[Federal Register: June 10, 2003 (Volume 68, Number 111)]
[Proposed Rules]
[Page 34767-34773]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10jn03-24]
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Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Part 413
Medicare Program; Prospective Payment System and Consolidated Billing
for Skilled Nursing Facilities--Update; Proposed Rule
[[Page 34768]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 413
[CMS-1469-P2]
RIN 0938-AL20
Medicare Program; Prospective Payment System and Consolidated
Billing for Skilled Nursing Facilities--Update
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: In this proposed rule, we are considering an adjustment to the
annual update for skilled nursing facilities (SNFs) that would account
for forecast errors. In addition, we are proposing to make a technical
correction to correct a misspelling in existing regulation text. This
proposed rule supplements the proposed rule that we published
previously in the Federal Register on May 16, 2003 (68 FR 26758), which
included proposed updates to the payment rates used under the
prospective payment system (PPS) for SNFs, for fiscal year (FY) 2004,
as required by section 1888(e) of the Social Security Act (the Act), as
amended by the Medicare, Medicaid, and State Children's Health
Insurance Program (SCHIP) Balanced Budget Refinement Act of 1999 (BBRA)
and the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA), relating to Medicare payments and
consolidated billing for SNFs.
DATES: We will consider comments if we receive them at the appropriate
address, as provided below, no later than 5 p.m. on July 7, 2003 (see
section VI of this proposed rule for a discussion of the comment
period).
ADDRESSES: Mail written comments (one original and three copies) to the
following address:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1469-P2, P.O. Box 8013, Baltimore, MD
21244-8013.
If you prefer, you may deliver your written comments (one original
and three copies) to one of the following addresses:
Hubert H. Humphrey Building, Room 443-G, 200 Independence Avenue, SW.,
Washington, DC 20201, or Centers for Medicare & Medicaid Services, Room
C5-14-03, 7500 Security Boulevard, Baltimore, MD 21244-8013.
Comments mailed to those addresses designated for courier delivery
may be delayed and could be considered late. Because of staffing and
resource limitations, we cannot accept comments by facsimile (FAX)
transmission. Please refer to file code CMS-1469-P2 on each comment.
Comments received timely will be available for public inspection as
they are received, generally beginning approximately 3 weeks after
publication of this document, in Room C5-12-08 of the Centers for
Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore,
Maryland, Monday through Friday of each week from 8:30 a.m. to 4 p.m.
Please call (410) 786-7197 to make an appointment to view comments.
FOR FURTHER INFORMATION CONTACT: Stephen Heffler, (410) 786-1211 (for
information related to the SNF Market Basket Index and forecast error
adjustments). Bill Ullman, (410) 786-5667, and Sheila Lambowitz, (410)
786-7605 (for general information).
SUPPLEMENTARY INFORMATION: To assist readers in referencing sections
contained in this document, we are providing the following Table of
Contents.
Table of Contents
I. Background and Purpose of this Proposed Rule
II. Proposed Adjustment to the Annual Update to Account for Forecast
Error in the SNF Market Basket
A. Background
B. Possible Approaches
C. SNF Market Basket Forecast Error for FYs 2000 through 2002
D. Process for Adjusting for SNF Market Basket Forecast Error
III. Solicitation of Comments on Quality of Care Efforts under SNF
PPS
IV. Provisions of the Proposed Rule
V. Collection of Information Requirements
VI. Response to Public Comments
VII. Regulatory Impact Analysis
Regulation Text
I. Background and Purpose of this Proposed Rule
Annual updates to the prospective payment system (PPS) rates are
required by section 1888(e) of the Social Security Act (the Act), as
amended by the Medicare, Medicaid, and State Children's Health
Insurance Program (SCHIP) Balanced Budget Refinement Act of 1999 (BBRA,
Pub. L. 106-113), and the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (BIPA, Pub. L. 106-554),
relating to Medicare payments and consolidated billing for SNFs.
On May 16, 2003, we published in the Federal Register a proposed
rule (68 FR 26758) in connection with the Medicare PPS for skilled
nursing facilities (SNFs). The proposed rule included updated payment
rates for fiscal year (FY) 2004, as well as a number of proposed
revisions and technical corrections to the associated regulations. We
are now publishing this supplemental proposed rule in order to propose
an additional possible change, concerning the regulations in 42 CFR
413.337(d)(2) for determining the annual update to the SNF payment
rates. Specifically, we are considering an adjustment that would
account for forecast error. In addition, we propose to make a technical
correction to correct a misspelling in the existing regulation text at
Sec. 413.345.
We note that the issue of establishing an adjustment to account for
forecast error is one that we have considered previously. To date, we
have not implemented such an adjustment, because we were concerned that
it might tend to detract from the prospective nature of the SNF payment
system. Additionally, we note that, in the past, our evaluation of a
possible adjustment to account for forecast error has not taken place
in isolation, but rather, within the broader context of considering the
possibility of developing a SNF-specific update framework, which would
keep track of the various factors that affect costs and payment per
case. This would include not only the market basket, but also other
factors as well, such as productivity changes, intensity changes, and
adjustment for case-mix creep. For example, the May 12, 1998 interim
final rule on the SNF PPS (63 FR 26293) discussed the possibility of
adopting a forecast error adjustment, similar to the one employed in
the existing update framework for the inpatient hospital PPS:
We are considering a mechanism to adjust future SNF PPS rates
for forecast errors. * * * In any given year, there may be
unanticipated price fluctuations that may result in differences
between the actual increases in prices faced by SNFs and the
forecast used in calculating the update factors.
We further noted that if such a mechanism were adopted,
* * * an adjustment would be made only if the forecasted market
basket percentage change for any year differs from the actual
percentage change by 0.25 percentage points or more. There would be
a 2-year lag between the forecast and the measurement of the
forecast error. Thus, for example, we would adjust for an error in
forecasting the 1997 market basket percentage used to compute the
PPS rates effective with this interim final
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rule through an adjustment to the fiscal year 1999 update to the SNF
PPS rates.
As noted in the May 12, 1998 interim final rule, the existing
update framework for the inpatient hospital capital PPS already
includes an adjustment to account for forecast error (see the
regulations at Sec. 412.308(c)(1)(ii)). The update framework for the
inpatient hospital operating PPS includes a similar forecast error
adjustment as well. However, the latter framework serves as the basis
for making a recommendation to the Congress, which then establishes the
actual update amount for the operating PPS through legislation. In the
context of discussing a possible update framework for the SNF PPS in
the FY 2002 proposed rule published on May 10, 2001 (66 FR 24018
through 24019), we observed that in this existing update framework,
a forecast error adjustment has typically been included, to reflect
that the updates are set prospectively and some degree of forecast
error is inevitable. In the case of the inpatient hospital PPS, this
adjustment is made on a two-year lag and only if the error exceeds a
defined threshold (0.25 percentage points).
Further, in the FY 2002 final rule published on July 31, 2001 (66
FR 39586), one commenter specifically suggested establishing a
mechanism in the SNF PPS to account for forecast error. In response, we
noted that the development of a SNF-specific update framework ``* * *
would give us the ability to factor in a forecast error adjustment in
our recommendation for an update to SNF payments.''
As the preceding discussion indicates, our consideration of
adopting a mechanism for making forecast error adjustments has, to
date, occurred exclusively within the broader context of developing a
SNF-specific update framework, where the end result would be solely a
recommendation to the Congress, rather than an actual adjustment to the
payment rates. However, it might also be possible to establish a
forecast error adjustment mechanism independently as a separate
initiative, as we discuss in the following sections of this proposed
rule.
II. Proposed Adjustment to the Annual Increase in the SNF Market Basket
Index Amount to Account for Forecast Error
A. Background
Since the implementation of the SNF PPS in July 1998, annual
updates to the national PPS rate have been based on the forecasted
percent change in the SNF market basket for the upcoming fiscal year.
The SNF market basket was described in detail in the interim final rule
that we published on May 12, 1998 (63 FR 26289), and in the final rule
published on July 31, 2001 (65 FR 39581). The use of a forecasted
market basket percent change is consistent with section 1888(e)(5) of
the Act, which directs us to establish a market basket index for SNFs
that ``* * * reflects changes over time in the prices of an appropriate
mix of goods and services'' included in covered SNF services, and to
calculate the percentage change in that index from the midpoint of the
prior fiscal year to the midpoint of the current one. It is also
consistent with the methodology used for other prospective payment
systems, most notably the inpatient hospital PPS.
The forecast of the SNF market basket percent change for the
upcoming fiscal year is based on data that are available when the final
rule is developed. This generally means that historical data that are
available through the first quarter of the current calendar year are
used to develop forecasts for the upcoming fiscal year. For example,
the SNF market basket percent change for the FY 2003 payment update was
forecast in June 2002, with historical data available through the first
quarter of 2002. We purchase the forecasts of the individual price
series in the SNF market basket from a leading macroeconometric
forecasting firm, Global Insights, Inc. We define the SNF market basket
forecast error as the difference in the forecasted percent change in
the SNF market basket and the actual percent change in the SNF market
basket for a given period, generally the fiscal year.
Upon further consideration of the language of the statute and
consistent with the use of a forecast to calculate the market basket
percentage under section 1888(e)(5) of the Act, we believe that the
statute provides us with authority to make adjustments to the update to
the SNF per diem amount computed under section 1888(e)(4)(E)(ii)(IV) of
the Act to adjust for differences in the forecasted percent change in
the SNF market basket and the actual percent change in the SNF market
basket, determined on the basis of later acquired, actual data.
Pursuant to section 1888(e)(4)(E)(ii)(IV) of the Act, the SNF market
basket percentage calculated by the Secretary is used to update the per
diem rate computed for the prior fiscal year in order to determine the
unadjusted Federal per diem rates to be applied during the upcoming
fiscal year. Consistent with section 1888(e)(4)(H)(i) of the Act,
before August 1, the Secretary shall publish in the Federal Register
``the unadjusted Federal per diem rates to be applied to days of
covered skilled nursing facility services furnished during the fiscal
year.'' There is, however, no requirement that this published figure be
used for purposes of computing the payment rate for the following
fiscal year. Rather, the annual update to the SNF per diem rate is
equal to ``the rate computed for the previous fiscal year increased by
the skilled nursing facility market basket percentage change for the
fiscal year involved'' (section 1888(e)(4)(E)(ii)(IV) of the Act).
Accordingly, we believe the language of these provisions supports an
interpretation of the Act in which the payment rate for a fiscal year
can be computed again after the end of a fiscal year to reflect later
acquired, actual data regarding changes in the market basket, and that
this recomputed rate could then be used in determining updates to the
SNF payment rate for the subsequent fiscal year. Because the payment
rates to be applied during a fiscal year are the rates that are
published in the Federal Register by the August 1 preceding the start
of the fiscal year, (see section 1888(e)(4)(H)(i) of the Act), any such
adjustments would be made for FY 2004 and subsequent years.
B. Possible Approaches
We believe that establishing an adjustment for forecast error in
prior years could help to further ensure that the payment rates
appropriately reflect changes over time in the price of goods and
services. However, it is important to consider certain additional
factors in evaluating the feasibility of such an approach. In order to
ensure that any such adjustment reflects actual market conditions
accurately, it is absolutely essential that the adjustment be applied
uniformly--not only in those instances where the forecasted percent
change is lower than the actual percent change (as has been the case up
to this point under the SNF PPS), but also in those instances where the
forecasted percent change is higher than the actual percent change.
We note that the latter circumstance would result in SNFs receiving
lower than expected payments. In fact, it is even possible that, under
a certain set of circumstances (for example, a year in which the law
specifies an adjustment of the SNF market basket percentage change
minus one percentage point, in combination with a negative forecast
error correction and low price inflation), it could actually yield a
net decrease in payment rates.
This possibility underscores a potential disadvantage of
establishing a forecast error adjustment, in that it would inevitably
introduce an element
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of uncertainty regarding the amount of future updates. This
uncertainty, in turn, would tend to detract from the prospective nature
of the SNF payment system. In fact, the final rule that we published on
January 3, 1984 at the inception of the prospective payment system for
inpatient hospital services (49 FR 252) cited those very concerns in
declining to adopt a suggestion to establish a forecast error
adjustment at that point:
One of the purposes of the prospective payment system is that
hospitals will know in advance of each discharge the amount of
Medicare payment. Using the latest available market basket
projections prior to the beginning of a particular Federal fiscal
year is consistent with this concept. To permit retroactive
adjustments of the market basket inflation rates would erode the
prospective nature of the system. We believe this would introduce an
element of uncertainty incompatible with the very purpose of the
prospective payment system. Therefore, we have not adopted the
suggestion that the rates be adjusted if market basket projections
prove to be inaccurate.
Thus, while there are considerations that argue in favor of
establishing an adjustment to account for forecast error, we believe
that such a change also raises a number of concerns. Accordingly, we
seek comments on the advisability of pursuing this approach.
Further, along with the basic question of whether to adopt a
forecast error adjustment, it is also necessary to consider other
related issues involving the precise nature of any such adjustment. For
example, as further discussed in section II.D of this proposed rule, we
are considering the inclusion of a threshold under which no forecast
error adjustment would be made if the forecasted percent change is
within 0.25 percentage points of the actual percent change (as is
currently the case under the inpatient capital PPS). However, it would
also be possible to set a different threshold, such as the 0.3
percentage point level that was used in updating the SNF routine cost
limits under the reasonable cost payment methodology that preceded the
SNF PPS. Alternatively, we could even use a significantly higher
threshold in this context, such as a full percentage point.
In addition, we are considering that the initial forecast error
adjustment would occur in FY 2004, and would take into account the
cumulative forecast error between FYs 2000 and 2002, that is, since the
beginning of the SNF PPS. We would apply the forecast error threshold
of 0.25 percentage points to the forecast error calculation for the
entire cumulative forecast error for FYs 2000 through 2002 instead of
applying it to each year individually. We would do this because, in
this calculation, the base payment rate is being adjusted in FY 2004 to
bring the payment system in line with the actual experience.
Alternatively, we could adopt an approach under which the initial
adjustment takes into account only the forecast error for periods
beginning after the effective date of the FY 2004 final rule. Under
this alternative approach, the initial adjustment would not occur until
FY 2006, and would take into account the forecast error from FY 2004.
Accordingly, we invite comments not only on whether to adopt an
adjustment to account for forecast error, but also on the specific
characteristics of any such adjustment. The following describes the
methodology that would be used if we considered an initial, cumulative
forecast error adjustment provision.
C. SNF Market Basket Forecast Error for FYs 2000 Through 2002
The initial SNF market basket forecasted update under the SNF PPS
was for FY 2000 (3.1 percent), followed by forecasted updates for FY
2001 (3.161 percent), FY 2002 (3.3 percent), and FY 2003 (3.1 percent).
Historical market basket data are now available through FY 2002;
therefore, we can calculate the cumulative SNF market basket forecast
error for FYs 2000 through 2002, as shown in Table A. Historical data
for the FY 2003 SNF market basket increase will not be available until
early in 2004.
Table A.--Cumulative SNF Market Basket Forecast Error For FYs 2000
Through 2002
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Forecasted Actual SNF
SNF market market
basket basket
percent percent
change change
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FY 2000......................................... 3.1 4.1
FY 2001......................................... 3.161 5.1
FY 2002......................................... 3.3 3.4
Cumulative Growth FY 2000 through 2002.......... 9.869 13.129
Cumulative SNF Market Basket Forecast Error..... .......... 3.26
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Note: The FY 2000 and FY 2001 SNF market basket percent changes
are based on the 1992-based SNF market basket. The FY 2002 SNF
market basket percent changes are based on the 1997-based SNF market
basket.
As indicated in Table A, the cumulative SNF market basket forecast
error from FYs 2000 through 2002 is 3.26 percent. This figure is
calculated by taking the difference in the cumulative forecasted SNF
market basket increase over this period (1.031*1.03161*1.033=1.09869)
and the cumulative actual SNF market basket increase
(1.041*1.051*1.034=1.13129). As mentioned previously in section II.B of
this proposed rule, we applied the forecast error threshold of 0.25
percentage points to the forecast error calculation for the entire
cumulative forecast error for FYs 2000 through 2002 instead of applying
it to each year individually. We did this because, in this calculation,
the base payment rate is being adjusted in FY 2004 to bring the payment
system in line with the actual experience. The difference between these
two cumulative increases equals 0.0326 (1.13129 minus 1.09869). This
means that the SNF market basket was under-forecast by 3.26 percent for
the period FY 2000 through 2002. Similarly, the base payment rate
computed for FY 2003 was 3.26 percent lower than it would have been if
actual data had been used.
The major reason that the SNF market basket forecast was under-
forecast during this period was that wages and benefits for nursing
home workers increased more rapidly than expected. This faster-than-
expected increase occurred primarily because the health sector
continued to grow rapidly despite the economic downturn, and also
because of the impacts of nursing staff shortages and other conditions
generally affecting the health care market.
In order to illustrate the potential impact that an initial,
cumulative forecast error adjustment provision would have on payment
rates, we are reproducing the original figures from Tables 1 and 2 in
the FY 2004 SNF PPS proposed rule that appeared in the Federal Register
on May 16, 2003 (68 FR 26761). The Federal rates in that proposed rule
reflect an update to the rates that we published in the July 31, 2002
Federal Register (67 FR 49798) equal to the full change in the SNF
market basket index. According to our interpretation of section
1888(e)(4)(E)(ii)(IV) of the Act, we would update the SNF PPS national
base payment rate for FY 2003 by the cumulative forecast error amount.
Thus, we would increase the SNF PPS national base payment rate for FY
2003 by 3.26 percent. We would then update the rate by adjusting the
revised rate by the full SNF market basket index (see the May 16, 2003
proposed rule (68 FR 26775) for an explanation of how we calculate the
full SNF market basket index). The FY 2004 market basket increase
factor is 2.9 percent. We are inviting comments on including an
[[Page 34771]]
adjustment to the SNF PPS base payment rate to account for the
cumulative forecast error between FY 2000 and FY 2002. Using this
approach, we would update the FY 2003 SNF PPS national payment rate by
an additional 3.26 percent above the 2.9 percent SNF market basket
increase currently forecasted for FY 2004. For a complete description
of the multi-step process, see the May 12, 1998 interim final rule (63
FR 26252).
As explained in section II.D, we have also included additional
figures that are adjusted to reflect a 3.26 percent forecast error
adjustment. The following describes the process we could consider using
if we apply a forecast error adjustment only in future years.
Table 1.--Unadjusted Federal Rate Per Diem Urban
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Nursing--case- Therapy--case- Therapy--non-
Rate component mix mix case-mix Non-case-mix
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Original Per Diem Amount without Forecast Error $125.15 $94.27 $12.42 $63.87
Adjustment........................................
Revised Per Diem Amount with Forecast Error 129.23 97.34 12.82 65.96
Adjustment........................................
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Table 2.--Unadjusted Federal Rate Per Diem Rural
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Nursing--case- Therapy--case- Therapy--non-
Rate component mix mix case-mix Non-case-mix
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Original Per Diem Amount without Forecast Error $119.57 $108.70 $13.26 $65.06
Adjustment........................................
Revised Per Diem Amount with Forecast Error 123.47 112.24 13.69 67.18
Adjustment........................................
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D. Process for Adjusting for SNF Market Basket Forecast Error
We are also inviting comments on applying the forecast error
adjustment in future years, by adjusting the SNF PPS base payment rate
annually for any forecast error in the SNF market basket. This process
would involve making a one-time adjustment for the forecast error from
the most recently available fiscal year. For example, for the FY 2005
update, we could adjust for forecast error for FY 2003 only; FY 2004
information would not yet be final. Similarly, for the FY 2006 update,
we could adjust for the FY 2004 forecast error. This process creates
what is essentially a 2-year lag on the forecast error correction, but
is as timely as possible given the availability of historical data.
The method of adjusting for annual forecast error would be similar
to that described above for the FY 2004 update. We could adjust for
forecast error in a fiscal year by adjusting the SNF PPS national base
payment by the forecast error amount. For example, if the FY 2004 SNF
market basket were over-forecast by 0.5 percent, we would reduce the
SNF PPS national base payment rate in FY 2006 by 0.5 percent.
Accordingly, this is a prospective adjustment and is consistent with
the methodology currently employed under the inpatient hospital capital
PPS, and with the update framework that we discussed in the FY 2002 SNF
PPS proposed rule published on May 10, 2001 (66 FR 24016) and FY 2002
final rule published on July 31, 2001 (66 FR 39587).
In addition, as mentioned previously in section II.B, we are
considering adopting a threshold under which no forecast error
adjustment would be made if the forecasted percent change is within a
defined range of the actual percent change. As noted previously, the
inpatient hospital capital PPS already uses a threshold of 0.25
percentage points. We are soliciting comments on what threshold would
be appropriate in the context of the SNF PPS. This methodology is again
consistent with the methodology used under the inpatient capital PPS,
and reflects the concept that there is a certain level of imprecision
associated with measuring statistics. We invite comments on the use of
this standard.
III. Solicitation of Comments on Quality of Care Efforts Under SNF PPS
We noted above that a major reason the SNF market basket forecast
was under-forecasted for previous periods was that wages and benefits
for SNF workers increased more rapidly than expected. Part of this wage
increase may have been caused by nursing staff shortages which, coupled
with the increased demand for services during this period, drove up
wages not only in SNFs but in the entire health sector. Since the
factors that drive costs in SNFs can also relate to nursing home
quality of care, we believe it is important to reflect appropriately
the market conditions facing SNFs.
We have focused significant resources in the past two years on
improving the quality of health care provided by Medicare providers.
Our efforts with respect to nursing home quality have been particularly
intensive. In December 2001, we announced a Nursing Home Quality
Initiative. This initiative is part of the goal of the Department of
Health and Human Services to continue to improve the quality of health
care for all Americans, including those covered by the Medicare and
Medicaid programs. After a successful six-State pilot in the Spring of
2002, we released quality of care information on November 12, 2002 for
nearly 17,000 nursing homes in all 50 States, the District of Columbia,
and some U.S. Territories. Consumers can view these measures and other
helpful information at http://www.medicare.gov.
The Nursing Home Quality Initiative is a four-prong effort that
consists of: regulation and enforcement efforts conducted by State
survey agencies and by us; improved consumer information on the quality
of care in nursing homes; continual, community-based quality
improvement programs designed to help nursing homes improve their
quality of care; and collaboration and partnership to utilize available
knowledge and resources most effectively. State pilot in the Spring of
2002, we released quality of care information on November 12, 2002 for
nearly 17,000 nursing homes in all 50 States, the District of Columbia,
and some U.S. Territories. Consumers can view these measures and other
helpful information at http://www.medicare.gov.
The Nursing Home Quality Initiative is a four-prong effort that
consists of: regulation and enforcement efforts conducted by State
survey agencies and by us; improved consumer information on the quality
of care in nursing homes; continual, community-based quality
improvement programs designed to help nursing homes improve their
quality of care; and collaboration and partnership
[[Page 34772]]
to utilize available knowledge and resources most effectively.
To the extent that market basket adjustments to the SNF PPS result
in more appropriate payments to SNFs in future years, it is expected
that a majority of the additional payments made in the future to SNFs
will be used for direct care services to nursing home residents.
Further, we expect that SNFs will use such payments to continue to
engage in proactive, quality improvement activities and programs.
Accordingly, we invite comments on how SNFs will account for these
direct care funds and how CMS may use its authority under section 1888
of the Act or elsewhere to further promote quality improvement efforts
among SNFs. We also invite comments on available legal authority, as
well as the advisability of refining and structuring payments under the
SNF PPS to promote additional caregiver staffing at SNFs.
IV. Provisions of the Proposed Rule
In this proposed rule, we propose to make the following revisions
to the existing text of the regulations:
[sbull] In Sec. 413.337(d)(2), we would insert additional text at
the end of the paragraph, which would provide for an adjustment to the
annual update of the previous fiscal year's rate to account for
forecast error in the SNF market basket beginning with FY 2004.
[sbull] In Sec. 413.345, we would make a technical correction to
the second sentence of the regulation text, in order to correct the
spelling of the word ``standardized.''
V. Collection of Information Requirements
This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).
VI. Response to Public Comments
Because of the large number of items of correspondence we normally
receive on a proposed rule, we are not able to acknowledge or respond
to them individually. However, in preparing the final rule, we will
consider all comments concerning the provisions of this proposed rule
that we receive by the date and time specified in the DATES section of
this preamble and respond to those comments in the preamble to that
rule.
Waiver of 60-day Comment Period
As discussed previously in section I of this preamble, we are
issuing this proposed rule specifically in order to supplement the
proposed rule that we published previously in the Federal Register on
May 16, 2003 (68 FR 26758). Section 1871(b)(1) of the Act normally
requires a 60-day public comment period for a proposed rule. However,
under section 1871(b)(2)(C) of the Act, this requirement can be waived
for good cause in situations where the agency finds that its
application would be ``* * * impracticable, unnecessary, or contrary to
the public interest'' (see 5 U.S.C. Sec. 553(b)). We note that under
section 1888(e)(4)(H) of the Act, the updated payment rates for FY 2004
must be published in the Federal Register no later than July 31, 2003.
This means that providing a full 60-day comment period for this
supplemental proposed rule could leave insufficient time following the
close of the comment period to include any resulting revisions in that
publication. We believe it to be in the public interest to consider any
revisions in conjunction with the annual update to the SNF PPS rates so
any adjustment to the payment rate could be done as part of the annual
update process. Moreover, promulgating such revisions in a separate
final rule published later than July 31 would require revising the rate
structure after the start of the new fiscal year in order to
accommodate the change, which would impose an inordinate administrative
burden. Additionally, we note that, other than to propose a minor
technical correction in the existing regulations text, the sole focus
of this supplemental proposed rule concerns a single potential change,
to adjust the annual update to the SNF payment rates in order to
account for forecast error. Given the extremely narrow scope of this
document, we believe that even a comment period of less than 60 days
would still give interested parties sufficient opportunity to comment
adequately on it.
For the reasons set forth in the preceding discussion, which
indicate that providing a full comment period would be contrary to the
public interest, we find that there is good cause to modify the 60-day
comment period in this instance. Accordingly, the closing date of the
comment period for this supplemental proposed rule is hereby set at
July 7, 2003, to coincide with the close of the initial proposed rule's
comment period.
VII. Regulatory Impact Analysis
We have examined the impacts of this proposed rule as required by
Executive Order 12866 (September 1993, Regulatory Planning and Review),
the Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-
354), section 1102(b) of the Social Security Act (the Act), the
Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4), and
Executive Order 13132.
Executive Order 12866 (as amended by Executive Order 13258, which
merely assigns responsibility of duties) directs agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
This proposed rule is a major rule, as defined in 5 U.S.C. 804(2),
because, if we proceed with a forecast error adjustment, we estimate
that the impact of such a change would be approximately $450 million in
FY 2004 (based on the cumulative SNF market basket forecast error of
3.26 percent for FYs 2000 through 2002, as shown in Table A). The $450
million estimate also assumes the use of a 0.25 percentage point
threshold (and would be reliable for thresholds up to 3.26 percent).
However, as noted previously in section II.D, this estimated impact
could change in any given year if we were to adopt a different
threshold level.
The RFA requires agencies to analyze options for the regulatory
relief of small businesses. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and government
agencies. Most SNFs and most other providers and suppliers are small
entities, either by their nonprofit status or by having revenues of
$11.5 million or less in any 1 year. For purposes of the RFA,
approximately 53 percent of SNFs are considered small businesses
according to the Small Business Administration's latest size standards
with total revenues of $11.5 million or less in any 1 year (for further
information, see 65 FR 69432, November 17, 2000). Individuals and
States are not included in the definition of a small entity.
The revision that we are considering in this proposed rule would
simply provide for adjusting the annual increase in the applicable SNF
market basket index amount, effective with FY
[[Page 34773]]
2004, to account for forecast error. Accordingly, we certify that this
proposed rule would not have a significant impact on small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. For a
proposed rule, this analysis must conform to the provisions of section
603 of the RFA. For purposes of section 1102(b) of the Act, we define a
small rural hospital as a hospital that is located outside of a
Metropolitan Statistical Area and has fewer than 100 beds. Because the
change in methodology set forth in this proposed rule would also affect
rural hospital swing-bed services, we believe that this proposed rule
would similarly affect small rural hospitals. However, because the
incremental change in payments for Medicare swing-bed services would be
relatively minor in comparison to overall rural hospital revenues, this
proposed rule would not have a significant impact on the overall
operations of these small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in an expenditure in any 1 year by
State, local, or tribal governments, in the aggregate, or by the
private sector, of $110 million or more. This proposed rule would have
no substantial effect on State, local, or tribal governments. We
believe the private sector cost of this proposed rule falls below these
thresholds as well.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. As stated above, this proposed rule would have no
substantial effect on State and local governments.
As stated previously, the purpose of this proposed rule is simply
to consider an adjustment to the annual update to account for forecast
error in the SNF market basket. We believe that such a revision would
have, at most, only a negligible overall effect in terms of the RFA and
the other provisions discussed in this section. As such, it would not
represent an additional burden to the industry.
For the reasons set forth in the preceding discussion, we are not
preparing analyses for either the RFA or section 1102(b) of the Act
because we have determined that this proposed rule would not have a
significant economic impact on a substantial number of small entities
or a significant impact on the operations of a substantial number of
small rural hospitals.
Finally, in accordance with the provisions of Executive Order
12866, this regulation was reviewed by the Office of Management and
Budget.
List of Subjects in 42 CFR Part 413
Health facilities, Kidney diseases, Medicare, Reporting and
recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV as follows:
PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT
RATES FOR SKILLED NURSING FACILITIES
1. The authority citation for part 413 continues to read as
follows:
Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i) and
(n), 1861(v), 1871, 1881, 1883, and 1886 of the Social Security Act
(42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n),
1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww).
Subpart J--Prospective Payment for Skilled Nursing Facilities
2. In Sec. 413.337(d)(2), paragraph (d)(2) is revised to read as
follows:
Sec. 413.337 Methodology for calculating the prospective payment
rates.
* * * * *
(d) Annual updates of Federal unadjusted payment rates. * * *
(2) For subsequent fiscal years, the unadjusted Federal rate is
equal to the rate for the previous fiscal year increased by the
applicable SNF market basket index amount. Beginning with fiscal year
2004, an adjustment to the annual update of the previous fiscal year's
rate will be computed to account for forecast error. The initial
adjustment (in fiscal year 2004) to the update of the previous fiscal
year's rate will take into account the cumulative forecast error
between fiscal years 2000 and 2002. Subsequent adjustments in
succeeding fiscal years will take into account the forecast error from
the most recently available fiscal year for which there is final data.
* * * * *
Sec. 413.345 [Amended]
3. In the second sentence of Sec. 413.345, the word
``tandardized'' is removed and the word ``standardized'' is added in
its place.
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare-Hospital Insurance Program; and No. 93.774, Medicare-
Supplementary Medical Insurance Program.)
Dated: May 22, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
Dated: June 3, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-14632 Filed 6-6-03; 10:38 am]
BILLING CODE 4120-01-P