), is equal to the sum of -
(i) the non-Federal percentage of the facility-specific per
diem rate (computed under paragraph (3)), and
(ii) the Federal percentage of the adjusted Federal per
diem rate (determined under paragraph (4)) applicable to the
facility; and
(B) after the transition period is equal to the adjusted
Federal per diem rate applicable to the facility.
(2) Definitions
For purposes of this subsection:
(A) Covered skilled nursing facility services
(i) In general
The term "covered skilled nursing facility services" -
(I) means post-hospital extended care services as defined
in section 1395x(i) of this title for which benefits are
provided under part A of this subchapter; and
(II) includes all items and services (other than items
and services described in clauses (ii), (iii), and (iv))
for which payment may be made under part B of this
subchapter and which are furnished to an individual who is
a resident of a skilled nursing facility during the period
in which the individual is provided covered post-hospital
extended care services.
(ii) Services excluded
Services described in this clause are physicians' services,
services described by clauses (i) and (ii) of section
1395x(s)(2)(K) of this title, certified nurse-midwife
services, qualified psychologist services, services of a
certified registered nurse anesthetist, items and services
described in subparagraphs (F) and (O) of section 1395x(s)(2)
of this title, and, only with respect to services furnished
during 1998, the transportation costs of electrocardiogram
equipment for electrocardiogram test services (HCPCS Code
R0076). Services described in this clause do not include any
physical, occupational, or speech-language therapy services
regardless of whether or not the services are furnished by,
or under the supervision of, a physician or other health care
professional.
(iii) Exclusion of certain additional items and services
Items and services described in this clause are the
following:
(I) Ambulance services furnished to an individual in
conjunction with renal dialysis services described in
section 1395x(s)(2)(F) of this title.
(II) Chemotherapy items (identified as of July 1, 1999,
by HCPCS codes J9000-J9020; J9040-J9151; J9170-J9185; J9200-
J9201; J9206-J9208; J9211; J9230-J9245; and J9265-J9600
(and as subsequently modified by the Secretary)) and any
additional chemotherapy items identified by the Secretary.
(III) Chemotherapy administration services (identified as
of July 1, 1999, by HCPCS codes 36260-36262; 36489; 36530-
36535; 36640; 36823; and 96405-96542 (and as subsequently
modified by the Secretary)) and any additional chemotherapy
administration services identified by the Secretary.
(IV) Radioisotope services (identified as of July 1,
1999, by HCPCS codes 79030-79440 (and as subsequently
modified by the Secretary)) and any additional radioisotope
services identified by the Secretary.
(V) Customized prosthetic devices (commonly known as
artificial limbs or components of artificial limbs) under
the following HCPCS codes (as of July 1, 1999 (and as
subsequently modified by the Secretary)), and any
additional customized prosthetic devices identified by the
Secretary, if delivered to an inpatient for use during the
stay in the skilled nursing facility and intended to be
used by the individual after discharge from the facility:
L5050-L5340; L5500-L5611; L5613-L5986; L5988; L6050-L6370;
L6400-L6880; L6920-L7274; and L7362-7366.
(iv) Exclusion of certain rural health clinic and federally
qualified health center services
Services described in this clause are -
(I) rural health clinic services (as defined in paragraph
(1) of section 1395x(aa) of this title); and
(II) federally qualified health center services (as
defined in paragraph (3) of such section);
that would be described in clause (ii) if such services were
furnished by an individual not affiliated with a rural health
clinic or a federally qualified health center.
(B) All costs
The term "all costs" means routine service costs, ancillary
costs, and capital-related costs of covered skilled nursing
facility services, but does not include costs associated with
approved educational activities.
(C) Non-Federal percentage; Federal percentage
For -
(i) the first cost reporting period (as defined in
subparagraph (D)) of a facility, the "non-Federal percentage"
is 75 percent and the "Federal percentage" is 25 percent;
(ii) the next cost reporting period of such facility, the
"non-Federal percentage" is 50 percent and the "Federal
percentage" is 50 percent; and
(iii) the subsequent cost reporting period of such
facility, the "non-Federal percentage" is 25 percent and the
"Federal percentage" is 75 percent.
(D) First cost reporting period
The term "first cost reporting period" means, with respect to
a skilled nursing facility, the first cost reporting period of
the facility beginning on or after July 1, 1998.
(E) Transition period
(i) In general
The term "transition period" means, with respect to a
skilled nursing facility, the 3 cost reporting periods of the
facility beginning with the first cost reporting period.
(ii) Treatment of new skilled nursing facilities
In the case of a skilled nursing facility that first
received payment for services under this subchapter on or
after October 1, 1995, payment for such services shall be
made under this subsection as if all services were furnished
after the transition period.
(3) Determination of facility specific per diem rates
The Secretary shall determine a facility-specific per diem rate
for each skilled nursing facility not described in paragraph
(2)(E)(ii) for a cost reporting period as follows:
(A) Determining base payments
The Secretary shall determine, on a per diem basis, the total
of -
(i) the allowable costs of extended care services for the
facility for cost reporting periods beginning in fiscal year
1995, including costs associated with facilities described in
subsection (d) of this section, with appropriate adjustments
(as determined by the Secretary) to non-settled cost reports
or, in the case of a facility participating in the Nursing
Home Case-Mix and Quality Demonstration (RUGS-III), the RUGS-
III rate received by the facility during the cost reporting
period beginning in 1997, and
(ii) an estimate of the amounts that would be payable under
part B of this subchapter (disregarding any applicable
deductibles, coinsurance, and copayments) for covered skilled
nursing facility services described in paragraph
(2)(A)(i)(II) furnished during the applicable cost reporting
period described in clause (i) to an individual who is a
resident of the facility, regardless of whether or not the
payment was made to the facility or to another entity.
In making appropriate adjustments under clause (i), the
Secretary shall take into account exceptions and shall take
into account exemptions but, with respect to exemptions, only
to the extent that routine costs do not exceed 150 percent of
the routine cost limits otherwise applicable but for the
exemption.
(B) Update to first cost reporting period
The Secretary shall update the amount determined under
subparagraph (A), for each cost reporting period after the
applicable cost reporting period described in subparagraph
(A)(i) and up to the first cost reporting period by a factor
equal to the skilled nursing facility market basket percentage
increase minus 1.0 percentage point.
(C) Updating to applicable cost reporting period
The Secretary shall update the amount determined under
subparagraph (B) for each cost reporting period beginning with
the first cost reporting period and up to and including the
cost reporting period involved by a factor equal to the
facility-specific update factor.
(D) Facility-specific update factor
For purposes of this paragraph, the "facility-specific update
factor" for cost reporting periods beginning during -
(i) during each of fiscal years 1998 and 1999, is equal to
the skilled nursing facility market basket percentage
increase for such fiscal year minus 1 percentage point, and
(ii) during each subsequent fiscal year is equal to the
skilled nursing facility market basket percentage increase
for such fiscal year.
(4) Federal per diem rate
(A) Determination of historical per diem for facilities
For each skilled nursing facility that received payments for
post-hospital extended care services during a cost reporting
period beginning in fiscal year 1995 and that was subject to
(and not exempted from) the per diem limits referred to in
paragraph (1) or (2) of subsection (a) of this section (and
facilities described in subsection (d) of this section), the
Secretary shall estimate, on a per diem basis for such cost
reporting period, the total of -
(i) the allowable costs of extended care services
(excluding exceptions payments) for the facility for cost
reporting periods beginning in 1995 with appropriate
adjustments (as determined by the Secretary) to non-settled
cost reports, and
(ii) an estimate of the amounts that would be payable under
part B of this subchapter (disregarding any applicable
deductibles, coinsurance, and copayments) for covered skilled
nursing facility services described in paragraph
(2)(A)(i)(II) furnished during such period to an individual
who is a resident of the facility, regardless of whether or
not the payment was made to the facility or to another
entity.
(B) Update to first fiscal year
The Secretary shall update the amount determined under
subparagraph (A), for each cost reporting period after the cost
reporting period described in subparagraph (A)(i) and up to the
first cost reporting period by a factor equal to the skilled
nursing facility market basket percentage increase reduced (on
an annualized basis) by 1 percentage point.
(C) Computation of standardized per diem rate
The Secretary shall standardize the amount updated under
subparagraph (B) for each facility by -
(i) adjusting for variations among facilities by area in
the average facility wage level per diem, and
(ii) adjusting for variations in case mix per diem among
facilities.
(D) Computation of weighted average per diem rates
(i) All facilities
The Secretary shall compute a weighted average per diem
rate for all facilities by computing an average of the
standardized amounts computed under subparagraph (C),
weighted for each facility by the number of days of extended
care services furnished during the cost reporting period
referred to in subparagraph (A).
(ii) Freestanding facilities
The Secretary shall compute a weighted average per diem
rate for freestanding facilities by computing an average of
the standardized amounts computed under subparagraph (C) only
for such facilities, weighted for each facility by the number
of days of extended care services furnished during the cost
reporting period referred to in subparagraph (A).
(iii) Separate computation
The Secretary may compute and apply such averages
separately for facilities located in urban and rural areas
(as defined in section 1395ww(d)(2)(D) of this title).
(E) Updating
(i) Initial period
For the initial period beginning on July 1, 1998, and
ending on September 30, 1999, the Secretary shall compute for
skilled nursing facilities an unadjusted Federal per diem
rate equal to the average of the weighted average per diem
rates computed under clauses (i) and (ii) of subparagraph
(D), increased by skilled nursing facility market basket
percentage change for such period minus 1 percentage point.
(ii) Subsequent fiscal years
The Secretary shall compute an unadjusted Federal per diem
rate equal to the Federal per diem rate computed under this
subparagraph -
(I) for fiscal year 2000, the rate computed for the
initial period described in clause (i), increased by the
skilled nursing facility market basket percentage change
for the initial period minus 1 percentage point;
(II) for fiscal year 2001, the rate computed for the
previous fiscal year increased by the skilled nursing
facility market basket percentage change for the fiscal
year;
(III) for each of fiscal years 2002 and 2003, the rate
computed for the previous fiscal year increased by the
skilled nursing facility market basket percentage change
for the fiscal year involved minus 0.5 percentage points;
and
(IV) for each subsequent fiscal year, the rate computed
for the previous fiscal year increased by the skilled
nursing facility market basket percentage change for the
fiscal year involved.
(F) Adjustment for case mix creep
Insofar as the Secretary determines that the adjustments
under subparagraph (G)(i) for a previous fiscal year (or
estimates that such adjustments for a future fiscal year) did
(or are likely to) result in a change in aggregate payments
under this subsection during the fiscal year that are a result
of changes in the coding or classification of residents that do
not reflect real changes in case mix, the Secretary may adjust
unadjusted Federal per diem rates for subsequent fiscal years
so as to eliminate the effect of such coding or classification
changes.
(G) Determination of Federal rate
The Secretary shall compute for each skilled nursing facility
for each fiscal year (beginning with the initial period
described in subparagraph (E)(i)) an adjusted Federal per diem
rate equal to the unadjusted Federal per diem rate determined
under subparagraph (E), as adjusted under subparagraph (F), and
as further adjusted as follows:
(i) Adjustment for case mix
The Secretary shall provide for an appropriate adjustment
to account for case mix. Such adjustment shall be based on a
resident classification system, established by the Secretary,
that accounts for the relative resource utilization of
different patient types. The case mix adjustment shall be
based on resident assessment data and other data that the
Secretary considers appropriate.
(ii) Adjustment for geographic variations in labor costs
The Secretary shall adjust the portion of such per diem
rate attributable to wages and wage-related costs for the
area in which the facility is located compared to the
national average of such costs using an appropriate wage
index as determined by the Secretary. Such adjustment shall
be done in a manner that does not result in aggregate
payments under this subsection that are greater or less than
those that would otherwise be made if such adjustment had not
been made.
(iii) Adjustment for exclusion of certain additional items
and services
The Secretary shall provide for an appropriate proportional
reduction in payments so that beginning with fiscal year
2001, the aggregate amount of such reductions is equal to the
aggregate increase in payments attributable to the exclusion
effected under clause (iii) of paragraph (2)(A).
(H) Publication of information on per diem rates
The Secretary shall provide for publication in the Federal
Register, before May 1, 1998 (with respect to fiscal period
described in subparagraph (E)(i)) and before the August 1
preceding each succeeding fiscal year (with respect to that
succeeding fiscal year), of -
(i) the unadjusted Federal per diem rates to be applied to
days of covered skilled nursing facility services furnished
during the fiscal year,
(ii) the case mix classification system to be applied under
subparagraph (G)(i) with respect to such services during the
fiscal year, and
(iii) the factors to be applied in making the area wage
adjustment under subparagraph (G)(ii) with respect to such
services.
(5) Skilled nursing facility market basket index and percentage
For purposes of this subsection:
(A) Skilled nursing facility market basket index
The Secretary shall establish a skilled nursing facility
market basket index that reflects changes over time in the
prices of an appropriate mix of goods and services included in
covered skilled nursing facility services.
(B) Skilled nursing facility market basket percentage
The term "skilled nursing facility market basket percentage"
means, for a fiscal year or other annual period and as
calculated by the Secretary, the percentage change in the
skilled nursing facility market basket index (established under
subparagraph (A)) from the midpoint of the prior fiscal year
(or period) to the midpoint of the fiscal year (or other
period) involved.
(6) Submission of resident assessment data
A skilled nursing facility, or a facility described in
paragraph (7)(B), shall provide the Secretary, in a manner and
within the timeframes prescribed by the Secretary, the resident
assessment data necessary to develop and implement the rates
under this subsection. For purposes of meeting such requirement,
a skilled nursing facility, or a facility described in paragraph
(7), may submit the resident assessment data required under
section 1395i-3(b)(3) of this title, using the standard
instrument designated by the State under section 1395i-3(e)(5) of
this title.
(7) Treatment of medicare swing bed hospitals
(A) Transition
Subject to subparagraph (C), the Secretary shall determine an
appropriate manner in which to apply this subsection to the
facilities described in subparagraph (B) (other than critical
access hospitals), taking into account the purposes of this
subsection, and shall provide that at the end of the transition
period (as defined in paragraph (2)(E)) such facilities shall
be paid only under this subsection. Payment shall not be made
under this subsection to such facilities for cost reporting
periods beginning before such date (not earlier than July 1,
1999) as the Secretary specifies.
(B) Facilities described
The facilities described in this subparagraph are facilities
that have in effect an agreement described in section 1395tt of
this title.
(C) Exemption from PPS of swing-bed services furnished in
critical access hospitals
The prospective payment system established under this
subsection shall not apply to services furnished by a critical
access hospital pursuant to an agreement under section 1395tt
of this title.
(8) Limitation on review
There shall be no administrative or judicial review under
section 1395ff of this title, 1395oo of this title, or otherwise
of -
(A) the establishment of Federal per diem rates under
paragraph (4), including the computation of the standardized
per diem rates under paragraph (4)(C), adjustments and
corrections for case mix under paragraphs (4)(F) and (4)(G)(i),
adjustments for variations in labor-related costs under
paragraph (4)(G)(ii), and adjustments under paragraph
(4)(G)(iii);
(B) the establishment of facility specific rates before July
1, 1999 (except any determination of costs paid under part A of
this subchapter); and
(C) the establishment of transitional amounts under paragraph
(7).
(9) Payment for certain services
In the case of an item or service furnished to a resident of a
skilled nursing facility or a part of a facility that includes a
skilled nursing facility (as determined under regulations) for
which payment would (but for this paragraph) be made under part B
of this subchapter in an amount determined in accordance with
section 1395l(a)(2)(B) of this title, the amount of the payment
under such part shall be the amount provided under the fee
schedule for such item or service. In the case of an item or
service described in clause (iii) of paragraph (2)(A) that would
be payable under part A of this subchapter but for the exclusion
of such item or service under such clause, payment shall be made
for the item or service, in an amount otherwise determined under
part B of this subchapter for such item or service, from the
Federal Hospital Insurance Trust Fund under section 1395i of this
title (rather than from the Federal Supplementary Medical
Insurance Trust Fund under section 1395t of this title).
(10) Required coding
No payment may be made under part B of this subchapter for
items and services (other than services described in paragraph
(2)(A)(ii)) furnished to an individual who is a resident of a
skilled nursing facility or of a part of a facility that includes
a skilled nursing facility (as determined under regulations),
unless the claim for such payment includes a code (or codes)
under a uniform coding system specified by the Secretary that
identifies the items or services furnished.
(11) Permitting facilities to waive 3-year transition
Notwithstanding paragraph (1)(A), a facility may elect to have
the amount of the payment for all costs of covered skilled
nursing facility services for each day of such services furnished
in cost reporting periods beginning no earlier than 30 days
before the date of such election determined pursuant to paragraph
(1)(B).
(12) Adjustment for residents with AIDS
(A) In general
Subject to subparagraph (B), in the case of a resident of a
skilled nursing facility who is afflicted with acquired immune
deficiency syndrome (AIDS), the per diem amount of payment
otherwise applicable (determined without regard to any increase
under section 101 of the Medicare, Medicaid, and SCHIP Balanced
Budget Refinement Act of 1999, or under section 314(a) of
Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000), shall be increased by 128 percent to
reflect increased costs associated with such residents.
(B) Sunset
Subparagraph (A) shall not apply on and after such date as
the Secretary certifies that there is an appropriate adjustment
in the case mix under paragraph (4)(G)(i) to compensate for the
increased costs associated with residents described in such
subparagraph.