View Rule

Statement of Need: The Medicare SNF PPS was established by section 4432 of the Balanced Budget Act of 1997 (BBA). The PPS applies to all costs (routine, ancillary, and capital) of covered SNF services furnished to beneficiaries under part A of the Medicare program, effective for cost reporting periods beginning on or after July 1, 1998. Annual updates to the PPS rates are required by section 1888(e) of the Social Security Act (the Act), as amended by the Medicare, Medicaid, and SCHIP Balanced Budged 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.

Summary of the Legal Basis: Section 1888(e)(4)(H) requires that annual updates to the SNF PPS rates be published in the Federal Register before August 1 of each year, to be effective on the first day of the fiscal year.

Alternatives: None.

Anticipated Costs and Benefits: Section 1888(e) of the Act established the SNF PPS for the payment of Medicare SNF services for cost reporting periods beginning on or after July 1, 1998. This section also specifies that the base year cost date to be used in computing the Resource Utilization Group III (RUG-III) payment rates must be from FY 1995. The Act also requires that a number of elements be incorporated into the SNF PPS, such as case-mix classification methodology, the Minimum Data Set (MDS) assessment schedule, a market basket index, a wage index, and the urban and rural distinction used in the development or adjustment of the Federal rates. Payment for SNF care prospectively has a direct, positive impact on the Medicare program by controlling the increase in costs for services provided by SNFs. Operating under a PPS also has a beneficial impact on the efficient management and planning capability of individual SNFs.

Risks: Failure to update the SNF PPS by October 1, 2002 would place us in violation of the Act. Moreover, failure to meet the publication deadline imposed by the Act would also constitute a violation.