CMS Issues SNF PPS Update for 2008

VHCA (8/3/2007)

On July 31, 2007, the Centers for Medicare & Medicaid Services (CMS) issued its final rule for the skilled nursing facility (SNF) prospective payment system (PPS) fiscal year FY 2008 update: Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities for FY 2008, Final Rule. The final rule has now been published in the Federal Register.

On August 2nd, the American Health Care Association (AHCA) posted its summary and analysis of the final rule.  Members providing SNF services are strongly encouraged to review this document.

The final rule provides for a full market basket increase of 3.3% beginning October 1, 2007, which CMS estimates would increase SNF payments by approximately $690 million in FY 2008. CMS revised and rebased the market basket update methodology to use 2004-based market basket cost weights and price proxies rather than the current 1997-based market basket cost weights and price proxies. CMS will continue to use the hospital wage index to adjust the labor-related portion of the federal rate. The labor-related weight is 70.152 percent for FY 2008 using the 2004-based market basket – down from 75.839 percent for FY 2007 using the 1997-based market basket.

The one-year transition from the old Metropolitan Statistical Area-based (MSA-based) wage index to the new Core Based Statistical Area-based (CBSA-based) wage index using a blended 50 percent CBSA- and 50 percent MSA-based wage index had been completed with FY 2007. For FY 2008, CMS will use the full CBSA-based wage index for the SNF PPS.

The distributional effect due to the full transition to the CBSA-based wage index and the final rule overall are highlighted in the following table:

Impact of the Final Rule

	Number Of Facilities	Wage Index Effect	Total FY 2008 Change
Total	15,325	0.0%	3.3%
Urban	10,476	-0.2%	3.1%
Rural	4,849	1.0%	4.3%
Hospital-based urban	1,450	0.0%	3.3%
Freestanding urban	9,026	-0.2%	3.1%
Hospital-based rural	1,130	1.2%	4.5%
Freestanding rural	3,719	1.0%	4.3%
Government	675	0.1%	3.4%
Proprietary	11,178	0.0%	3.3%
Voluntary	3,472	-0.1%	3.2%

While SNF providers should be pleased to receive the full market basket update provided under current law, it is also recognized that the 110th Congress continues to seek funds that could be used to pay for various legislative initiatives. In fact, the House of Representatives passed the Children’s Health And Medicare Protection (CHAMP) Act of 2007 on August 2, 2007. The bill would reauthorize the Children’s Health Insurance Program (CHIP) and includes a provision that would eliminate the SNF market basket update for FY 2008, redirecting $2.7 billion in Medicare Part A SNF provider payments over the next five years to “pay for” CHIP and other CHAMP Act provisions.

AHCA anticipates that these important battles around reimbursement issues will have major consequences for long term care providers over the next twelve months. These issues include:

• SNF Market Basket – As noted above, the increase in the SNF market basket for FY 2008 is under attack in Congress;
• 75 % Rule – AHCA strongly opposes the efforts by hospitals to either freeze or overturn full implementation of the rule. Full implementation would allow Medicare beneficiaries to receive the same high-quality rehabilitation services in the SNF setting and achieve savings to the Medicare program; and 
• Medicare Part B Therapy Caps – AHCA continues to work with congressional champions to extend the therapy caps exceptions process until a new acuity-based system can be implemented.