PROSPECTIVE PAYMENT FOR SKILLED NURSING FACILITY SERVICES.

SEC. 4432. PROSPECTIVE PAYMENT FOR SKILLED NURSING FACILITY SERVICES. (a) In General.—Section 1888 (42 U.S.C. 1395yy) is amended by adding at the end the following new subsection: “(e) Prospective Payment.— “(1) Payment provision.—Notwithstanding any other provision of this title, subject to paragraph (7), 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—111 STAT. 415 “(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 1861(i) for which benefits are provided under part A; and “(II) includes all items and services (other than services described in clause (ii)) for which payment may be made under part B 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) through (iii) of section 1861(s)(2)(K), 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 1861(s)(2), 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. “(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.111 STAT. 416 “(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 title 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), with appropriate adjustments (as determined by the Secretary) to nonsettled cost reports, and “(ii) an estimate of the amounts that would be payable under part B (disregarding any applicable deductibles, coinsurance, and copayments) for covered skilled nursing facility services described in paragraph (2)(A)(i)(H) 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. 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.— “(i) In general.—Subject to clause (ii), 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 minus 1 percentage point. “(ii) Certain demonstration projects.—In the case of a facility participating in the Nursing Home Case-Mix and Quality Demonstration (RUGS–III), there shall be substituted for the amount described in clause (i) the RUGS–III rate received by the facility for 1997.111 STAT. 417 “(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) (and facilities described in subsection (d)), 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 nonsettled cost reports, and “(ii) an estimate of the amounts that would be payable under part B (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 111 STAT. 418computing 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 1886(d)(2)(D)). “(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 each of fiscal years 2001 and 2002, the rate computed for the previous fiscal year increased by the skilled nursing facility market basket percentage change for the fiscal year involved minus 1 percentage point; and “(III) 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.111 STAT. 419 “(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. “(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.111 STAT. 420 “(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 1819(b)(3), using the standard instrument designated by the State under section 1819(e)(5). “(7) Transition for medicare swing bed hospitals.— “(A) In general.—The Secretary shall determine an appropriate manner in which to apply this subsection to the facilities described in subparagraph (B), 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 1883, for which payment is made for the furnishing of extended care services on a reasonable cost basis under section 1814(1) (as in effect on and after such date). “(8) Limitation on review.—There shall be no administrative or judicial review under section 1869, 1878, 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), and adjustments for variations in labor-related costs under paragraph (4)(G)(ii); “(B) the establishment of facility specific rates before January 1, 1999, (except any determination of costs paid under part A of this title); and “(C) the establishment of transitional amounts under paragraph (7).”. (b) Consolidated Billing.— (1) For snf services.—Section 1862(a) (42 U.S.C. 1395y(a)), as amended by 4319(b), is amended— (A) by striking “or” at the end of paragraph (16), (B) by striking the period at the end of paragraph (17) and inserting “; or”, and (C) by inserting after paragraph (17) the following new paragraph: “(18) which are covered skilled nursing facility services described in section 1888(e)(2)(A)(i) and which are 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), by an entity other than the skilled nursing facility, unless the services are furnished under arrangements (as defined in section 1861(w)(1)) with the entity made by the skilled nursing facility.”.111 STAT. 421 (2) Requiring payment for all part b items and services to be made to facility.—The first sentence of section 1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended— (A) by striking “and (D)” and inserting “(D)”; and (B) by striking the period at the end and inserting the following: “, find (E) in the case of an item or service (other than services described in section 1888(e)(2)(A)(ii)) furnished to an individual who (at the time the item or service is furnished) 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), payment shall be made to the facility (without regard to whether or not the item or service was furnished by the facility, by others under arrangement with them made by the facility, under any other contracting or consulting arrangement, or otherwise).”. (3) Payment rules.—Section 1888(e) (42 U.S.C. 1395yy(e)), as added by subsection (a), is amended by adding at the end the following: “(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 in an amount determined in accordance with section 1833(a)(2)(B), the amount of the payment under such part shall be the amount provided under the fee schedule for such item or service. “(10) Required coding.—No payment may be made under part B 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 famished”. (4) Facility provider number required on claims submitted by physicians.—Section 1842 (42 U.S.C. 1395u) is amended by adding at the end the following new section: “(t) Each request for payment, or bill submitted, for an item or service famished by a physician 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), for which payment may be made under this part shall include the facility’s medicare provider number.”. (5) Conforming amendments.— (A) Section 1819(b)(3)(C)(i) (42 U.S.C. 1395i–3(b)(3)(C)(i)) is amended by striking “Such” and inserting “Subject to the timeframes prescribed by the Secretary under section 1888(e)(6), such”. (B) Section 1832(a)(1) (42 U.S.C. 1395k(a)(D) is amended by striking “(2);” and inserting “(2) and section 1842(b)(6)(E);”. (C) Section 1833(a)(2)(B) (42 U.S.C. 13951(a)(2)(B)) is amended by inserting “or section 1888(e)(9)” after “section 1886”. (D) Section 1861(h) (42 U.S.C 1395x(h)) is amended—111 STAT. 422 (i) in the opening paragraph, by striking “paragraphs (3) and (6)” and inserting “paragraphs (3), (6), and (7)”, and (ii) in paragraph (7), after “skilled nursing facilities”, by inserting “, or by others under arrangements with them made by the facility”. (E) Section 1861(v)(7)(D) (42 U.S.C. 1395x(v)(7)(D)) is amended by inserting “subsections (a) through (c) of” before “section 1888.”. (F) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)) is amended— (i) by redesignating clauses (i) and (ii) as subclauses (I) and (II) respectively, (ii) by inserting “(i)” after “(H)”, and (iii) by adding after clause (i), as so redesignated, the following new clause: “(ii) in the case of skilled nursing facilities which provide covered skilled nursing facility services— “(I) that are furnished to an individual who is a resident of the skilled nursing facility, and “(II) for which the individual is entitled to have payment made under this title, to have items and services (other than services described in section 1888(e)(2)(A)(ii)) furnished by the skilled nursing facility or otherwise under arrangements (as defined in section 1861(w)(1)) made by the skilled nursing facility,”. (G) Section 1883(a)(2)(B)(ii)(II) (42 U.S.C. 1395tt(a)(2)(B)(ii)(II)) is amended by inserting “subsections (a) through (d) of” before “section 1888”. (H) Section 1888(d)(1) (42 U.S.C. 1395yy(d)(D) is amended by striking “Any skilled nursing facility” and inserting “Subject to subsection (e), any skilled nursing facility”. (c) Medical Review Process.—In order to ensure that medicare beneficiaries are furnished appropriate services in skilled nursing facilities, the Secretary of Health and Human Services shall establish and implement a thorough medical review process to examine the effects of the amendments made by this section on the quality of covered skilled nursing facility services furnished to medicare beneficiaries. In developing such a medical review process, the Secretary shall place a particular emphasis on the quality of non-routine covered services and physicians’ services for which payment is made under title XVIII of the Social Security Act. (d) Effective Date.—The amendments made by this section are effective for cost reporting periods beginning on or after July 1, 1998; except that the amendments made by subsection (b) shall apply to items and services furnished on or after July 1, 1998.