Re: CMS-1469-P and CMS-1469-P2 – Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities – Update.

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325 Seventh Street, NW
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Tuesday, July 8th 2003

Thomas A. Scully, Administrator
Centers for Medicare & Medicaid Services
Attention: CMS – 1474 – P
Post Office Box 8010
Baltimore, MD 21244-8010

Dear Mr. Scully:

On behalf of our nearly 5,000 member hospitals, health care systems, networks and other providers of care, including about 1,300 hospital-based skilled nursing facilities (SNFs), the American Hospital Association (AHA) appreciates the opportunity to comment on the Centers for Medicare & Medicaid Services’ (CMS) proposed rule concerning the Skilled Nursing Facility Prospective Payment System (SNF PPS).  

The proposed rule issued May 16th in the Federal Register would update fiscal year (FY) 2004 payments to SNFs by 2.9 percent, the projected market basket rate; clarify the definition for distinct part units; and consider additional exemptions to the SNF consolidated billing process.  The proposed rule supplement published in the Federal Register on June 10th would increase the SNF payment update by 3.26 percent for FY 2004 because of an adjustment for previous market basket forecast errors.  

Payment for Medically Complex Patients
The AHA is pleased that CMS is re-examining the payment system to develop and refine a patient classification structure that more accurately reflects costs associated with medically complex patients, including non-therapy ancillary costs. Both Congress and CMS agree that the current system under-compensates providers for medically complex patients.  Since system refinements most likely won’t be implemented, until 2005, the payment system should be modified to provide additional payment for complex patients with multiple comorbidities, and associated nursing and non-therapy ancillary resource use.  

Analysis by the Medicare Payment Advisory Commission (MedPAC) staff shows that hospital-based SNFs tend to treat a much larger proportion of the less-profitable types of patients – those with complex needs that do not include rehabilitation therapy – than freestanding facilities.  According to MedPAC, hospital-based SNFs have a substantially higher case mix of patients than freestanding SNFs and may treat a disproportionate number of patients with expensive non-rehabilitation therapy needs.  Serving these more complex patients has led to severe financial problems for hospital-based SNFs.  As noted in its March 2003 report, one in four hospital-based SNFs has closed since the implementation of the SNF PPS.  MedPAC suggests these closures may indicate an imbalance in the payment distribution across different types of patients in the system.  

Data and research from MedPAC and others overwhelmingly reinforce the severe plight of hospital-based SNFs and highlight the need for decisive intervention to preserve access to care for the complex patients they serve.  We urge CMS to quickly complete its refinement of the system in a way that acknowledges more complex patients and adequately pays the costs of Medicare patients treated in hospital-based SNFs.  In the interim, an outlier program may be appropriate for covering the costs of very complex and high cost patients.

Distinct Part Units
In the proposed rule, CMS clarifies the definition and specific criteria for “distinct part” and proposes a new term, “composite distinct part.”  CMS states the concept of distinct part is broader than a hospital’s Medicare SNF, and proposes that the new regulatory distinct part definition also apply to Medicaid nursing facilities (NFs).  The AHA urges CMS to implement these definitions in a manner that neither adds administrative burdens on SNFs or NFs nor adversely affects their quality of care or financial status.  State Medicaid programs and other payors should not be required to use the new definitions, and the creation of the definitions should not hamper their ability to use the previous definitions.

Consolidated Billing
In the proposed rule, CMS asked for suggestions of services that fall within one of the four categories, and meet the standards of high cost and low probability within the SNF setting, that should be added to the list of services excluded from SNF PPS consolidated billing.  In addition to submitting services in the selected categories, the AHA is submitting additional items for consideration which meet the stated criteria.

Chemotherapy Items and Administration, Radioisotopes, and Customized Prosthetics.   CMS should exclude drugs (i.e. J1260, J9202 and Q0136) and administration of IV infusion (90780 and 90781) that accompany chemotherapy.

Additional High Cost Items for Exclusion. The following very high costs items have a low probability of utilization, and as such should be considered as additional exclusions.  Many of these are hospital-based services that are outside the domain of a SNF.

  • PET scans
  • Dialysis
  • Magnetic resonance angiography
  • Nuclear Medicine
  • Ultrasonic procedures and duplex scan
  • Hyperbaric oxygen
  • Administration of intravenous lines

Finally, we urge CMS to offer a full 60-day comment period from the date of publication, rather than 60 days from display at the Federal Register.  Providers rely on publication in the Federal Register and do not receive proposed rules until they are published.  CMS should take the necessary steps to ensure the full 60 days from publication and adequate time for CMS review of comments is provided in the future.

Thank you for considering our remarks on the proposed rule.  If you have any questions about our comments, please feel free to contact Rochelle Archuleta, senior associate director for policy, at (202) 626-2320 or me.



Rick Pollack
Executive Vice President


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