[Federal Register Volume 81, Number 151 (Friday, August 5, 2016)]
[Rules and Regulations]
[Pages 51969-52053]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18113]



[[Page 51969]]

Vol. 81

Friday,

No. 151

August 5, 2016

Part II





Department of Health and Human Services





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Centers for Medicare and Medicaid Services





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42 CFR Part 413





Medicare Program; Prospective Payment System and Consolidated Billing 
for Skilled Nursing Facilities for FY 2017, SNF Value-Based Purchasing 
Program, SNF Quality Reporting Program, and SNF Payment Models 
Research; Final Rule

Federal Register / Vol. 81 , No. 151 / Friday, August 5, 2016 / Rules 
and Regulations

[[Page 51970]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 413

[CMS-1645-F]
RIN 0938-AS75


Medicare Program; Prospective Payment System and Consolidated 
Billing for Skilled Nursing Facilities for FY 2017, SNF Value-Based 
Purchasing Program, SNF Quality Reporting Program, and SNF Payment 
Models Research

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule updates the payment rates used under the 
prospective payment system (PPS) for skilled nursing facilities (SNFs) 
for fiscal year (FY) 2017. In addition, it specifies a potentially 
preventable readmission measure for the Skilled Nursing Facility Value-
Based Purchasing Program (SNF VBP), and implements requirements for 
that program, including performance standards, a scoring methodology, 
and a review and correction process for performance information to be 
made public, aimed at implementing value-based purchasing for SNFs. 
Additionally, this final rule includes additional polices and measures 
in the Skilled Nursing Facility Quality Reporting Program (SNF QRP). 
This final rule also responds to comments on the SNF Payment Models 
Research (PMR) project.

DATES: These regulations are effective on October 1, 2016.

FOR FURTHER INFORMATION CONTACT: 
    Penny Gershman, (410) 786-6643, for information related to SNF PPS 
clinical issues.
    John Kane, (410) 786-0557, for information related to the 
development of the payment rates and case-mix indexes.
    Kia Sidbury, (410) 786-7816, for information related to the wage 
index.
    Bill Ullman, (410) 786-5667, for information related to level of 
care determinations, consolidated billing, and general information.
    Stephanie Frilling, (410) 786-4507, for information related to 
skilled nursing facility value-based purchasing.
    Charlayne Van, (410) 786-8659, for information related to skilled 
nursing facility quality reporting.

SUPPLEMENTARY INFORMATION:

Availability of Certain Tables Exclusively Through the Internet on the 
CMS Web Site

    As discussed in the FY 2017 SNF PPS proposed rule (81 FR 24230), 
tables setting forth the Wage Index for Urban Areas Based on CBSA Labor 
Market Areas and the Wage Index Based on CBSA Labor Market Areas for 
Rural Areas are no longer published in the Federal Register. Instead, 
these tables are available exclusively through the Internet on the CMS 
Web site. The wage index tables for this final rule can be accessed on 
the SNF PPS Wage Index home page, at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.
    Readers who experience any problems accessing any of these online 
SNF PPS wage index tables should contact Kia Sidbury at (410) 786-7816.
    To assist readers in referencing sections contained in this 
document, we are providing the following Table of Contents.

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of Major Provisions
    C. Summary of Cost and Benefits
II. Background on SNF PPS
    A. Statutory Basis and Scope
    B. Initial Transition for the SNF PPS
    C. Required Annual Rate Updates
III. Analysis of and Responses to Public Comments on the FY 2017 SNF 
PPS Proposed Rule
    A. General Comments on the FY 2017 SNF PPS Proposed Rule
    B. SNF PPS Rate Setting Methodology and FY 2017 Update
    1. Federal Base Rates
    2. SNF Market Basket Update
    3. Case-Mix Adjustment
    4. Wage Index Adjustment
    5. Adjusted Rate Computation Example
    C. Additional Aspects of the SNF PPS
    1. SNF Level of Care--Administrative Presumption
    2. Consolidated Billing
    3. Payment for SNF-Level Swing-Bed Services
    D. Other Issues
    1. Skilled Nursing Facility Value-Based Purchasing Program (SNF 
VBP)
    2. Skilled Nursing Facility (SNF) Quality Reporting Program 
(QRP)
    3. SNF Payment Models Research
IV. Collection of Information Requirements
V. Economic Analyses

Acronyms

    In addition, because of the many terms to which we refer by acronym 
in this final rule, we are listing these abbreviations and their 
corresponding terms in alphabetical order below:

AIDS Acquired Immune Deficiency Syndrome
ARD Assessment reference date
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999, Pub. L. 106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Pub. L. 106-554
CAH Critical access hospital
CASPER Certification and Survey Provider Enhanced Reporting
CBSA Core-based statistical area
CCN CMS Certification Number
CFR Code of Federal Regulations
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
FFS Fee-for-service
FR Federal Register
FY Fiscal year
HCPCS Healthcare Common Procedure Coding System
HIQR Hospital Inpatient Quality Reporting
HOQR Hospital Outpatient Quality Reporting
HRRP Hospital Readmissions Reduction Program
HVBP Hospital Value-Based Purchasing
IGI IHS (Information Handling Services) Global Insight, Inc.
IMPACT Improving Medicare Post-Acute Care Transformation Act of 
2014, Pub. L. 113-185
IPPS Inpatient prospective payment system
IRF Inpatient Rehabilitation Facility
LTC Long-term care
LTCH Long-term care hospital
MAP Measures Application Partnership
MDS Minimum data set
MFP Multifactor productivity
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Pub. L. 108-173
MSA Metropolitan statistical area
NF Nursing facility
NQF National Quality Forum
OMB Office of Management and Budget
PAC Post-acute care
PAMA Protecting Access to Medicare Act of 2014, Pub. L. 113-93
PBJ Payroll-Based Journal
PMR Payment Models Research
PPS Prospective Payment System
PQRS Physician Quality Reporting System
QIES Quality Improvement Evaluation System
QIES ASAP Quality Improvement and Evaluation System Assessment 
Submission and Processing
QRP Quality Reporting Program
RAI Resident assessment instrument
RAVEN Resident assessment validation entry
RFA Regulatory Flexibility Act, Pub. L. 96-354
RIA Regulatory impact analysis
RUG-III Resource Utilization Groups, Version 3
RUG-IV Resource Utilization Groups, Version 4
RUG-53 Refined 53-Group RUG-III Case-Mix Classification System
SCHIP State Children's Health Insurance Program
sDTI Suspected deep tissue injuries
SNF Skilled nursing facility

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SNF QRP Skill nursing facility quality reporting program
SNFRM Skilled Nursing Facility 30-Day All-Cause Readmission Measure
STM Staff time measurement
STRIVE Staff time and resource intensity verification
TEP Technical expert panel
UMRA Unfunded Mandates Reform Act, Pub. L. 104-4
VBP Value-based purchasing

I. Executive Summary

A. Purpose

    This final rule updates the SNF prospective payment rates for FY 
2017 as required under section 1888(e)(4)(E) of the Social Security Act 
(the Act). It also responds to section 1888(e)(4)(H) of the Act, which 
requires the Secretary to provide for publication in the Federal 
Register before the August 1 that precedes the start of each fiscal 
year (FY) certain specified information relating to the payment update 
(see section II.C.). This final rule also includes an update on the SNF 
PMR project. In addition, it specifies a potentially preventable 
readmission measure for the Skilled Nursing Facility (SNF) Value-Based 
Purchasing (VBP) Program and finalizes other requirements related to 
that Program's implementation, including performance standards, a 
scoring methodology, and a review and correction process for 
performance information to be made public under the Program. We are 
also including four new quality and resource use measures for the SNF 
QRP and new SNF review and correction procedures for performance data 
that are to be publicly reported.

B. Summary of Major Provisions

    In accordance with sections 1888(e)(4)(E)(ii)(IV) and 1888(e)(5) of 
the Act, the federal rates in this final rule reflect an update to the 
rates that we published in the SNF PPS final rule for FY 2016 (80 FR 
46390), which reflects the SNF market basket index, as adjusted by the 
multifactor productivity (MFP) adjustment, for FY 2017. We are also 
finalizing various requirements for the SNF VBP Program, including a 
potentially preventable readmission measure, performance standards, and 
a scoring methodology, among other policies. In addition, we are 
adopting and implementing four new quality and resource use measures 
for the SNF QRP and new SNF review and correction procedures for 
performance data that are to be publicly reported as we continue to 
implement this program and meet the requirements of the IMPACT Act.

C. Summary of Cost and Benefits

------------------------------------------------------------------------
        Provision description                   Total transfers
------------------------------------------------------------------------
FY 2017 SNF PPS payment rate update..  The overall economic impact of
                                        this final rule would be an
                                        estimated increase of $920
                                        million in aggregate payments to
                                        SNFs during FY 2017.
------------------------------------------------------------------------

II. Background on SNF PPS

A. Statutory Basis and Scope

    As amended by section 4432 of the Balanced Budget Act of 1997 (BBA, 
Pub. L. 105-33, enacted on August 5, 1997), section 1888(e) of the Act 
provides for the implementation of a PPS for SNFs. This methodology 
uses prospective, case-mix adjusted per diem payment rates applicable 
to all covered SNF services defined in section 1888(e)(2)(A) of the 
Act. The SNF PPS is effective for cost reporting periods beginning on 
or after July 1, 1998, and covers all costs of furnishing covered SNF 
services (routine, ancillary, and capital-related costs) other than 
costs associated with approved educational activities and bad debts. 
Under section 1888(e)(2)(A)(i) of the Act, covered SNF services include 
post-hospital extended care services for which benefits are provided 
under Part A, as well as those items and services (other than a small 
number of excluded services, such as physician services) for which 
payment may otherwise be made under Part B and which are furnished to 
Medicare beneficiaries who are residents in a SNF during a covered Part 
A stay. A comprehensive discussion of these provisions appears in the 
May 12, 1998 interim final rule (63 FR 26252). In addition, a detailed 
discussion of the legislative history of the SNF PPS is available 
online at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_07302013.pdf.
    Section 215(a) of PAMA added section 1888(g) to the Act requiring 
the Secretary to specify an all-cause all-condition hospital 
readmission measure and a resource use measure, an all-condition risk-
adjusted potentially preventable hospital readmission measure, for the 
SNF setting. Additionally, section 215(b) of PAMA added section 1888(h) 
to the Act requiring the Secretary to implement a VBP program for SNFs. 
Finally, section 2(a) of the IMPACT Act added section 1899B to the Act 
that, among other things, requires SNFs to report standardized data for 
measures in specified quality and resource use domains. In addition, 
the IMPACT Act added section 1888(e)(6) to the Act, which requires the 
Secretary to implement a quality reporting program for SNFs, which 
includes a requirement that SNFs report certain data to receive their 
full payment under the SNF PPS.

B. Initial Transition for the SNF PPS

    Under sections 1888(e)(1)(A) and 1888(e)(11) of the Act, the SNF 
PPS included an initial, three-phase transition that blended a 
facility-specific rate (reflecting the individual facility's historical 
cost experience) with the federal case-mix adjusted rate. The 
transition extended through the facility's first 3 cost reporting 
periods under the PPS, up to and including the one that began in FY 
2001. Thus, the SNF PPS is no longer operating under the transition, as 
all facilities have been paid at the full federal rate effective with 
cost reporting periods beginning in FY 2002. As we now base payments 
for SNFs entirely on the adjusted federal per diem rates, we no longer 
include adjustment factors under the transition related to facility-
specific rates for the upcoming FY.

C. Required Annual Rate Updates

    Section 1888(e)(4)(E) of the Act requires the SNF PPS payment rates 
to be updated annually. The most recent annual update occurred in a 
final rule that set forth updates to the SNF PPS payment rates for FY 
2016 (80 FR 46390, August 4, 2015).
    Section 1888(e)(4)(H) of the Act specifies that we provide for 
publication annually in the Federal Register of the following:
     The unadjusted federal per diem rates to be applied to 
days of covered SNF services furnished during the upcoming FY.
     The case-mix classification system to be applied for these 
services during the upcoming FY.
     The factors to be applied in making the area wage 
adjustment for these services.
    Along with other revisions discussed later in this preamble, this 
final rule would provide the required annual updates to the per diem 
payment rates for SNFs for FY 2017.

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III. Analysis of and Responses to Public Comments on the FY 2017 SNF 
PPS Proposed Rule

    In response to the publication of the FY 2017 SNF PPS proposed 
rule, we received 95 public comments from individuals, providers, 
corporations, government agencies, private citizens, trade 
associations, and major organizations. The following are brief 
summaries of each proposed provision, a summary of the public comments 
that we received related to that proposal, and our responses to the 
comments.

A. General Comments on the FY 2017 SNF PPS Proposed Rule

    In addition to the comments we received on specific proposals 
contained within the proposed rule (which we address later in this 
final rule), commenters also submitted the following, more general, 
observations on the SNF PPS and SNF care generally. A discussion of 
these comments, along with our responses, appears below.
    Comment: One commenter stated that there is a significant amount of 
fraud and abuse in the SNF PPS. The commenter further stated that, 
often times, non-licensed professionals will dictate the type of care 
beneficiaries receive, specifically referring to the number of therapy 
minutes a beneficiary receives. This commenter also stated that if a 
health care professional tries to speak about these issues, his or her 
job may be in jeopardy.
    Response: We appreciate this commenter raising these concerns. 
While outside the scope of this rule, we will pass these concerns along 
to our colleagues in the Center for Program Integrity, who are 
responsible for identifying and addressing instances of fraud, waste 
and abuse in the Medicare program. Additionally, information on areas 
of potential waste, fraud or abuse may be reported to the Office of the 
Inspector General Hotline by calling 1-800-HHS-TIPS (1-800-447-8477).
    Comment: A number of commenters raised concerns regarding the cost 
of care for the beneficiary. One commenter discussed how the individual 
beneficiary cost for living in a nursing home seemed to greatly exceed 
the cost of living in the community. A few commenters referenced the 
pace and breadth of potential changes to conditions of participation 
for long-term care facilities, notably those contained in rulemaking 
such as the 2015 proposed rule entitled ``Medicare and Medicaid 
Programs: Reform of Requirements for Long-Term Care Facilities'' (80 FR 
42168), as well as noted that the cost of implementing these provisions 
is not covered by Medicaid or Medicare.
    Response: While we appreciate the commenters raising these 
concerns, these comments and the provisions of the proposed rule 
referenced by commenters are outside the scope of this final rule. That 
being said, we will share these comments with the appropriate team 
within CMS responsible for these provisions.
    Comment: A few commenters raised concerns regarding decisions made 
by Medicare Administrative Contractors. One commenter requested that we 
instruct these contractors to refrain from denying coverage and payment 
for SNF Part B claims in which physician visits occur more frequently 
than the minimum standards set by the conditions of participation at 
Sec.  483.40. Another commenter requested that we examine potential 
instances in which contractors might unnecessarily target speech-
language pathology services by making revisions to Medicare manuals 
which might affect coverage of these services.
    Response: With regard to our instructing the contractors to refrain 
from denying coverage or payment for SNF Part B claims in which 
physician visits occur more frequently than the minimum standard set by 
the conditions of participation, this comment is outside the scope of 
this final rule. However, we will forward these comments to the 
appropriate division within CMS for consideration. With regard to 
contractors targeting speech-language pathology services, we are not 
aware of such targeting. We will continue to educate the contractors to 
ensure compliance with all federal guidance and regulations.

B. SNF PPS Rate Setting Methodology and FY 2017 Update

1. Federal Base Rates
    Under section 1888(e)(4) of the Act, the SNF PPS uses per diem 
federal payment rates based on mean SNF costs in a base year (FY 1995) 
updated for inflation to the first effective period of the PPS. We 
developed the federal payment rates using allowable costs from 
hospital-based and freestanding SNF cost reports for reporting periods 
beginning in FY 1995. The data used in developing the federal rates 
also incorporated a Part B add-on, which is an estimate of the amounts 
that, prior to the SNF PPS, would have been payable under Part B for 
covered SNF services furnished to individuals during the course of a 
covered Part A stay in a SNF.
    In developing the rates for the initial period, we updated costs to 
the first effective year of the PPS (the 15-month period beginning July 
1, 1998) using a SNF market basket index, and then standardized for 
geographic variations in wages and for the costs of facility 
differences in case mix. In compiling the database used to compute the 
federal payment rates, we excluded those providers that received new 
provider exemptions from the routine cost limits, as well as costs 
related to payments for exceptions to the routine cost limits. Using 
the formula that the BBA prescribed, we set the federal rates at a 
level equal to the weighted mean of freestanding costs plus 50 percent 
of the difference between the freestanding mean and weighted mean of 
all SNF costs (hospital-based and freestanding) combined. We computed 
and applied separately the payment rates for facilities located in 
urban and rural areas, and adjusted the portion of the federal rate 
attributable to wage-related costs by a wage index to reflect 
geographic variations in wages.
2. SNF Market Basket Update
a. SNF Market Basket Index
    Section 1888(e)(5)(A) of the Act requires us to establish a SNF 
market basket index that reflects changes over time in the prices of an 
appropriate mix of goods and services included in covered SNF services. 
Accordingly, we have developed a SNF market basket index that 
encompasses the most commonly used cost categories for SNF routine 
services, ancillary services, and capital-related expenses. We use the 
SNF market basket index, adjusted in the manner described below, to 
update the federal rates on an annual basis. In the SNF PPS final rule 
for FY 2014 (78 FR 47939 through 47946), we revised and rebased the 
market basket, which included updating the base year from FY 2004 to FY 
2010.
    For the FY 2017 proposed rule, the FY 2010-based SNF market basket 
growth rate was estimated to be 2.6 percent, which was based on the IHS 
Global Insight Inc. (IGI) first quarter 2016 forecast, with historical 
data through fourth quarter 2015. However, as discussed in the FY 2017 
SNF PPS proposed rule (81 FR 24234), we proposed that if more recent 
data become available (for example, a more recent estimate of the FY 
2010 based SNF market basket and/or MFP adjustment), we would use such 
data, if appropriate, to determine the FY 2017 SNF market basket 
percentage change, labor-related share relative importance, forecast 
error adjustment, and MFP adjustment in this final rule. Since that 
time, we have received an updated FY

[[Page 51973]]

2017 market basket percentage increase, which is based on the second 
quarter 2016 IGI forecast of the FY 2010-based SNF market basket. The 
revised market basket growth rate is 2.7 percent. In section III.B.2.e. 
of this final rule, we discuss the specific application of this 
adjustment to the forthcoming annual update of the SNF PPS payment 
rates.
b. Use of the SNF Market Basket Percentage
    Section 1888(e)(5)(B) of the Act defines the SNF market basket 
percentage as the percentage change in the SNF market basket index from 
the midpoint of the previous FY to the midpoint of the current FY. For 
the federal rates set forth in this final rule, we use the percentage 
change in the SNF market basket index to compute the update factor for 
FY 2017. This is based on the IGI second quarter 2016 forecast (with 
historical data through the first quarter 2016) of the FY 2017 
percentage increase in the FY 2010-based SNF market basket index for 
routine, ancillary, and capital-related expenses, which is used to 
compute the update factor in this final rule. As discussed in sections 
III.B.2.c. and III.B.2.d. of this final rule, this market basket 
percentage change is reduced by the applicable forecast error 
correction (as described in Sec.  413.337(d)(2)) and by the MFP 
adjustment as required by section 1888(e)(5)(B)(ii) of the Act. 
Finally, as discussed in section II.B. of this final rule, we no longer 
compute update factors to adjust a facility-specific portion of the SNF 
PPS rates, because the initial three-phase transition period from 
facility-specific to full federal rates that started with cost 
reporting periods beginning in July 1998 has expired.
c. Forecast Error Adjustment
    As discussed in the June 10, 2003 supplemental proposed rule (68 FR 
34768) and finalized in the August 4, 2003, final rule (68 FR 46057 
through 46059), Sec.  413.337(d)(2) provides for an adjustment to 
account for market basket forecast error. The initial adjustment for 
market basket forecast error applied to the update of the FY 2003 rate 
for FY 2004, and took into account the cumulative forecast error for 
the period from FY 2000 through FY 2002, resulting in an increase of 
3.26 percent to the FY 2004 update. Subsequent adjustments in 
succeeding FYs take into account the forecast error from the most 
recently available FY for which there are final data, and apply the 
difference between the forecasted and actual change in the market 
basket when the difference exceeds a specified threshold. We originally 
used a 0.25 percentage point threshold for this purpose; however, for 
the reasons specified in the FY 2008 SNF PPS final rule (72 FR 43425, 
August 3, 2007), we adopted a 0.5 percentage point threshold effective 
for FY 2008 and subsequent FYs. As we stated in the final rule for FY 
2004 that first issued the market basket forecast error adjustment (68 
FR 46058, August 4, 2003), the adjustment will reflect both upward and 
downward adjustments, as appropriate.
    For FY 2015 (the most recently available FY for which there is 
final data), the estimated increase in the market basket index was 2.5 
percentage points, while the actual increase for FY 2015 was 2.3 
percentage points, resulting in the actual increase being 0.2 
percentage point lower than the estimated increase. Accordingly, as the 
difference between the estimated and actual amount of change in the 
market basket index does not exceed the 0.5 percentage point threshold, 
the FY 2017 market basket percentage change of 2.7 percent will be not 
adjusted to account for the forecast error. Table 1 shows the 
forecasted and actual market basket amounts for FY 2015.

            Table 1--Difference Between the Forecasted and Actual Market Basket Increases for FY 2015
----------------------------------------------------------------------------------------------------------------
                                                                Forecasted FY    Actual FY 2015      FY 2015
                            Index                              2015 increase *    increase **       difference
----------------------------------------------------------------------------------------------------------------
SNF..........................................................             2.5              2.3              0.2
----------------------------------------------------------------------------------------------------------------
* Published in Federal Register; based on second quarter 2014 IGI forecast (2010-based index).
** Based on second quarter 2016 IGI forecast, with historical data through the first quarter 2016 (2010-based
  index).

d. Multifactor Productivity Adjustment
    Section 3401(b) of the Affordable Care Act requires that, in FY 
2012 (and in subsequent FYs), the market basket percentage under the 
SNF payment system as described in section 1888(e)(5)(B)(i) of the Act 
is to be reduced annually by the productivity adjustment described in 
section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) 
of the Act, added by section 3401(a) of the Affordable Care Act, sets 
forth the definition of this productivity adjustment. The statute 
defines the productivity adjustment to be equal to the 10-year moving 
average of changes in annual economy-wide private nonfarm business 
multi-factor productivity (as projected by the Secretary for the 10-
year period ending with the applicable FY, year, cost-reporting period, 
or other annual period) (the MFP adjustment). The Bureau of Labor 
Statistics (BLS) is the agency that publishes the official measure of 
private nonfarm business MFP. We refer readers to the BLS Web site at 
http://www.bls.gov/mfp for the BLS historical published MFP data.
    MFP is derived by subtracting the contribution of labor and capital 
inputs growth from output growth. The projections of the components of 
MFP are currently produced by IGI, a nationally recognized economic 
forecasting firm with which CMS contracts to forecast the components of 
the market baskets and MFP. To generate a forecast of MFP, IGI 
replicates the MFP measure calculated by the BLS, using a series of 
proxy variables derived from IGI's U.S. macroeconomic models. For a 
discussion of the MFP projection methodology, we refer readers to the 
FY 2012 SNF PPS final rule (76 FR 48527 through 48529) and the FY 2016 
SNF PPS final rule (80 FR 46395). A complete description of the MFP 
projection methodology is available on our Web site at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html.
(i) Incorporating the MFP Adjustment Into the Market Basket Update
    Per section 1888(e)(5)(A) of the Act, the Secretary shall establish 
a SNF market basket index that reflects changes over time in the prices 
of an appropriate mix of goods and services included in covered SNF 
services. Section 1888(e)(5)(B)(ii) of the Act, added by section 
3401(b) of the Affordable Care Act, requires that for FY 2012 and each 
subsequent FY, after determining the market basket percentage described 
in section 1888(e)(5)(B)(i) of the Act, the Secretary shall reduce such 
percentage by the

[[Page 51974]]

productivity adjustment described in section 1886(b)(3)(B)(xi)(II) 
(which we refer to as the MFP adjustment). Section 1888(e)(5)(B)(ii) of 
the Act further states that the reduction of the market basket 
percentage by the MFP adjustment may result in the market basket 
percentage being less than zero for a FY, and may result in payment 
rates under section 1888(e) of the Act for a FY being less than such 
payment rates for the preceding FY. Thus, if the application of the MFP 
adjustment to the market basket percentage calculated under section 
1888(e)(5)(B)(i) of the Act results in an MFP-adjusted market basket 
percentage that is less than zero, then the annual update to the 
unadjusted federal per diem rates under section 1888(e)(4)(E)(ii) of 
the Act would be negative, and such rates would decrease relative to 
the prior FY.
    For the FY 2017 update, the MFP adjustment is calculated as the 10-
year moving average of changes in MFP for the period ending September 
30, 2017. In the FY 2017 SNF PPS proposed rule, this adjustment was 
calculated to be 0.5 percent. However, as discussed in the FY 2017 SNF 
PPS proposed rule (81 FR 24234), we proposed that if more recent data 
become available (for example, a more recent estimate of the FY 2010-
based SNF market basket and/or MFP adjustment), we would use such data, 
if appropriate, to determine, among other things, the FY 2017 SNF 
market basket percentage change and the MFP adjustment in this final 
rule. Therefore, based on IGI's most recent second quarter 2016 
forecast (with historical data through first quarter 2016), the MFP 
adjustment for FY 2017 is 0.3 percent. Consistent with section 
1888(e)(5)(B)(i) of the Act and Sec.  413.337(d)(2) of the regulations, 
the market basket percentage for FY 2017 for the SNF PPS is based on 
IGI's second quarter 2016 forecast of the SNF market basket update, 
which is estimated to be 2.7 percent, as adjusted by any applicable 
forecast error adjustment (as discussed above, in this final rule, we 
are not applying a forecast error adjustment to the SNF market basket 
update). In accordance with section 1888(e)(5)(B)(ii) of the Act (as 
added by section 3401(b) of the Affordable Care Act) and Sec.  
413.337(d)(3), this market basket percentage is then reduced by the MFP 
adjustment (the 10-year moving average of changes in MFP for the period 
ending September 30, 2017) of 0.3 percent, which is calculated as 
described above and based on IGI's second quarter 2016 forecast. The 
resulting MFP-adjusted SNF market basket update is equal to 2.4 
percent, or 2.7 percent less 0.3 percentage point.
e. Market Basket Update Factor for FY 2017
    Sections 1888(e)(4)(E)(ii)(IV) and 1888(e)(5)(i) of the Act require 
that the update factor used to establish the FY 2017 unadjusted federal 
rates be at a level equal to the market basket index percentage change. 
Accordingly, we determined the total growth from the average market 
basket level for the period of October 1, 2015 through September 30, 
2016 to the average market basket level for the period of October 1, 
2016 through September 30, 2017. This process yields a percentage 
change in the market basket of 2.7 percent.
    As further explained in section III.B.2.c. of this final rule, as 
applicable, we adjust the market basket percentage change by the 
forecast error from the most recently available FY for which there is 
final data and apply this adjustment whenever the difference between 
the forecasted and actual percentage change in the market basket 
exceeds a 0.5 percentage point threshold. Since the difference between 
the forecasted FY 2015 SNF market basket percentage change and the 
actual FY 2015 SNF market basket percentage change (FY 2015 is the most 
recently available FY for which there is historical data) did not 
exceed the 0.5 percentage point threshold, the FY 2017 market basket 
percentage change of 2.7 percent will not be adjusted by the forecast 
error correction.
    For FY 2017, section 1888(e)(5)(B)(ii) of the Act requires us to 
reduce the market basket percentage change by the MFP adjustment (the 
10-year moving average of changes in MFP for the period ending 
September 30, 2017) of 0.3 percent, as described in section III.B.2.d. 
of this final rule. The resulting net SNF market basket update would 
equal 2.4 percent, or 2.7 percent less the 0.3 percentage point MFP 
adjustment. A discussion of the general comments that we received on 
the market basket update factor for FY 2017, and our responses to those 
comments, appears below.
    Comment: We received a number of comments in relation to applying 
the FY 2017 market basket update factor in the determination of the FY 
2017 unadjusted federal per diem rates, with some commenters supporting 
its application in determining the FY 2017 unadjusted per diem rates, 
while others opposed its application. In their March 2016 report 
(available at http://medpac.gov/documents/reports/chapter-7-skilled-nursing-facility-services-(march-2016-report).pdf?sfvrsn=0) and in 
their comment on the FY 2017 SNF PPS proposed rule, MedPAC recommended 
that we eliminate the market basket update for SNFs altogether and 
implement revisions to the SNF PPS.
    Response: We appreciate all of the comments received on the 
proposed market basket update for FY 2017. In response to those 
comments opposing the application of the FY 2017 market basket update 
factor in determining the FY 2017 unadjusted federal per diem rates, 
specifically MedPAC's proposal to eliminate the market basket update 
for SNFs, under section 1888(e)(4)(E)(ii)(IV) and (e)(5)(B) of the Act, 
we are required to update the unadjusted Federal per diem rates each 
fiscal year by the SNF market basket percentage change, as reduced by 
the MFP adjustment.
    Comment: Several commenters recommended that the SNF market basket 
be reweighted more frequently. They stated that due to the rapidly 
changing long term care environment, SNFs have and will continue to 
make significant modifications to their operations, including the need 
to respond to alternative payment models, managed care, and emerging 
quality requirements. One specific recommendation was to update the SNF 
market basket cost weights in accordance with the hospital market 
basket update schedule in order to increase the accuracy of the SNF 
market basket--particularly if the SNF wage index continues to be 
directly linked to the hospital wage index.
    Response: We appreciate the commenter's suggestion for a more 
frequent rebasing of the SNF market basket. In the past, we have 
rebased the SNF market basket roughly every 5 to 7 years. In accordance 
with section 404 of Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA, Pub. L. 108-173), we determined that 
the frequency for rebasing the hospital market basket would be every 4 
years. The SNF market basket was last rebased and revised 3 years ago 
in the FY 2014 SNF PPS final rule (reflecting 2010 base year 
expenditures), and was effective beginning in FY 2014. We will continue 
to review the most recent SNF Medicare cost report data and resulting 
market basket cost weights for any notable changes, and determine if we 
need to rebase the SNF market basket more frequently than roughly every 
5 to 7 years. Should we determine that the SNF market basket would be 
improved by updating the base year, such an update would be proposed in

[[Page 51975]]

rulemaking and be subject to public comment.
    Comment: One commenter requested that we engage in an ongoing 
dialogue with the commenter's association on their market basket 
research. The goal of such discussions would be to inform us and 
support any analogous CMS reform efforts.
    Response: We appreciate the commenter's review of the market basket 
and continued dialogue regarding their research. Additionally, the 
commenter is encouraged to submit any research to [email protected].
    Comment: One commenter identified a potential error in our 
calculation of the proposed FY 2017 unadjusted federal per diem rates. 
Specifically, the commenter stated that the FY 2017 unadjusted federal 
per diem rates published in the FY 2017 SNF PPS proposed rule (81 FR 
24234) did not appear to reflect the full, proposed FY 2017 market 
basket update factor of 2.1 percent.
    Response: We appreciate this comment and, after review of the 
calculations used to determine the FY 2017 unadjusted federal per diem 
rates, we have determined that there was an error in our calculation of 
the proposed FY 2017 unadjusted federal per diem rates. Specifically, 
when performing the calculation of the FY 2017 unadjusted federal per 
diem rates, we begin with the FY 2016 unadjusted federal per diem rates 
which are updated by the FY 2017 MFP-adjusted market basket update 
factor in accordance with section 1888(e)(4)(E)(ii)(IV) and (e)(5)(B) 
of the Act. However, in performing the calculation, we inadvertently 
made an error in transcribing the FY 2016 unadjusted federal per diem 
rates (though we applied the correct FY 2017 proposed market basket 
update factor of 2.1 percent). Specifically, for the FY 2017 SNF PPS 
proposed rule, we inadvertently used the following rates as the FY 2016 
unadjusted urban federal per diem rates in the calculation of the 
proposed FY 2017 urban unadjusted federal per diem rates: $171.12 
(nursing case-mix), $128.90 (therapy case-mix), $16.97 (therapy non-
case-mix), and $87.33 (non-case-mix). We inadvertently used the 
following rates as the FY 2016 unadjusted rural federal per diem rates 
in the calculation of the proposed FY 2017 unadjusted rural federal per 
diem rates: $163.48 (nursing case-mix), $148.62 (therapy case-mix), 
$18.14 (therapy non-case-mix), and $88.95 (non-case-mix). The correct 
FY 2016 urban and rural unadjusted federal per diem rates which should 
have been used in this calculation, and which have been used in the 
calculation of the final FY 2017 urban and rural unadjusted federal per 
diem rates provided in Tables 2 and 3 below, are those in Tables 2 and 
3 of the FY 2016 SNF PPS final rule (80 FR 46397).
    Additionally, as further discussed in section III.B.4., we also 
discovered an error in the calculation of the proposed FY 2017 wage 
index budget neutrality factor, which also impacted the calculation of 
the proposed FY 2017 unadjusted federal per diem rates set forth in the 
proposed rule (81 FR 24234) (as well as the impact analysis provided in 
Table 19 of the FY 2017 SNF PPS proposed rule (81 FR 24278), as further 
discussed in section VI.A.4. of this final rule).
    We appreciate the commenter bringing this error to our attention. 
The corrected final FY 2017 SNF PPS unadjusted federal per diem rates 
are set forth below in Tables 2 and 3. We further note that, as 
described previously in this section, the FY 2017 market basket update 
factor and MFP adjustment were both updated in advance of the final 
rule. As such, the FY 2017 unadjusted federal per diem rates provided 
in Tables 2 and 3 reflect the updated FY 2017 market basket increase 
factor and MFP adjustment, as well as the corrected FY 2016 unadjusted 
federal per diem rates and corrected wage index budget neutrality 
factor which serve as the foundation for calculating the FY 2017 
unadjusted federal per diem rates.
    Accordingly, for the reasons specified in this final rule and in 
the FY 2017 SNF PPS proposed rule (81 FR 24230), we are applying the FY 
2017 market basket factor, as adjusted by the MFP adjustment as 
described above, in our determination of the FY 2017 unadjusted federal 
per diem rates. We used the SNF market basket, adjusted as described 
previously, to adjust each per diem component of the federal rates 
forward to reflect the change in the average prices for FY 2017 from 
average prices for FY 2016. We further adjusted the rates by a wage 
index budget neutrality factor, described later in this section. Tables 
2 and 3 reflect the updated components of the unadjusted federal rates 
for FY 2017, prior to adjustment for case-mix. As discussed previously 
in this section, the unadjusted federal per diem rates provided below 
reflect the updated FY 2017 market basket update factor, as adjusted by 
the updated MFP adjustment, and the corrections to the FY 2016 
unadjusted federal per diem rates and the FY 2017 wage index budget 
neutrality factor described previously.

                             Table 2--FY 2017 Unadjusted Federal Rate per Diem Urban
----------------------------------------------------------------------------------------------------------------
                                               Nursing--case-   Therapy--case-   Therapy-- non-
               Rate component                       mix              mix            case-mix       Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............................         $175.28          $132.03           $17.39           $89.46
----------------------------------------------------------------------------------------------------------------


                             Table 3--FY 2017 Unadjusted Federal Rate per Diem Rural
----------------------------------------------------------------------------------------------------------------
                                               Nursing--case-   Therapy--case-   Therapy-- non-
               Rate component                       mix              mix            case-mix       Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............................         $167.45          $152.24           $18.58           $91.11
----------------------------------------------------------------------------------------------------------------

3. Case-Mix Adjustment
    Under section 1888(e)(4)(G)(i) of the Act, the federal rate also 
incorporates an adjustment to account for facility case-mix, using a 
classification system that accounts for the relative resource 
utilization of different patient types. The statute specifies that the 
adjustment is to reflect both a resident classification system that the 
Secretary establishes to account for the relative resource use of 
different patient types, as well as resident assessment data and other 
data that the Secretary considers appropriate. In the interim final 
rule with comment period that initially implemented the SNF PPS (63 FR 
26252, May 12, 1998), we developed the RUG-III case-mix classification 
system, which tied the amount of payment to resident resource

[[Page 51976]]

use in combination with resident characteristic information. Staff time 
measurement (STM) studies conducted in 1990, 1995, and 1997 provided 
information on resource use (time spent by staff members on residents) 
and resident characteristics that enabled us not only to establish RUG-
III, but also to create case-mix indexes (CMIs). The original RUG-III 
grouper logic was based on clinical data collected in 1990, 1995, and 
1997. As discussed in the SNF PPS proposed rule for FY 2010 (74 FR 
22208), we subsequently conducted a multi-year data collection and 
analysis under the Staff Time and Resource Intensity Verification 
(STRIVE) project to update the case-mix classification system for FY 
2011. The resulting Resource Utilization Groups, Version 4 (RUG-IV) 
case-mix classification system reflected the data collected in 2006-
2007 during the STRIVE project, and was finalized in the FY 2010 SNF 
PPS final rule (74 FR 40288) to take effect in FY 2011 concurrently 
with an updated new resident assessment instrument, version 3.0 of the 
Minimum Data Set (MDS 3.0), which collects the clinical data used for 
case-mix classification under RUG-IV.
    We note that case-mix classification is based, in part, on the 
beneficiary's need for skilled nursing care and therapy services. The 
case-mix classification system uses clinical data from the MDS to 
assign a case-mix group to each patient that is then used to calculate 
a per diem payment under the SNF PPS. As discussed in section IV.A. of 
the FY 2017 SNF PPS proposed rule (81 FR 24241 through 24242), the 
clinical orientation of the case-mix classification system supports the 
SNF PPS's use of an administrative presumption that considers a 
beneficiary's initial case-mix classification to assist in making 
certain SNF level of care determinations. Further, because the MDS is 
used as a basis for payment, as well as a clinical assessment, we have 
provided extensive training on proper coding and the time frames for 
MDS completion in our Resident Assessment Instrument (RAI) Manual. For 
an MDS to be considered valid for use in determining payment, the MDS 
assessment must be completed in compliance with the instructions in the 
RAI Manual in effect at the time the assessment is completed. For 
payment and quality monitoring purposes, the RAI Manual consists of 
both the Manual instructions and the interpretive guidance and policy 
clarifications posted on the appropriate MDS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/MDS30RAIManual.html.
    In addition, we note that section 511 of the MMA, amended section 
1888(e)(12) of the Act, to provide for a temporary increase of 128 
percent in the PPS per diem payment for any SNF residents with Acquired 
Immune Deficiency Syndrome (AIDS), effective with services furnished on 
or after October 1, 2004. This special add-on for SNF residents with 
AIDS was to remain in effect until the Secretary certifies that there 
is an appropriate adjustment in the case mix to compensate for the 
increased costs associated with such residents. The add-on for SNF 
residents with AIDS is also discussed in Program Transmittal #160 
(Change Request #3291), issued on April 30, 2004, which is available 
online at www.cms.gov/transmittals/downloads/r160cp.pdf. In the SNF PPS 
final rule for FY 2010 (74 FR 40288), we did not address this 
certification in that final rule's implementation of the case-mix 
refinements for RUG-IV, thus allowing the add-on payment required by 
section 511 of the MMA to remain in effect. For the limited number of 
SNF residents that qualify for this add-on, there is a significant 
increase in payments. For example, using FY 2014 data (which still used 
ICD-9-CM coding), we identified fewer than 4,800 SNF residents with a 
diagnosis code of 042 (Human Immunodeficiency Virus (HIV) Infection). 
As explained in the FY 2016 SNF PPS final rule (80 FR 46397 through 
46398), on October 1, 2015 (consistent with section 212 of PAMA), we 
converted to using ICD-10-CM code B20 to identify those residents for 
whom it is appropriate to apply the AIDS add-on established by section 
511 of the MMA. For FY 2017, an urban facility with a resident with 
AIDS in RUG-IV group ``HC2'' would have a case-mix adjusted per diem 
payment of $438.13 (see Table 4) before the application of the MMA 
adjustment. After an increase of 128 percent, this urban facility would 
receive a case-mix adjusted per diem payment of approximately $998.94.
    Under section 1888(e)(4)(H) of the Act, each update of the payment 
rates must include the case-mix classification methodology applicable 
for the upcoming FY. The payment rates set forth in this final rule 
reflect the use of the RUG-IV case-mix classification system from 
October 1, 2016, through September 30, 2017. We list the case-mix 
adjusted RUG-IV payment rates, provided separately for urban and rural 
SNFs, in Tables 4 and 5 with corresponding case-mix values. We use the 
revised OMB delineations adopted in the FY 2015 SNF PPS final rule (79 
FR 45632, 45634) to identify a facility's urban or rural status for the 
purpose of determining which set of rate tables would apply to the 
facility. Tables 4 and 5 do not reflect the add-on for SNF residents 
with AIDS enacted by section 511 of the MMA, which we apply only after 
making all other adjustments (such as wage index and case-mix). We 
would note that the case mix adjusted rates provided below are based on 
the FY 2017 unadjusted federal per diem rates provided in Tables 2 and 
3 of this section, which reflect the updated FY 2017 SNF market basket 
update factor and updated MFP adjustment, as well as corrections to the 
errors associated with the unadjusted federal per diem rates published 
in the FY 2017 SNF PPS proposed rule (81 FR 24234) described previously 
in this section.

                                      Table 4--RUG-IV Case-Mix Adjusted Federal Rates and Associated Indexes--Urban
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Nursing         Therapy      Non-case-mix    Non-case-mix
             RUG-IV Category               Nursing index   Therapy index     component       component     therapy comp      component      Total rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUX.....................................            2.67            1.87         $468.00         $246.90  ..............          $89.46         $804.36
RUL.....................................            2.57            1.87          450.47          246.90  ..............           89.46          786.83
RVX.....................................            2.61            1.28          457.48          169.00  ..............           89.46          715.94
RVL.....................................            2.19            1.28          383.86          169.00  ..............           89.46          642.32
RHX.....................................            2.55            0.85          446.96          112.23  ..............           89.46          648.65
RHL.....................................            2.15            0.85          376.85          112.23  ..............           89.46          578.54
RMX.....................................            2.47            0.55          432.94           72.62  ..............           89.46          595.02
RML.....................................            2.19            0.55          383.86           72.62  ..............           89.46          545.94
RLX.....................................            2.26            0.28          396.13           36.97  ..............           89.46          522.56
RUC.....................................            1.56            1.87          273.44          246.90  ..............           89.46          609.80
RUB.....................................            1.56            1.87          273.44          246.90  ..............           89.46          609.80

[[Page 51977]]

 
RUA.....................................            0.99            1.87          173.53          246.90  ..............           89.46          509.89
RVC.....................................            1.51            1.28          264.67          169.00  ..............           89.46          523.13
RVB.....................................            1.11            1.28          194.56          169.00  ..............           89.46          453.02
RVA.....................................            1.10            1.28          192.81          169.00  ..............           89.46          451.27
RHC.....................................            1.45            0.85          254.16          112.23  ..............           89.46          455.85
RHB.....................................            1.19            0.85          208.58          112.23  ..............           89.46          410.27
RHA.....................................            0.91            0.85          159.50          112.23  ..............           89.46          361.19
RMC.....................................            1.36            0.55          238.38           72.62  ..............           89.46          400.46
RMB.....................................            1.22            0.55          213.84           72.62  ..............           89.46          375.92
RMA.....................................            0.84            0.55          147.24           72.62  ..............           89.46          309.32
RLB.....................................            1.50            0.28          262.92           36.97  ..............           89.46          389.35
RLA.....................................            0.71            0.28          124.45           36.97  ..............           89.46          250.88
ES3.....................................            3.58  ..............          627.50  ..............          $17.39           89.46          734.35
ES2.....................................            2.67  ..............          468.00  ..............           17.39           89.46          574.85
ES1.....................................            2.32  ..............          406.65  ..............           17.39           89.46          513.50
HE2.....................................            2.22  ..............          389.12  ..............           17.39           89.46          495.97
HE1.....................................            1.74  ..............          304.99  ..............           17.39           89.46          411.84
HD2.....................................            2.04  ..............          357.57  ..............           17.39           89.46          464.42
HD1.....................................            1.60  ..............          280.45  ..............           17.39           89.46          387.30
HC2.....................................            1.89  ..............          331.28  ..............           17.39           89.46          438.13
HC1.....................................            1.48  ..............          259.41  ..............           17.39           89.46          366.26
HB2.....................................            1.86  ..............          326.02  ..............           17.39           89.46          432.87
HB1.....................................            1.46  ..............          255.91  ..............           17.39           89.46          362.76
LE2.....................................            1.96  ..............          343.55  ..............           17.39           89.46          450.40
LE1.....................................            1.54  ..............          269.93  ..............           17.39           89.46          376.78
LD2.....................................            1.86  ..............          326.02  ..............           17.39           89.46          432.87
LD1.....................................            1.46  ..............          255.91  ..............           17.39           89.46          362.76
LC2.....................................            1.56  ..............          273.44  ..............           17.39           89.46          380.29
LC1.....................................            1.22  ..............          213.84  ..............           17.39           89.46          320.69
LB2.....................................            1.45  ..............          254.16  ..............           17.39           89.46          361.01
LB1.....................................            1.14  ..............          199.82  ..............           17.39           89.46          306.67
CE2.....................................            1.68  ..............          294.47  ..............           17.39           89.46          401.32
CE1.....................................            1.50  ..............          262.92  ..............           17.39           89.46          369.77
CD2.....................................            1.56  ..............          273.44  ..............           17.39           89.46          380.29
CD1.....................................            1.38  ..............          241.89  ..............           17.39           89.46          348.74
CC2.....................................            1.29  ..............          226.11  ..............           17.39           89.46          332.96
CC1.....................................            1.15  ..............          201.57  ..............           17.39           89.46          308.42
CB2.....................................            1.15  ..............          201.57  ..............           17.39           89.46          308.42
CB1.....................................            1.02  ..............          178.79  ..............           17.39           89.46          285.64
CA2.....................................            0.88  ..............          154.25  ..............           17.39           89.46          261.10
CA1.....................................            0.78  ..............          136.72  ..............           17.39           89.46          243.57
BB2.....................................            0.97  ..............          170.02  ..............           17.39           89.46          276.87
BB1.....................................            0.90  ..............          157.75  ..............           17.39           89.46          264.60
BA2.....................................            0.70  ..............          122.70  ..............           17.39           89.46          229.55
BA1.....................................            0.64  ..............          112.18  ..............           17.39           89.46          219.03
PE2.....................................            1.50  ..............          262.92  ..............           17.39           89.46          369.77
PE1.....................................            1.40  ..............          245.39  ..............           17.39           89.46          352.24
PD2.....................................            1.38  ..............          241.89  ..............           17.39           89.46          348.74
PD1.....................................            1.28  ..............          224.36  ..............           17.39           89.46          331.21
PC2.....................................            1.10  ..............          192.81  ..............           17.39           89.46          299.66
PC1.....................................            1.02  ..............          178.79  ..............           17.39           89.46          285.64
PB2.....................................            0.84  ..............          147.24  ..............           17.39           89.46          254.09
PB1.....................................            0.78  ..............          136.72  ..............           17.39           89.46          243.57
PA2.....................................            0.59  ..............          103.42  ..............           17.39           89.46          210.27
PA1.....................................            0.54  ..............           94.65  ..............           17.39           89.46          201.50
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                      Table 5--RUG-IV Case-Mix Adjusted Federal Rates and Associated Indexes--Rural
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Nursing         Therapy      Non-case-mix    Non-case-mix
             RUG-IV Category               Nursing index   Therapy index     component       component     therapy comp      component      Total rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUX.....................................            2.67            1.87         $447.09         $284.69  ..............          $91.11         $822.89
RUL.....................................            2.57            1.87          430.35          284.69  ..............           91.11          806.15
RVX.....................................            2.61            1.28          437.04          194.87  ..............           91.11          723.02
RVL.....................................            2.19            1.28          366.72          194.87  ..............           91.11          652.70
RHX.....................................            2.55            0.85          427.00          129.40  ..............           91.11          647.51
RHL.....................................            2.15            0.85          360.02          129.40  ..............           91.11          580.53
RMX.....................................            2.47            0.55          413.60           83.73  ..............           91.11          588.44
RML.....................................            2.19            0.55          366.72           83.73  ..............           91.11          541.56
RLX.....................................            2.26            0.28          378.44           42.63  ..............           91.11          512.18

[[Page 51978]]

 
RUC.....................................            1.56            1.87          261.22          284.69  ..............           91.11          637.02
RUB.....................................            1.56            1.87          261.22          284.69  ..............           91.11          637.02
RUA.....................................            0.99            1.87          165.78          284.69  ..............           91.11          541.58
RVC.....................................            1.51            1.28          252.85          194.87  ..............           91.11          538.83
RVB.....................................            1.11            1.28          185.87          194.87  ..............           91.11          471.85
RVA.....................................            1.10            1.28          184.20          194.87  ..............           91.11          470.18
RHC.....................................            1.45            0.85          242.80          129.40  ..............           91.11          463.31
RHB.....................................            1.19            0.85          199.27          129.40  ..............           91.11          419.78
RHA.....................................            0.91            0.85          152.38          129.40  ..............           91.11          372.89
RMC.....................................            1.36            0.55          227.73           83.73  ..............           91.11          402.57
RMB.....................................            1.22            0.55          204.29           83.73  ..............           91.11          379.13
RMA.....................................            0.84            0.55          140.66           83.73  ..............           91.11          315.50
RLB.....................................            1.50            0.28          251.18           42.63  ..............           91.11          384.92
RLA.....................................            0.71            0.28          118.89           42.63  ..............           91.11          252.63
ES3.....................................            3.58  ..............          599.47  ..............          $18.58           91.11          709.16
ES2.....................................            2.67  ..............          447.09  ..............           18.58           91.11          556.78
ES1.....................................            2.32  ..............          388.48  ..............           18.58           91.11          498.17
HE2.....................................            2.22  ..............          371.74  ..............           18.58           91.11          481.43
HE1.....................................            1.74  ..............          291.36  ..............           18.58           91.11          401.05
HD2.....................................            2.04  ..............          341.60  ..............           18.58           91.11          451.29
HD1.....................................            1.60  ..............          267.92  ..............           18.58           91.11          377.61
HC2.....................................            1.89  ..............          316.48  ..............           18.58           91.11          426.17
HC1.....................................            1.48  ..............          247.83  ..............           18.58           91.11          357.52
HB2.....................................            1.86  ..............          311.46  ..............           18.58           91.11          421.15
HB1.....................................            1.46  ..............          244.48  ..............           18.58           91.11          354.17
LE2.....................................            1.96  ..............          328.20  ..............           18.58           91.11          437.89
LE1.....................................            1.54  ..............          257.87  ..............           18.58           91.11          367.56
LD2.....................................            1.86  ..............          311.46  ..............           18.58           91.11          421.15
LD1.....................................            1.46  ..............          244.48  ..............           18.58           91.11          354.17
LC2.....................................            1.56  ..............          261.22  ..............           18.58           91.11          370.91
LC1.....................................            1.22  ..............          204.29  ..............           18.58           91.11          313.98
LB2.....................................            1.45  ..............          242.80  ..............           18.58           91.11          352.49
LB1.....................................            1.14  ..............          190.89  ..............           18.58           91.11          300.58
CE2.....................................            1.68  ..............          281.32  ..............           18.58           91.11          391.01
CE1.....................................            1.50  ..............          251.18  ..............           18.58           91.11          360.87
CD2.....................................            1.56  ..............          261.22  ..............           18.58           91.11          370.91
CD1.....................................            1.38  ..............          231.08  ..............           18.58           91.11          340.77
CC2.....................................            1.29  ..............          216.01  ..............           18.58           91.11          325.70
CC1.....................................            1.15  ..............          192.57  ..............           18.58           91.11          302.26
CB2.....................................            1.15  ..............          192.57  ..............           18.58           91.11          302.26
CB1.....................................            1.02  ..............          170.80  ..............           18.58           91.11          280.49
CA2.....................................            0.88  ..............          147.36  ..............           18.58           91.11          257.05
CA1.....................................            0.78  ..............          130.61  ..............           18.58           91.11          240.30
BB2.....................................            0.97  ..............          162.43  ..............           18.58           91.11          272.12
BB1.....................................            0.90  ..............          150.71  ..............           18.58           91.11          260.40
BA2.....................................            0.70  ..............          117.22  ..............           18.58           91.11          226.91
BA1.....................................            0.64  ..............          107.17  ..............           18.58           91.11          216.86
PE2.....................................            1.50  ..............          251.18  ..............           18.58           91.11          360.87
PE1.....................................            1.40  ..............          234.43  ..............           18.58           91.11          344.12
PD2.....................................            1.38  ..............          231.08  ..............           18.58           91.11          340.77
PD1.....................................            1.28  ..............          214.34  ..............           18.58           91.11          324.03
PC2.....................................            1.10  ..............          184.20  ..............           18.58           91.11          293.89
PC1.....................................            1.02  ..............          170.80  ..............           18.58           91.11          280.49
PB2.....................................            0.84  ..............          140.66  ..............           18.58           91.11          250.35
PB1.....................................            0.78  ..............          130.61  ..............           18.58           91.11          240.30
PA2.....................................            0.59  ..............           98.80  ..............           18.58           91.11          208.49
PA1.....................................            0.54  ..............           90.42  ..............           18.58           91.11          200.11
--------------------------------------------------------------------------------------------------------------------------------------------------------

4. Wage Index Adjustment
    Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the 
federal rates to account for differences in area wage levels, using a 
wage index that the Secretary determines appropriate. Since the 
inception of the SNF PPS, we have used hospital inpatient wage data in 
developing a wage index to be applied to SNFs. We proposed to continue 
this practice for FY 2017, as we continue to believe that in the 
absence of SNF-specific wage data, using the hospital inpatient wage 
index data is appropriate and reasonable for the SNF PPS. As explained 
in the update notice for FY 2005 (69 FR 45786), the SNF PPS does not 
use the hospital area wage index's occupational mix adjustment, as this 
adjustment serves specifically to define the occupational categories 
more clearly in a hospital setting; moreover, the collection of the 
occupational wage data also excludes any wage data related to SNFs. 
Therefore, we believe that using the updated wage data exclusive of the 
occupational mix adjustment continues to be appropriate for SNF 
payments. For FY 2017, the updated wage data are for

[[Page 51979]]

hospital cost reporting periods beginning on or after October 1, 2012 
and before October 1, 2013 (FY 2013 cost report data).
    We note that section 315 of the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106-554, 
enacted on December 21, 2000) authorized us to establish a geographic 
reclassification procedure that is specific to SNFs, but only after 
collecting the data necessary to establish a SNF wage index that is 
based on wage data from nursing homes. However, to date, this has 
proven to be unfeasible due to the volatility of existing SNF wage data 
and the significant amount of resources that would be required to 
improve the quality of that data.
    In addition, we proposed to continue to use the same methodology 
discussed in the SNF PPS final rule for FY 2008 (72 FR 43423) to 
address those geographic areas in which there are no hospitals, and 
thus, no hospital wage index data on which to base the calculation of 
the FY 2017 SNF PPS wage index. For rural geographic areas that do not 
have hospitals, and therefore, lack hospital wage data on which to base 
an area wage adjustment, we would use the average wage index from all 
contiguous Core-Based Statistical Areas (CBSAs) as a reasonable proxy. 
For FY 2017, there are no rural geographic areas that do not have 
hospitals, and thus, this methodology would not be applied. For rural 
Puerto Rico, we would not apply this methodology due to the distinct 
economic circumstances that exist there (for example, due to the close 
proximity to one another of almost all of Puerto Rico's various urban 
and non-urban areas, this methodology would produce a wage index for 
rural Puerto Rico that is higher than that in half of its urban areas); 
instead, we would continue to use the most recent wage index previously 
available for that area. For urban areas without specific hospital wage 
index data, we would use the average wage indexes of all of the urban 
areas within the state to serve as a reasonable proxy for the wage 
index of that urban CBSA. For FY 2017, the only urban area without wage 
index data available is CBSA 25980, Hinesville-Fort Stewart, GA. The 
wage index applicable to FY 2017 is set forth in Tables A and B 
available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.
    Once calculated, we would apply the wage index adjustment to the 
labor-related portion of the federal rate. Each year, we calculate a 
revised labor-related share, based on the relative importance of labor-
related cost categories (that is, those cost categories that are labor-
intensive and vary with the local labor market) in the input price 
index. In the SNF PPS final rule for FY 2014 (78 FR 47944 through 
47946), we finalized a proposal to revise the labor-related share to 
reflect the relative importance of the FY 2010-based SNF market basket 
cost weights for the following cost categories: Wages and salaries; 
employee benefits; the labor-related portion of nonmedical professional 
fees; administrative and facilities support services; all other: Labor-
related services; and a proportion of capital-related expenses.
    We calculate the labor-related relative importance from the SNF 
market basket, and it approximates the labor-related portion of the 
total costs, after taking into account historical and projected price 
changes between the base year and FY 2017. The price proxies that move 
the different cost categories in the market basket do not necessarily 
change at the same rate, and the relative importance captures these 
changes. Accordingly, the relative importance figure more closely 
reflects the cost share weights for FY 2017 than the base year weights 
from the SNF market basket.
    We calculate the labor-related relative importance for FY 2017 in 
four steps. First, we compute the FY 2017 price index level for the 
total market basket and each cost category of the market basket. 
Second, we calculate a ratio for each cost category by dividing the FY 
2017 price index level for that cost category by the total market 
basket price index level. Third, we determine the FY 2017 relative 
importance for each cost category by multiplying this ratio by the base 
year (FY 2010) weight. Finally, we add the FY 2017 relative importance 
for each of the labor-related cost categories (wages and salaries, 
employee benefits, the labor-related portion of non-medical 
professional fees, administrative and facilities support services, all 
other: Labor-related services, and a portion of capital-related 
expenses) to produce the FY 2017 labor-related relative importance. 
Table 6 summarizes the updated labor-related share for FY 2017, 
compared to the labor-related share that was used for the FY 2016 SNF 
PPS final rule. In the FY 2017 SNF PPS proposed rule, the labor-related 
share for FY 2017 was proposed to be 68.9 percent. However, as 
discussed in the FY 2017 SNF PPS proposed rule (81 FR 24234), we 
proposed that if more recent data become available, we would use such 
data, if appropriate, to determine, among other things, the FY 2017 SNF 
labor related share. Therefore, based on IGI's most recent second 
quarter 2016 forecast (with historical data through first quarter 
2016), the labor-related share for FY 2017 is 68.8 percent.
    We invited public comments on these proposals. A discussion of the 
comments we received on these proposals, as well as a discussion of the 
general comments we received on the wage index adjustment, and our 
responses to those comments, appears below.
    Comment: One commenter is concerned with the significant drop in 
the wage index for Great Falls, Montana (CBSA 24500). The commenter 
mentioned that Montana is a frontier state as defined in the Affordable 
Care Act and that the Affordable Care Act, specifically section 10324 
of the Affordable Care Act, establishes a wage index floor of 1.0 for 
frontier state hospitals. The commenter recommends that CMS use its 
authority to apply the ACA-mandated frontier floor for hospitals to 
SNFs.
    Response: We appreciate the commenter's concern regarding the 
application of a floor on area wage indexes for SNFs in frontier 
states. Section 10324 of the Affordable Care Act requires that 
hospitals in frontier states cannot be assigned a wage index of less 
than 1.0000. We do not believe it would be prudent at this time to 
adopt such a policy under the SNF PPS. As we stated in the FY 2016 SNF 
PPS final rule (80 FR 46401), MedPAC has recommended eliminating the 
rural floor policy (which actually sets a floor for urban hospitals) 
from the calculation of the IPPS wage index (see, for example, Chapter 
3 of MedPAC's March 2013 Report to Congress on Medicare Payment Policy, 
available at http://medpac.gov/documents/reports/mar13_entirereport.pdf, which notes on page 65 that in 2007, MedPAC had 
``. . . recommended eliminating these special wage index adjustments 
and adopting a new wage index system to avoid geographic inequities 
that can occur due to current wage index policies (Medicare Payment 
Advisory Commission 2007b.'') We stated in the FY 2016 SNF PPS final 
rule that if we adopted the rural floor at that time under the SNF PPS, 
we believed that the SNF PPS wage index could become vulnerable to 
problems similar to those that MedPAC identified in its March 2013 
Report to Congress. Similarly, we have concerns regarding adopting a 
frontier state floor at this time under the SNF PPS as we are concerned 
that the frontier state floor could produce vulnerabilities for the SNF 
PPS wage index similar to those discussed by

[[Page 51980]]

MedPAC in its report. As stated above, under section 1888(e)(4)(G)(ii) 
of the Act and Sec.  413.337(a)(1)(ii) of the regulations, we adjust 
the SNF PPS rates to account for differences in area wage levels. We 
believe that applying a floor to those facilities located in frontier 
states would make the wage index for those areas less reflective of the 
area wage levels.
    Comment: Several commenters recommend that we continue exploring 
potential approaches for collecting SNF-specific wage data to establish 
a SNF-specific wage index. These commenters stated that the hospital 
wage index does not provide a reasonable proxy for SNF wages and 
occupational mix and should be replaced by use of SNF-specific data as 
soon as is practicable. One commenter recommended that we consider 
collecting base-hourly wage data as part of the Payroll-Based Journal 
(PBJ) initiative, which may be used in developing a SNF-specific wage 
index.
    Response: We appreciate the commenters raising these concerns 
regarding the use of the hospital wage index data under the SNF PPS, 
and the commenter's recommendation to continue exploring potential 
approaches for collecting SNF-specific wage data to establish a SNF-
specific wage index. However, we note that, consistent with our 
previous responses to these recurring comments (most recently published 
in the FY 2016 SNF PPS final rule (80 FR 46401)), developing such a 
wage index would require a resource-intensive audit process similar to 
that used for IPPS hospital data, to improve the quality of the SNF 
cost report data, in order for it to be used as part of this analysis. 
We would further note that, as this audit process is quite extensive in 
the case of approximately 3,300 hospitals, it would be significantly 
more so in the case of approximately 15,000 SNFs. Therefore, while we 
continue to review all available data and contemplate the potential 
methodological approaches for a SNF-specific wage index in the future, 
we continue to believe that in the absence of the appropriate SNF-
specific wage data, using the pre-reclassified hospital inpatient wage 
data (without the occupational mix adjustment) is appropriate and 
reasonable for the SNF PPS. With regard to the PBJ recommendation, we 
will pass this comment to our colleagues managing that initiative for 
further consideration.
    Comment: A few commenters suggested that we modify the use of 
hospital wage data used to construct the SNF PPS wage index, 
specifically calling for us to remove certain labor categories and data 
that are specific to hospitals only. These commenters also suggested 
that this modified methodology could further be tailored to SNFs by 
weighting it by occupational mix data for SNFs published by the Bureau 
of Labor Statistics (BLS).
    Response: We appreciate these commenters' suggestion that we modify 
the current hospital wage data used to construct the SNF PPS wage index 
to reflect the SNF environment more accurately. While we consider 
whether or not such an approach may constitute an interim step in the 
process of developing a SNF-specific wage index, we would note that 
other provider types also use the hospital wage index as the basis for 
their associated wage index. As such, we believe that such a 
recommendation should be part of a broader discussion of wage index 
reform across Medicare payment systems.
    Comment: A few commenters raised concerns around evolving minimum 
wage standards across the country and recommended that we consider ways 
to incorporate increasing minimum wage standards into the SNF PPS wage 
index. One commenter recommended that we should modify the wage index 
adjustment in the future to identify ``living wages'' across the 
country and that wage index policies should ensure that facilities pay 
their staff such a living wage. This commenter also recommended that we 
reward facilities that invest in their workforce.
    Response: With regard to rising minimum wage standards, we would 
note that such increases would likely be reflected in future data used 
to create the hospital wage index, to the extent these changes to state 
minimum wage standards are reflected in increased wages to hospital 
staff. Therefore, such standards would already be incorporated into the 
calculation of the SNF PPS wage index to the extent that these 
standards impact on facility wages. With regard to the comment that we 
should modify the wage index adjustment to identify and support 
facilities that pay a living wage to their staff, the purpose of the 
wage index adjustment is to reflect the actual wages being paid to 
staff, not to influence the wages being paid to staff. Therefore, we do 
not believe that we should make modifications to the wage index to 
reflect an ideal standard of wages that does not currently exist.
    Accordingly, after considering the comments received and for the 
reasons discussed previously in this section and in the FY 2017 SNF PPS 
proposed rule (81 FR 24237 through 24241), we are finalizing the FY 
2017 wage index adjustment and related policies as proposed in the FY 
2017 SNF PPS proposed rule. For FY 2017, the updated wage data are for 
hospital cost reporting periods beginning on or after October 1, 2012 
and before October 1, 2013 (FY 2013 cost report data). Table 6 
summarizes the updated labor-related share for FY 2017, compared to the 
labor-related share that was used in the FY 2016 SNF PPS final rule.

     Table 6--Labor-Related Relative Importance, FY 2016 and FY 2017
------------------------------------------------------------------------
                                         Relative           Relative
                                    importance, labor- importance, labor-
                                     related, FY 2016   related, FY 2017
                                    15:2 forecast \1\  16:2 forecast \2\
------------------------------------------------------------------------
Wages and salaries................               48.8               48.8
Employee benefits.................               11.3               11.1
Nonmedical Professional fees:                     3.5                3.4
 Labor-related....................
Administrative and facilities                     0.5                0.5
 support services.................
All Other: Labor-related services.                2.3                2.3
Capital-related (.391)............                2.7                2.7
                                   -------------------------------------
    Total.........................               69.1               68.8
------------------------------------------------------------------------
\1\ Published in the Federal Register; based on second quarter 2015 IGI
  forecast.
\2\ Based on second quarter 2016 IGI forecast, with historical data
  through first quarter 2016.


[[Page 51981]]

    Tables 7 and 8 show the RUG-IV case-mix adjusted federal rates by 
labor-related and non-labor-related components.

         Table 7--RUG-IV Case-Mix Adjusted Federal Rates for Urban SNFs By Labor and Non-Labor Component
----------------------------------------------------------------------------------------------------------------
                                                                                                     Non-labor
                         RUG-IV category                            Total rate     Labor portion      portion
----------------------------------------------------------------------------------------------------------------
RUX.............................................................          804.36         $553.40         $250.96
RUL.............................................................          786.83          541.34          245.49
RVX.............................................................          715.94          492.57          223.37
RVL.............................................................          642.32          441.92          200.40
RHX.............................................................          648.65          446.27          202.38
RHL.............................................................          578.54          398.04          180.50
RMX.............................................................          595.02          409.37          185.65
RML.............................................................          545.94          375.61          170.33
RLX.............................................................          522.56          359.52          163.04
RUC.............................................................          609.80          419.54          190.26
RUB.............................................................          609.80          419.54          190.26
RUA.............................................................          509.89          350.80          159.09
RVC.............................................................          523.13          359.91          163.22
RVB.............................................................          453.02          311.68          141.34
RVA.............................................................          451.27          310.47          140.80
RHC.............................................................          455.85          313.62          142.23
RHB.............................................................          410.27          282.27          128.00
RHA.............................................................          361.19          248.50          112.69
RMC.............................................................          400.46          275.52          124.94
RMB.............................................................          375.92          258.63          117.29
RMA.............................................................          309.32          212.81           96.51
RLB.............................................................          389.35          267.87          121.48
RLA.............................................................          250.88          172.61           78.27
ES3.............................................................          734.35          505.23          229.12
ES2.............................................................          574.85          395.50          179.35
ES1.............................................................          513.50          353.29          160.21
HE2.............................................................          495.97          341.23          154.74
HE1.............................................................          411.84          283.35          128.49
HD2.............................................................          464.42          319.52          144.90
HD1.............................................................          387.30          266.46          120.84
HC2.............................................................          438.13          301.43          136.70
HC1.............................................................          366.26          251.99          114.27
HB2.............................................................          432.87          297.81          135.06
HB1.............................................................          362.76          249.58          113.18
LE2.............................................................          450.40          309.88          140.52
LE1.............................................................          376.78          259.22          117.56
LD2.............................................................          432.87          297.81          135.06
LD1.............................................................          362.76          249.58          113.18
LC2.............................................................          380.29          261.64          118.65
LC1.............................................................          320.69          220.63          100.06
LB2.............................................................          361.01          248.37          112.64
LB1.............................................................          306.67          210.99           95.68
CE2.............................................................          401.32          276.11          125.21
CE1.............................................................          369.77          254.40          115.37
CD2.............................................................          380.29          261.64          118.65
CD1.............................................................          348.74          239.93          108.81
CC2.............................................................          332.96          229.08          103.88
CC1.............................................................          308.42          212.19           96.23
CB2.............................................................          308.42          212.19           96.23
CB1.............................................................          285.64          196.52           89.12
CA2.............................................................          261.10          179.64           81.46
CA1.............................................................          243.57          167.58           75.99
BB2.............................................................          276.87          190.49           86.38
BB1.............................................................          264.60          182.04           82.56
BA2.............................................................          229.55          157.93           71.62
BA1.............................................................          219.03          150.69           68.34
PE2.............................................................          369.77          254.40          115.37
PE1.............................................................          352.24          242.34          109.90
PD2.............................................................          348.74          239.93          108.81
PD1.............................................................          331.21          227.87          103.34
PC2.............................................................          299.66          206.17           93.49
PC1.............................................................          285.64          196.52           89.12
PB2.............................................................          254.09          174.81           79.28
PB1.............................................................          243.57          167.58           75.99
PA2.............................................................          210.27          144.67           65.60
PA1.............................................................          201.50          138.63           62.87
----------------------------------------------------------------------------------------------------------------


[[Page 51982]]


         Table 8--RUG-IV Case-Mix Adjusted Federal Rates for Rural SNFs by Labor and Non-Labor Component
----------------------------------------------------------------------------------------------------------------
                                                                                                     Non-labor
                         RUG-IV Category                            Total rate     Labor portion      portion
----------------------------------------------------------------------------------------------------------------
RUX.............................................................          822.89         $566.15         $256.74
RUL.............................................................          806.15          554.63          251.52
RVX.............................................................          723.02          497.44          225.58
RVL.............................................................          652.70          449.06          203.64
RHX.............................................................          647.51          445.49          202.02
RHL.............................................................          580.53          399.40          181.13
RMX.............................................................          588.44          404.85          183.59
RML.............................................................          541.56          372.59          168.97
RLX.............................................................          512.18          352.38          159.80
RUC.............................................................          637.02          438.27          198.75
RUB.............................................................          637.02          438.27          198.75
RUA.............................................................          541.58          372.61          168.97
RVC.............................................................          538.83          370.72          168.11
RVB.............................................................          471.85          324.63          147.22
RVA.............................................................          470.18          323.48          146.70
RHC.............................................................          463.31          318.76          144.55
RHB.............................................................          419.78          288.81          130.97
RHA.............................................................          372.89          256.55          116.34
RMC.............................................................          402.57          276.97          125.60
RMB.............................................................          379.13          260.84          118.29
RMA.............................................................          315.50          217.06           98.44
RLB.............................................................          384.92          264.82          120.10
RLA.............................................................          252.63          173.81           78.82
ES3.............................................................          709.16          487.90          221.26
ES2.............................................................          556.78          383.06          173.72
ES1.............................................................          498.17          342.74          155.43
HE2.............................................................          481.43          331.22          150.21
HE1.............................................................          401.05          275.92          125.13
HD2.............................................................          451.29          310.49          140.80
HD1.............................................................          377.61          259.80          117.81
HC2.............................................................          426.17          293.20          132.97
HC1.............................................................          357.52          245.97          111.55
HB2.............................................................          421.15          289.75          131.40
HB1.............................................................          354.17          243.67          110.50
LE2.............................................................          437.89          301.27          136.62
LE1.............................................................          367.56          252.88          114.68
LD2.............................................................          421.15          289.75          131.40
LD1.............................................................          354.17          243.67          110.50
LC2.............................................................          370.91          255.19          115.72
LC1.............................................................          313.98          216.02           97.96
LB2.............................................................          352.49          242.51          109.98
LB1.............................................................          300.58          206.80           93.78
CE2.............................................................          391.01          269.01          122.00
CE1.............................................................          360.87          248.28          112.59
CD2.............................................................          370.91          255.19          115.72
CD1.............................................................          340.77          234.45          106.32
CC2.............................................................          325.70          224.08          101.62
CC1.............................................................          302.26          207.95           94.31
CB2.............................................................          302.26          207.95           94.31
CB1.............................................................          280.49          192.98           87.51
CA2.............................................................          257.05          176.85           80.20
CA1.............................................................          240.30          165.33           74.97
BB2.............................................................          272.12          187.22           84.90
BB1.............................................................          260.40          179.16           81.24
BA2.............................................................          226.91          156.11           70.80
BA1.............................................................          216.86          149.20           67.66
PE2.............................................................          360.87          248.28          112.59
PE1.............................................................          344.12          236.75          107.37
PD2.............................................................          340.77          234.45          106.32
PD1.............................................................          324.03          222.93          101.10
PC2.............................................................          293.89          202.20           91.69
PC1.............................................................          280.49          192.98           87.51
PB2.............................................................          250.35          172.24           78.11
PB1.............................................................          240.30          165.33           74.97
PA2.............................................................          208.49          143.44           65.05
PA1.............................................................          200.11          137.68           62.43
----------------------------------------------------------------------------------------------------------------


[[Page 51983]]

    Section 1888(e)(4)(G)(ii) of the Act also requires that we apply 
this wage index in a manner that does not result in aggregate payments 
under the SNF PPS that are greater or less than would otherwise be made 
if the wage adjustment had not been made. For FY 2017 (federal rates 
effective October 1, 2016), we will apply an adjustment to fulfill the 
budget neutrality requirement. We meet this requirement by multiplying 
each of the components of the unadjusted federal rates by a budget 
neutrality factor equal to the ratio of the weighted average wage 
adjustment factor for FY 2016 to the weighted average wage adjustment 
factor for FY 2017. For this calculation, we use the same FY 2015 
claims utilization data for both the numerator and denominator of this 
ratio. We define the wage adjustment factor used in this calculation as 
the labor share of the rate component multiplied by the wage index plus 
the non-labor share of the rate component. The budget neutrality factor 
stated in the FY 2017 SNF PPS proposed rule was 1.0000. However, we 
discovered that in calculating the FY 2017 proposed wage index budget 
neutrality factor, we inadvertently failed to update the wage index 
data used in the calculation with the most recently available FY 2017 
data. This resulted in a budget neutrality factor of 1.000, whereas, 
using the most recently available wage index data at the time of the 
proposed rule, the proposed factor should have been 0.9997. Moreover, 
because the wage index data used were incorrect and because the wage 
index is the primary source of variation in the impacts calculated in 
the regulatory impact analysis, the error which caused the incorrect 
calculation of the wage index budget neutrality factor in the proposed 
rule also affected the wage index impacts in Table 19 of the FY 2017 
SNF PPS proposed rule (Projected Impact to the SNF PPS for FY 2017) (81 
FR 24278). These impacts are discussed further in section V.A.4. of 
this final rule. We have recalculated the wage index budget neutrality 
factor for FY 2017 utilizing updated wage index data, and the final 
budget neutrality factor for FY 2017 is 1.0000.
    In the SNF PPS final rule for FY 2006 (70 FR 45026, August 4, 
2005), we adopted the changes discussed in the OMB Bulletin No. 03-04 
(June 6, 2003), available online at www.whitehouse.gov/omb/bulletins/b03-04.html, which announced revised definitions for MSAs and the 
creation of micropolitan statistical areas and combined statistical 
areas.
    In adopting the CBSA geographic designations, we provided for a 1-
year transition in FY 2006 with a blended wage index for all providers. 
For FY 2006, the wage index for each provider consisted of a blend of 
50 percent of the FY 2006 MSA-based wage index and 50 percent of the FY 
2006 CBSA-based wage index (both using FY 2002 hospital data). We 
referred to the blended wage index as the FY 2006 SNF PPS transition 
wage index. As discussed in the SNF PPS final rule for FY 2006 (70 FR 
45041), since the expiration of this 1-year transition on September 30, 
2006, we have used the full CBSA-based wage index values.
    Generally, OMB issues major revisions to statistical areas every 10 
years, based on the results of the decennial census. In the FY 2015 SNF 
PPS final rule (79 FR 45644 through 45646), we finalized changes to the 
SNF PPS wage index based on the newest OMB delineations, as described 
in OMB Bulletin No. 13-01, beginning in FY 2015, including a 1-year 
transition with a blended wage index for FY 2015. OMB Bulletin No. 13-
01 established revised delineations for Metropolitan Statistical Areas, 
Micropolitan Statistical Areas, and Combined Statistical Areas in the 
United States and Puerto Rico based on the 2010 Census, and provided 
guidance on the use of the delineations of these statistical areas 
using standards published in the June 28, 2010 Federal Register (75 FR 
37246 through 37252). In addition, OMB occasionally issues minor 
updates and revisions to statistical areas in the years between the 
decennial censuses. On July 15, 2015, OMB issued OMB Bulletin No. 15-
01, which provides minor updates to and supersedes OMB Bulletin No. 13-
01 that was issued on February 28, 2013. The attachment to OMB Bulletin 
No. 15-01 provides detailed information on the update to statistical 
areas since February 28, 2013. The updates provided in OMB Bulletin No. 
15-01 are based on the application of the 2010 Standards for 
Delineating Metropolitan and Micropolitan Statistical Areas to Census 
Bureau population estimates for July 1, 2012 and July 1, 2013. A copy 
of this bulletin may be obtained on the Web site at https://www.whitehouse.gov/sites/default/files/omb/bulletins/2015/15-01.pdf. As 
we previously stated in the FY 2008 SNF PPS proposed and final rules 
(72 FR 25538 through 25539, and 72 FR 43423), we again wish to clarify 
that this and all subsequent SNF PPS rules and notices are considered 
to incorporate any such updates and revisions set forth in the most 
recent OMB bulletin that applies to the hospital wage data used to 
determine the current SNF PPS wage index. As noted previously in this 
section, the wage index applicable to FY 2017 is set forth in Tables A 
and B available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.
5. Adjusted Rate Computation Example
    Using the hypothetical SNF XYZ described below, Table 9 shows the 
adjustments made to the federal per diem rates to compute the 
provider's actual per diem PPS payment. We derive the Labor and Non-
labor columns from Table 7. The wage index used in this example is 
based on the final wage index, which may be found in Table A as 
referenced previously in this section. As illustrated in Table 9, SNF 
XYZ's total PPS payment would equal $46,861.86.

                                                       Chart 9--Adjusted Rate Computation Example
                                                  SNF XYZ: Located in Frederick, MD (Urban CBSA 43524)
                                                                   Wage Index: 0.9797
                                                             [See Wage Index in Table A] \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Adjusted                  Adjusted     Percent      Medicare
                  RUG-IV group                       Labor      Wage index     labor      Non-labor       rate      adjustment      days       Payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
RVX.............................................      $492.57       0.9797      $482.57      $223.37      $705.94      $705.94           14    $9,883.16
ES2.............................................       395.50       0.9797       387.47       179.35       566.82       566.82           30    17,004.60
RHA.............................................       248.50       0.9797       243.46       112.69       356.15       356.15           16     5,698.40
CC2 *...........................................       229.08       0.9797       224.43       103.88       328.31       748.55           10     7,485.50
BA2.............................................       157.93       0.9797       154.72        71.62       226.34       226.34           30     6,790.20

[[Page 51984]]

 
                                                  ...........  ...........  ...........  ...........  ...........  ...........          100    46,861.86
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Reflects a 128 percent adjustment from section 511 of the MMA.
\1\ Available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.

C. Additional Aspects of the SNF PPS

1. SNF Level of Care--Administrative Presumption
    The establishment of the SNF PPS did not change Medicare's 
fundamental requirements for SNF coverage. However, because the case-
mix classification is based, in part, on the beneficiary's need for 
skilled nursing care and therapy, we have attempted, where possible, to 
coordinate claims review procedures with the existing resident 
assessment process and case-mix classification system discussed in 
section III.B.3. of this final rule. This approach includes an 
administrative presumption that utilizes a beneficiary's initial 
classification in one of the upper 52 RUGs of the 66-group RUG-IV case-
mix classification system to assist in making certain SNF level of care 
determinations.
    In accordance with section 1888(e)(4)(H)(ii) of the Act and the 
regulations at Sec.  413.345, we include in each update of the federal 
payment rates in the Federal Register the designation of those specific 
RUGs under the classification system that represent the required SNF 
level of care, as provided in Sec.  409.30. As set forth in the FY 2011 
SNF PPS update notice (75 FR 42910), this designation reflects an 
administrative presumption under the 66-group RUG-IV system that 
beneficiaries who are correctly assigned to one of the upper 52 RUG-IV 
groups on the initial 5-day, Medicare-required assessment are 
automatically classified as meeting the SNF level of care definition up 
to and including the assessment reference date (ARD) on the 5-day 
Medicare-required assessment.
    A beneficiary assigned to any of the lower 14 RUG-IV groups is not 
automatically classified as either meeting or not meeting the 
definition, but instead receives an individual level of care 
determination using the existing administrative criteria. This 
presumption recognizes the strong likelihood that beneficiaries 
assigned to one of the upper 52 RUG-IV groups during the immediate 
post-hospital period require a covered level of care, which would be 
less likely for those beneficiaries assigned to one of the lower 14 
RUG-IV groups.
    In the July 30, 1999 final rule (64 FR 41670), we indicated that we 
would announce any changes to the guidelines for Medicare level of care 
determinations related to modifications in the case-mix classification 
structure. In this final rule, we continue to designate the upper 52 
RUG-IV groups for purposes of this administrative presumption, 
consisting of all groups encompassed by the following RUG-IV 
categories:
     Rehabilitation plus Extensive Services.
     Ultra High Rehabilitation.
     Very High Rehabilitation.
     High Rehabilitation.
     Medium Rehabilitation.
     Low Rehabilitation.
     Extensive Services.
     Special Care High.
     Special Care Low.
     Clinically Complex.
    However, we note that this administrative presumption policy does 
not supersede the SNF's responsibility to ensure that its decisions 
relating to level of care are appropriate and timely, including a 
review to confirm that the services prompting the beneficiary's 
assignment to one of the upper 52 RUG-IV groups (which, in turn, serves 
to trigger the administrative presumption) are themselves medically 
necessary. As we explained in the FY 2000 SNF PPS final rule (64 FR 
41667), the administrative presumption:

    . . . is itself rebuttable in those individual cases in which 
the services actually received by the resident do not meet the basic 
statutory criterion of being reasonable and necessary to diagnose or 
treat a beneficiary's condition (according to section 1862(a)(1) of 
the Act). Accordingly, the presumption would not apply, for example, 
in those situations in which a resident's assignment to one of the 
upper . . . groups is itself based on the receipt of services that 
are subsequently determined to be not reasonable and necessary.

    Moreover, we want to stress the importance of careful monitoring 
for changes in each patient's condition to determine the continuing 
need for Part A SNF benefits after the ARD of the 5-day assessment.
2. Consolidated Billing
    Sections 1842(b)(6)(E) and 1862(a)(18) of the Act (as added by 
section 4432(b) of the BBA) require a SNF to submit consolidated 
Medicare bills to its Medicare Administrative Contractor for almost all 
of the services that its residents receive during the course of a 
covered Part A stay. In addition, section 1862(a)(18) of the Act places 
the responsibility with the SNF for billing Medicare for physical 
therapy, occupational therapy, and speech-language pathology services 
that the resident receives during a noncovered stay. Section 
1888(e)(2)(A) of the Act excludes a small list of services from the 
consolidated billing provision (primarily those services furnished by 
physicians and certain other types of practitioners), which remain 
separately billable under Part B when furnished to a SNF's Part A 
resident. These excluded service categories are discussed in greater 
detail in section V.B.2. of the May 12, 1998 interim final rule (63 FR 
26295 through 26297).
    A detailed discussion of the legislative history of the 
consolidated billing provision is available on the SNF PPS Web site at 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_07302013.pdf. In particular, section 103 
of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (BBRA) (Pub. L. 106-113, enacted on November 29, 1999) amended 
section 1888(e)(2)(A) of the Act by further excluding a number of 
individual high-cost, low probability services, identified by 
Healthcare Common Procedure Coding System (HCPCS) codes, within several 
broader categories (chemotherapy items, chemotherapy administration 
services, radioisotope services, and customized prosthetic devices) 
that otherwise remained subject to the provision. We discuss this BBRA 
amendment in

[[Page 51985]]

greater detail in the SNF PPS proposed and final rules for FY 2001 (65 
FR 19231 through 19232, April 10, 2000, and 65 FR 46790 through 46795, 
July 31, 2000), as well as in Program Memorandum AB-00-18 (Change 
Request #1070), issued March 2000, which is available online at 
www.cms.gov/transmittals/downloads/ab001860.pdf.
    As explained in the FY 2001 proposed rule (65 FR 19232), the 
amendments enacted in section 103 of the BBRA not only identified for 
exclusion from this provision a number of particular service codes 
within four specified categories (that is, chemotherapy items, 
chemotherapy administration services, radioisotope services, and 
customized prosthetic devices), but also gave the Secretary the 
authority to designate additional, individual services for exclusion 
within each of the specified service categories. In the proposed rule 
for FY 2001, we also noted that the BBRA Conference report (H.R. Rep. 
No. 106-479 at 854 (1999) (Conf. Rep.)) characterizes the individual 
services that this legislation targets for exclusion as high-cost, low 
probability events that could have devastating financial impacts 
because their costs far exceed the payment SNFs receive under the PPS. 
According to the conferees, section 103(a) of the BBRA is an attempt to 
exclude from the PPS certain services and costly items that are 
provided infrequently in SNFs. By contrast, we noted that the Congress 
declined to designate for exclusion any of the remaining services 
within those four categories (thus, leaving all of those services 
subject to SNF consolidated billing), because they are relatively 
inexpensive and are furnished routinely in SNFs.
    As we further explained in the final rule for FY 2001 (65 FR 
46790), and according to our longstanding policy, any additional 
service codes that we might designate for exclusion under our 
discretionary authority must meet the same statutory criteria used in 
identifying the original codes excluded from consolidated billing under 
section 103(a) of the BBRA: They must fall within one of the four 
service categories specified in the BBRA; and they also must meet the 
same standards of high cost and low probability in the SNF setting, as 
discussed in the BBRA Conference report. Accordingly, we characterized 
this statutory authority to identify additional service codes for 
exclusion as essentially affording the flexibility to revise the list 
of excluded codes in response to changes of major significance that may 
occur over time (for example, the development of new medical 
technologies or other advances in the state of medical practice) (65 FR 
46791). In the FY 2017 SNF PPS proposed rule (81 FR 24242), we 
specifically invited public comments identifying HCPCS codes in any of 
these four service categories (chemotherapy items, chemotherapy 
administration services, radioisotope services, and customized 
prosthetic devices) representing recent medical advances that might 
meet our criteria for exclusion from SNF consolidated billing. We 
stated that we may consider excluding a particular service if it meets 
our criteria for exclusion as specified above. We also asked that 
commenters identify in their comments the specific HCPCS code that is 
associated with the service in question, as well as their rationale for 
requesting that the identified HCPCS code(s) be excluded.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the consolidated billing aspects of the SNF PPS. A 
discussion of these comments, along with our responses, appears below.
    Comment: One commenter suggested excluding all high-cost oral 
chemotherapy drugs from consolidated billing, and proposed a threshold 
of $50 or more per tablet to define ``high-cost'' for this purpose. 
Another commenter specifically recommended for exclusion the oral 
chemotherapy drug Revlimid[supreg] (lenalidomide). Still another 
suggested that we conduct an analysis with a view toward excluding a 
broader range of expensive drugs beyond the category of chemotherapy 
alone, citing anecdotal evidence that leaving such drugs within the SNF 
PPS bundle may create a disincentive for admitting those patients who 
require them.
    Response: When the Congress carved out certain exceptionally 
intensive chemotherapy drugs from the SNF PPS bundle in section 103 of 
the BBRA, it characterized those drugs as ``high-cost'' and ``low 
probability.'' This legislation did not categorically exclude all high-
cost oral chemotherapy drugs from SNF consolidated billing. The 
accompanying Conference Report explained that this provision

    . . . is an attempt to exclude from the PPS certain services and 
costly items that are provided infrequently in SNFs. For example, in 
the case of chemotherapy drugs, [this provision has] excluded 
specific chemotherapy drugs from the PPS because these drugs are not 
typically administered in a SNF, or are exceptionally expensive, or 
are given as infusions, thus requiring special staff expertise to 
administer. Some chemotherapy drugs, which are relatively 
inexpensive and are administered routinely in SNFs, were excluded 
from this provision'' (H. Conf. Rep. No. 106-479 at 854) (emphasis 
added).

    Accordingly, we decline to exclude all high-cost oral chemotherapy 
drugs as a class from consolidated billing, because any such drugs that 
are capable of being ``administered routinely in SNFs'' are not 
reasonably characterized as ``requiring special staff expertise to 
administer.'' We note that in the SNF PPS final rules for FYs 2009 (73 
FR 46436, August 8, 2008) and 2010 (74 FR 40353, August 11, 2009), we 
declined to exclude certain oral medications suggested by commenters 
for the same reason. In addition, the BBRA Conference Report language 
(H. Conf. Rep. No. 106-479 at 854) further indicates that the term 
``high-cost'' in this context would not serve to encompass a routinely-
used chemotherapy drug merely because its cost somewhat exceeds the 
typical range of drug costs encountered in this setting; rather, this 
provision is directed specifically at those uncommon chemotherapy drugs 
that are so exceptionally expensive as to ``. . . have devastating 
financial impacts because their costs far exceed the payment [SNFs] 
receive under the prospective payment system'' (emphasis added). With 
specific reference to Revlimid[supreg], we note that we already 
received a similar exclusion recommendation during the public comment 
period on the FY 2015 SNF PPS proposed rule, and we discussed our 
decision not to exclude this particular drug in that year's final rule 
(79 FR 45641 through 45642, August 5, 2014). Finally, in response to 
the suggestion that we exclude a broader range of expensive drugs 
beyond the category of chemotherapy alone, as we have noted repeatedly 
in previous rulemaking--most recently, in the FY 2016 SNF PPS final 
rule (80 FR 46406, August 4, 2015)--the statutory authority to 
designate additional services for exclusion applies solely to the four 
service categories (chemotherapy items, chemotherapy administration 
services, radioisotope services, and customized prosthetic devices) 
that are specified in the law. Accordingly, expanding the existing 
exclusion authority to encompass additional categories (such as non-
chemotherapy drugs) is not provided for in current law.
    Comment: Several commenters noted the importance of continuing to 
exclude prosthetic devices from consolidated billing. They suggested 
that the following four HCPCS codes should be added to the list of 
codes excluded from consolidated billing: L5010--Partial foot, molded 
socket, ankle height, with toe filler; L5020--Partial foot, molded 
socket, tibial tubercle height, with toe

[[Page 51986]]

filler; L5969--Addition, endoskeletal ankle-foot or ankle system, power 
assist, includes any type motor(s); and L5987--All lower extremity 
prosthesis, shank foot system with vertical loading pylon. Some also 
advocated excluding custom orthotics from consolidated billing as well. 
They stated that the custom orthotic and prosthetic professions are 
closely aligned, with a sizable percentage of patients who require 
prosthetic care also requiring custom orthotics to address orthopedic 
impairments of the arms, legs, spine, and neck. They further suggested 
that the same factors that justify exempting prosthetic devices also 
apply to custom orthotics, as custom orthotics are typically a high-
cost, low frequency service for patients in SNFs.
    Response: The recommendation to exclude certain particular 
prosthetics essentially reiterates a comment made during last year's 
SNF PPS rulemaking cycle, which recommended for exclusion certain 
prosthetic device codes that were already in existence--but not 
excluded--upon the original 1999 enactment of the customized prosthetic 
device exclusion in the BBRA. In response, we reiterated in the FY 2016 
SNF PPS final rule our longstanding position that if a particular 
prosthetic code was already in existence as of the BBRA enactment date 
but was not designated in the BBRA for exclusion, this meant that it 
was intended to remain within the SNF PPS bundle, subject to a GAO 
review that was conducted the following year (80 FR 46407, August 4, 
2015). This would apply to three of the prosthetic codes (L5010, L5020, 
and L5987) cited in the current comments. Regarding the fourth 
prosthetic code (L5969), we also noted in last year's final rule (80 FR 
46407) that code L5969 actually appears already on the exclusion list 
under Major Category III.D. (``Customized Prosthetic Devices''), where 
this particular L code has, in fact, been listed ever since its initial 
assignment in January 2014.
    With reference to orthotics, in the FY 2016 SNF PPS final rule (80 
FR 46407, August 4, 2015), we explained that while the law does specify 
customized prosthetic devices as one of the exclusion categories, this 
is a separate and distinct category from orthotics and does not 
encompass orthotics. Moreover, as already noted in this and previous 
final rules, the statutory authority to designate additional services 
for exclusion applies solely to the four service categories 
(chemotherapy items, chemotherapy administration services, radioisotope 
services, and customized prosthetic devices) that are specified in the 
law. Accordingly, expanding the existing exclusion authority to 
encompass additional categories (such as orthotics) is not provided for 
in current law.
3. Payment for SNF-Level Swing-Bed Services
    Section 1883 of the Act permits certain small, rural hospitals to 
enter into a Medicare swing-bed agreement, under which the hospital can 
use its beds to provide either acute- or SNF-level care, as needed. For 
critical access hospitals (CAHs), Part A pays on a reasonable cost 
basis for SNF-level services furnished under a swing-bed agreement. 
However, in accordance with section 1888(e)(7) of the Act, these 
services furnished by non-CAH rural hospitals are paid under the SNF 
PPS, effective with cost reporting periods beginning on or after July 
1, 2002. As explained in the FY 2002 final rule (66 FR 39562), this 
effective date is consistent with the statutory provision to integrate 
swing-bed rural hospitals into the SNF PPS by the end of the transition 
period, June 30, 2002.
    Accordingly, all non-CAH swing-bed rural hospitals have now come 
under the SNF PPS. Therefore, all rates and wage indexes outlined in 
earlier sections of this proposed rule for the SNF PPS also apply to 
all non-CAH swing-bed rural hospitals. A complete discussion of 
assessment schedules, the MDS, and the transmission software (RAVEN-SB 
for Swing Beds) appears in the FY 2002 final rule (66 FR 39562) and in 
the FY 2010 final rule (74 FR 40288). As finalized in the FY 2010 SNF 
PPS final rule (74 FR 40356 through 40357), effective October 1, 2010, 
non-CAH swing-bed rural hospitals are required to complete an MDS 3.0 
swing-bed assessment which is limited to the required demographic, 
payment, and quality items. The latest changes in the MDS for swing-bed 
rural hospitals appear on the SNF PPS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html.

D. Other Issues

1. Skilled Nursing Facility Value-Based Purchasing Program (SNF VBP)
a. Background
    Section 215 of the Protecting Access to Medicare Act of 2014 (PAMA) 
authorizes the SNF VBP Program by adding sections 1888(g) and (h) to 
the Act. These sections provide structure for the development of the 
SNF VBP Program, including, among other things, the requirement of only 
two measures--an all-cause, all-condition hospital readmission measure, 
which is to be replaced as soon as practicable by an all-condition 
risk-adjusted potentially preventable hospital readmission measure--and 
confidential and public reporting requirements for the SNF VBP Program. 
We began development of the SNF VBP Program in the FY 2016 SNF PPS 
final rule with, among other things, the adoption of an all-cause, all-
condition hospital readmission measure, as required under section 
1888(g)(1) of the Act. We will continue the process in this final rule 
with our adoption of an all-condition risk-adjusted potentially 
preventable hospital readmission measure for SNFs, which the Secretary 
is required to specify no later than October 1, 2016 under section 
1888(g)(2) of the Act. The Act requires that the SNF VBP apply to 
payments for services furnished on or after October 1, 2018. The SNF 
VBP Program applies to freestanding SNFs, SNFs affiliated with acute 
care facilities, and all non-CAH swing-bed rural hospitals. We believe 
the implementation of the SNF VBP Program is an important step toward 
transforming how care is paid for, moving increasingly toward rewarding 
better value, outcomes, and innovations instead of merely volume.
    For additional background information on the SNF VBP Program, 
including an overview of the SNF VBP Report to Congress and a summary 
of the Program's statutory requirements, we refer readers to the FY 
2016 SNF PPS final rule (80 FR 46409 through 46410).
    We received a number of general comments on the Program.
    Comment: Some commenters urged us to broaden the SNF VBP Program to 
include other post-acute care outcome measures, such as measures of 
care transitions, resource use over care episodes, and beneficiary 
functional change. Commenters noted that these measures are required of 
all PAC providers, though implementation dates vary.
    Response: We thank commenters for this feedback. However, as we 
stated in the FY 2016 SNF PPS final rule (80 FR 46410), we do not 
believe we have the authority to adopt measures covering additional 
clinical topics beyond those specified in sections 1888(g)(1) and (2) 
of the Act at this time.
    Comment: Commenters urged us to monitor the Program's impact on 
facilities' delivery of care quality and on beneficiaries' quality of 
life in nursing homes.
    Response: We thank the commenters for this suggestion. We intend to 
monitor the Program's effects on

[[Page 51987]]

beneficiaries, care quality, and other factors carefully.
    Comment: One commenter offered several general suggestions for the 
Program based on New York's experience with the Nursing Home VBP 
Demonstration (https://innovation.cms.gov/initiatives/Nursing-Home-Value-Based-Purchasing/) including incomparability of specialty and 
general facilities, narrowly-structured measures for participating 
facilities, regional adjustments, measure and calculation information 
provided to facilities to assist with quality improvement, a focus on 
preventable hospitalizations, and incentive payments large enough and 
close enough to the performance period to maximize behavioral changes.
    Response: We thank the commenter for these suggestions. We proposed 
to adopt a performance period that is as close as we feasibly can set 
it to the payment year in order to establish a clear link between 
quality measurement and value-based payment. We note also that the 
methodology for determining the size of the pool available to fund the 
value-based incentive payments that we will disburse under the Program 
is specified in the statute. We intend to provide SNFs with information 
to assist with quality improvement efforts, and will work with 
stakeholders to ensure that all SNFs are able to improve the quality of 
care that they provide to Medicare beneficiaries. However, we do not 
agree with the commenter that we should perform regional adjustments to 
the measures adopted under the Program. Our experience with achievement 
thresholds and benchmarks based on national data in the Hospital Value-
Based Purchasing Program has given us confidence that regional 
adjustments are not necessary to ensure that achievement thresholds and 
benchmarks for this program are balanced, appropriate standards of high 
quality. Some groups of facilities may perform better or worse than 
other facilities on certain measures, but we do not believe it would be 
appropriate to raise or lower the performance standards or measured 
performance for a facility based on regional differences in quality 
measurement, because such adjustments would seem to indicate that some 
areas of the country should be held to higher or lower standards of 
care quality. We intend to monitor SNFs' performance on the measures 
adopted under the Program carefully and may consider further 
adjustments to the measures or to the scoring methodology in the 
future.
    Comment: Commenter also suggested that we factor managed care 
expansions into our measure calculations, noting that many states are 
rapidly expanding into managed care for Medicare and Medicaid 
beneficiaries and that managed care delivery could affect quality 
measurements. Commenter also recommended that we consider major care 
innovations that are being developed and tested across state lines to 
ensure that the interventions with the greatest potential for quality 
improvement may proliferate among SNFs.
    Response: We thank the commenter for the suggestion. However, the 
SNF VBP Program is limited by statute to payments made under Medicare's 
SNF PPS, not payments to managed-care organizations, and we therefore 
believe the Program is appropriately focused on Medicare quality data 
at this time. We may consider incorporating quality information related 
to care provided by managed-care organizations in the Program in the 
future. However, we do not have the authority to make value-based 
incentive payments to SNFs based on their performance with patients 
enrolled in managed care plans. We will monitor clinical research on 
the effects of managed care in comparison to care delivered under fee-
for-service systems, however.
    We will consider major care innovations as they arise in clinical 
literature and in care delivery and will work with SNFs and 
stakeholders in order to encourage their proliferation.
    We thank the commenters for this feedback.
b. Measures
i. SNF 30-Day All-Cause Readmission Measure (SNFRM) (NQF #2510)
    Per the requirement at section 1888(g)(1) of the Act, in the FY 
2016 SNF PPS final rule (80 FR 46419), we finalized our proposal to 
specify the SNF 30-Day All-Cause Readmission Measure (SNFRM) (NQF 
#2510) as the SNF all-cause, all-condition hospital readmission measure 
for the SNF VBP Program. The SNFRM assesses the risk-standardized rate 
of all-cause, all-condition, unplanned inpatient hospital readmissions 
of Medicare fee-for-service (FFS) SNF patients within 30 days of 
discharge from an admission to an inpatient prospective payment system 
(IPPS) hospital, CAH, or psychiatric hospital. The measure is claims-
based, requiring no additional data collection or submission burden for 
SNFs. For additional details on the SNFRM, including our responses to 
public comments, we refer readers to the FY 2016 SNF PPS final rule (80 
FR 46411 through 46419).
    We received one comment on the SNFRM.
    Comment: One commenter urged us to provide more timely feedback to 
SNFs on their performance on the SNFRM in order to better enable 
performance improvement.
    Response: We intend to provide as much feedback on the SNFRM as is 
operationally possible to SNFs, and to do so as quickly as possible. As 
required by section 1888(g)(5) of the Act and as discussed further 
below, we will provide quarterly confidential feedback reports to SNFs 
beginning October 1, 2016, and will continue providing as much 
information to SNFs on their performance on the SNFRM as possible using 
those reports.
ii. Skilled Nursing Facility 30-Day Potentially Preventable Readmission 
Measure (SNFPPR)
    We proposed to specify the SNF 30-Day Potentially Preventable 
Readmission Measure (SNFPPR) as the SNF all-condition risk-adjusted 
potentially preventable hospital readmission measure to meet the 
requirements of section 1888(g)(2) of the Act. This proposed measure 
assesses the facility-level risk-standardized rate of unplanned, 
potentially preventable hospital readmissions for SNF patients within 
30 days of discharge from a prior admission to an IPPS hospital, CAH, 
or psychiatric hospital. Hospital readmissions include readmissions to 
a short-stay acute-care hospital or CAH, with a diagnosis considered to 
be unplanned and potentially preventable. This proposed measure is 
claims-based, requiring no additional data collection or submission 
burden for SNFs.
    Hospital readmissions among the Medicare population, including 
beneficiaries that utilize post-acute care, are common, costly, and 
often preventable.1 2 The Medicare Payment Advisory 
Commission (MedPAC) and a study by Jencks et al. estimated that 17 to 
20 percent of Medicare beneficiaries discharged from the hospital were 
readmitted within 30 days. MedPAC found that more than 75 percent of 
30-day and 15-day readmissions and 84 percent of 7-day readmissions 
were considered potentially preventable.\3\ In

[[Page 51988]]

addition, MedPAC calculated that annual Medicare spending on 
potentially preventable readmissions would be $12B for 30-day, $8B for 
15-day, and $5B for 7-day readmissions.\4\ For hospital readmissions 
from SNFs, MedPAC deemed 76 percent of readmissions as potentially 
avoidable--associated with $12B in Medicare expenditures.\5\ Mor et al. 
analyzed 2006 Medicare claims and SNF assessment data (Minimum Data 
Set), and reported a 23.5 percent readmission rate from SNFs, 
associated with $4.3B in expenditures.\6\
---------------------------------------------------------------------------

    \1\ Friedman, B., and Basu, J.: The rate and cost of hospital 
readmissions for preventable conditions. Med. Care Res. Rev. 
61(2):225-240, 2004. doi:10.1177/1077558704263799.
    \2\ Jencks, S.F., Williams, M.V., and Coleman, E.A.: 
Rehospitalizations among patients in the Medicare Fee-for-Service 
Program. N. Engl. J. Med. 360(14):1418-1428, 2009. doi:10.1016/
j.jvs.2009.05.045.
    \3\ MedPAC: Payment policy for inpatient readmissions, in Report 
to the Congress: Promoting Greater Efficiency in Medicare. 
Washington, DC, pp. 103-120, 2007. Available from http://www.medpac.gov/documents/reports/Jun07_EntireReport.pdf.
    \4\ Ibid.
    \5\ Ibid.
    \6\ Mor, V., Intrator, O., Feng, Z., et al.: The revolving door 
of rehospitalization from SNFs. Health Aff. 29(1):57-64, 2010. 
doi:10.1377/hlthaff.2009.0629.
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    We have addressed the high rates of hospital readmissions in the 
acute care setting, as well as in PAC by developing the SNF 30-Day All-
Cause Readmission Measure (NQF #2510), as well as similar measures for 
other PAC providers (NQF #2502 for IRFs and NQF #2512 for LTCHs).\7\ 
These measures are endorsed by the National Quality Forum (NQF), and 
the NQF-endorsed measure (NQF #2510) was adopted for the SNF VBP 
program in the FY 2016 SNF PPS final rule (80 FR 46411 through 46419). 
These NQF-endorsed measures assess all-cause unplanned readmissions.
---------------------------------------------------------------------------

    \7\ National Quality Forum: All-Cause Admissions and 
Readmissions Measures. pp. 1-319, April 2015. Available from http://www.qualityforum.org/Publications/2015/04/All-Cause_Admissions_and_Readmissions_Measures_-_Final_Report.aspx.
---------------------------------------------------------------------------

    Several general methods and algorithms have been developed to 
assess potentially avoidable or preventable hospitalizations and 
readmissions for the Medicare population. These include the Agency for 
Healthcare Research and Quality's (AHRQ) Prevention Quality Indicators, 
approaches developed by MedPAC, and proprietary approaches, such as the 
3M\TM\ algorithm for Potentially Preventable Readmissions 
(PPR).8 9 10 Recent work led by Kramer et al. for MedPAC 
identified 13 conditions for which readmissions were deemed as 
potentially preventable among SNF and IRF populations 11 12; 
however, these conditions did not differ by PAC setting or readmission 
window (that is, readmissions during the PAC stay or post-PAC 
discharge). Although much of the existing literature addresses hospital 
readmissions more broadly and potentially avoidable hospitalizations 
for specific settings like skilled nursing facilities, these findings 
are relevant to the development of potentially preventable readmission 
measures for PAC.13 14 15
---------------------------------------------------------------------------

    \8\ Goldfield, N.I., McCullough, E.C., Hughes, J.S., et al.: 
Identifying potentially preventable readmissions. Health Care Finan. 
Rev. 30(1):75-91, 2008. Available from http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4195042/.
    \9\ Agency for Healthcare Research and Quality: Prevention 
Quality Indicators Overview. 2008.
    \10\ MedPAC: Online Appendix C: Medicare Ambulatory Care 
Indicators for the Elderly. pp. 1-12, prepared for Chapter 4, 2011. 
Available from http://www.medpac.gov/documents/reports/Mar11_Ch04_APPENDIX.pdf?sfvrsn=0.
    \11\ Kramer, A., Lin, M., Fish, R., et al.: Development of 
Inpatient Rehabilitation Facility Quality Measures: Potentially 
Avoidable Readmissions, Community Discharge, and Functional 
Improvement. pp. 1-42, 2015. Available from http://www.medpac.gov/documents/contractor-reports/development-of-inpatient-rehabilitation-facility-quality-measures-potentially-avoidable-readmissions-community-discharge-and-functional-improvement.pdf?sfvrsn=0.
    \12\ Kramer, A., Lin, M., Fish, R., et al.: Development of 
Potentially Avoidable Readmission and Functional Outcome SNF Quality 
Measures. pp. 1-75, 2014. Available from http://www.medpac.gov/documents/contractor-reports/mar14_snfqualitymeasures_contractor.pdf?sfvrsn=0.
    \13\ Allaudeen, N., Vidyarthi, A., Maselli, J., et al.: 
Redefining readmission risk factors for general medicine patients. 
J. Hosp. Med. 6(2):54-60, 2011. doi:10.1002/jhm.805.
    \14\ Gao, J., Moran, E., Li, Y.-F., et al.: Predicting 
potentially avoidable hospitalizations. Med. Care 52(2):164-171, 
2014. doi:10.1097/MLR.0000000000000041.
    \15\ Walsh, E.G., Wiener, J.M., Haber, S., et al.: Potentially 
avoidable hospitalizations of dually eligible Medicare and Medicaid 
beneficiaries from nursing facility and home[hyphen]and 
community[hyphen]based services waiver programs. J. Am. Geriatr. 
Soc. 60(5):821-829, 2012. doi:10.1111/j.1532-5415.2012.03920.
---------------------------------------------------------------------------

    Based on the evidence discussed above and to meet PAMA 
requirements, we proposed to specify this measure, entitled, SNF 30-Day 
Potentially Preventable Readmission Measure (SNFPPR), for the SNF VBP 
Program. The SNFPPR measure was developed by CMS to harmonize with the 
NQF-endorsed SNF 30-Day All-Cause Readmission Measure (NQF #2510) \16\ 
adopted in the FY 2016 SNF final rule (80 FR 46411 through 46419) and 
the Hospital-Wide Risk-Adjusted All-Cause Unplanned Readmission Measure 
(NQF #1789) (Hospital-Wide Readmission or HWR measure \17\), finalized 
for the Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53521 through 53528). Although these existing measures focus on 
all-cause unplanned readmissions and the SNFPPR measure assesses 
potentially preventable hospital readmissions, the SNFPPR will use the 
same statistical approach, the same time window as NQF measure #2510 
(that is, 30 days post-hospital discharge), and a similar set of 
patient characteristics for risk adjustment. As appropriate, the 
potentially preventable hospital readmission measure for SNFs is being 
harmonized with similar measures being finalized for LTCHs, IRFs, and 
HHAs to meet the requirements of the Improving Medicare Post-Acute Care 
Transformation Act of 2014 (IMPACT Act) (Pub. L. 113-185).
---------------------------------------------------------------------------

    \16\ National Quality Forum: All-Cause Admissions and 
Readmissions Measures. pp. 1-319, April 2015. National Quality 
Forum: All-Cause Admissions and Readmissions Measures. pp. 1-319, 
April 2015. Available from http://www.qualityforum.org/Publications/2015/04/All-Cause_Admissions_and_Readmissions_Measures_-_Final_Report.aspx.
    \17\ Available by searching for ``1789'' at http://www.qualityforum.org/QPS/QPSTool.aspx.
---------------------------------------------------------------------------

    The SNFPPR measure estimates the risk-standardized rate of 
unplanned, potentially preventable hospital readmissions for Medicare 
FFS beneficiaries that occur within 30 days of discharge from the prior 
proximal hospitalization. This is a departure from readmission measures 
in other PAC settings, such as the two measures being adopted in the 
Inpatient Rehabilitation Facility (IRF) Quality Reporting Program, one 
of which assesses readmissions that take place during the IRF stay and 
the other that assesses readmissions within 30 days following discharge 
from the IRF. The SNFPPR measure is distinct because section 1888(h)(2) 
of the Act requires that only a single quality measure be implemented 
in the SNF VBP program at one time. A purely within-stay measure (that 
is, a measure that assesses readmission rates only when those 
readmissions occurred during a SNF stay) would perversely incentivize 
the premature discharge of residents from SNFs to avoid penalty. 
Conversely, limiting the measure to readmissions that occur within 30-
days post-discharge from the SNF would not capture readmissions that 
occur during the SNF stay. In order to qualify for this measure, the 
SNF admission must take place within 1 day of discharge from a prior 
proximal hospital stay. The prior proximal hospital stay is defined as 
an inpatient admission to an acute care hospital (including IPPS, CAH, 
or a psychiatric hospital). Because the measure denominator is based on 
SNF admissions, a single Medicare beneficiary could be included in the 
measure multiple times within a given year. Readmissions counted in 
this measure are identified by examining Medicare FFS claims data for 
readmissions to either acute care hospitals (IPPS or CAH) that occur 
within 30 days of discharge from the prior proximal hospitalization, 
regardless of whether the readmission occurs during the SNF stay or 
takes

[[Page 51989]]

place after the patient is discharged from the SNF. Because patients 
differ in complexity and morbidity, the measure is risk-adjusted for 
case-mix. Our approach for defining potentially preventable 
readmissions is described below.
    Potentially Preventable Readmission Measure Definition: We 
conducted a comprehensive environmental scan, analyzed claims data, and 
obtained input from a technical expert panel (TEP) to develop a working 
conceptual definition and list of conditions for which hospital 
readmissions may be considered potentially preventable. The Ambulatory 
Care Sensitive Conditions (ACSC)/Prevention Quality Indicators (PQI), 
developed by AHRQ, served as the starting point in this work. For the 
purposes of the SNFPPR measure, the definition of potentially 
preventable readmissions differs based on whether the resident is 
admitted to the SNF (referred to as ``within-stay'') or in the post-SNF 
discharge period; however, there is considerable overlap of the 
definitions. For patients readmitted to a hospital during within the 
SNF stay, potentially preventable readmissions (PPR) should be 
avoidable with sufficient medical monitoring and appropriate treatment. 
The within-stay list of PPR conditions includes the following, which 
are categorized by 4 clinical rationale groupings: (1) Inadequate 
management of chronic conditions; (2) Inadequate management of 
infections; (3) Inadequate management of other unplanned events; and 
(4) Inadequate injury prevention. For individuals in the post-SNF 
discharge period, a potentially preventable readmission refers to a 
readmission in which the probability of occurrence could be minimized 
with adequately planned, explained, and implemented post discharge 
instructions, including the establishment of appropriate follow-up 
ambulatory care. Our list of PPR conditions in the post-SNF discharge 
period includes the following, categorized by 3 clinical rationale 
groupings: (1) Inadequate management of chronic conditions; (2) 
Inadequate management of infections; and (3) Inadequate management of 
other unplanned events. Additional details regarding the definitions of 
potentially preventable readmissions are available in our Measure 
Specification (available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNF-VBP.html).
    This SNFPPR measure focuses on readmissions that are potentially 
preventable and also unplanned. Similar to the SNF 30-Day All-Cause 
Readmission Measure (SNFRM) (NQF #2510), this measure uses the CMS 
Planned Readmission Algorithm to define planned readmissions. In 
addition to the CMS Planned Readmission Algorithm, this measure 
incorporates procedures that are considered planned in post-acute care 
settings, as identified in consultation with TEPs. Full details on the 
planned readmissions criteria used, including the additional procedures 
considered planned for post-acute care, can be found in the Measure 
Specifications (available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNF-VBP.html).
    This measure assesses potentially preventable readmission rates 
while accounting for patient or resident demographics, principal 
diagnosis in the prior hospital stay, comorbidities, and other patient 
factors. The model also estimates a facility-specific effect, common to 
patients or residents treated in each facility. This measure is 
calculated for each SNF based on the ratio of the predicted number of 
risk-adjusted, unplanned, potentially preventable hospital readmissions 
that occurred within 30 days of discharge from the prior proximal 
hospitalization, including the estimated facility effect, to the 
estimated predicted number of risk-adjusted, unplanned hospital 
readmissions for the same individuals receiving care at the average 
SNF. A ratio above 1.0 indicates a higher than expected readmission 
rate (worse), while a ratio below 1.0 indicates a lower than expected 
readmission rate (better). This ratio is referred to as the 
standardized risk ratio or SRR. The SRR is then multiplied by the 
overall national raw rate of potentially preventable readmissions for 
all SNF stays. The resulting rate is the risk-standardized readmission 
rate (RSRR) of potentially preventable readmissions. The full 
methodology is detailed in the Measure Specifications (available at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNF-VBP.html).
    Eligible SNF stays in the measure are assessed until: (1) The 30-
day period ends; or (2) the patient is readmitted to an acute care 
hospital (IPPS or CAH). If the readmission is classified as unplanned 
and potentially preventable, it is counted as a readmission in the 
measure calculation. If the readmission is planned or not preventable, 
the readmission is not counted in the measure rate.
    Readmission rates are risk-adjusted for case-mix characteristics. 
The risk adjustment modeling estimates the effects of patient/resident 
characteristics, comorbidities, and select health care variables on the 
probability of readmission. More specifically, the risk-adjustment 
model for SNFs accounts for sociodemographic characteristics (age, sex, 
original reason for entitlement), principal diagnosis during the prior 
proximal hospital stay, body system specific surgical indicators, 
comorbidities, length of stay during the resident's prior proximal 
hospital stay, intensive care utilization, end-stage renal disease 
status, and number of prior acute care hospitalizations in the 
preceding 365 days. This measure is calculated using one full calendar 
year of data. The full measure specifications and results of the 
reliability testing can be found in the Measure Specifications 
(available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNF-VBP.html).
    Our measure development contractor convened a TEP, which provided 
input on the technical specifications of this measure, including the 
development of an approach to define potentially preventable hospital 
readmissions for a number of PAC settings, including SNFs. Details from 
the TEP meetings, including TEP members' ratings of conditions proposed 
as being potentially preventable, are available in the TEP Summary 
Report available on the CMS Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html. We also solicited stakeholder feedback on the development 
of this measure through a public comment period held from November 2 
through December 1, 2015. A summary of the public comments we received 
is also available on the CMS Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    In addition to our TEP and public comment feedback, we also 
considered input from the Measures Application Partnership (MAP) on the 
SNFPPR. The MAP is composed of multi-stakeholder groups convened by the 
NQF. The MAP provides input on the measures we are considering for 
implementation in certain quality reporting and pay-for-performance 
programs. In general, the MAP has noted the need for care

[[Page 51990]]

transition measures in PAC/LTC performance measurement programs and 
stated that setting-specific admission and readmission measures would 
address this need.\18\ The SNFPPR measure that we proposed, and that we 
are adopting for the SNF VBP Program in this final rule, was included 
in the List of Measures under Consideration (MUC List) for December 1, 
2015.\19\
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    \18\ National Quality Forum: Measure Applications Partnership 
Pre-Rulemaking Report: 2013 Recommendations of Measures Under 
Consideration by HHS. pp. 1-394, February 2013. Available from 
https://www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_Report_-_February_2013.aspx.
    \19\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityMeasures/Downloads/2015-Measures-Under-Consideration-List.pdf.
---------------------------------------------------------------------------

    The MAP encouraged continued development of the measure in the SNF 
VBP Program to meet the mandate of PAMA. Specifically, the MAP stressed 
the need to promote shared accountability and ensure effective care 
transitions. More information about the MAP's recommendations for this 
measure is available at http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx. At the time, the risk-adjustment model was still under 
development. Following completion of that development work, we were 
able to test for measure validity and reliability as available in the 
measure specifications document provided above. Testing results are 
within range for similar outcome measures finalized in public reporting 
and value-based purchasing programs, including the SNFRM finalized for 
this program.
    We invited public comment on our proposal to adopt this measure, 
the SNF 30-Day Potentially Preventable Readmission Measure (SNFPPR). 
The comments we received on this topic, with their responses, appear 
below.
    Comment: One commenter called on us to establish a standardized 
process by which we could evaluate new measures for the Program, or 
alternatively a standard process to evaluate whether or not we should 
remove or retire a measure. The commenter suggested that we adopt the 
same methods under use in the Hospital IQR and Hospital VBP Programs.
    Response: We do not believe that a standardized process is 
necessary for the SNF VBP Program because unlike the Hospital IQR and 
Hospital VBP Programs, we are statutorily limited in the SNF VBP 
Program to including only two measures (one at a time). Since we have 
not yet implemented the SNFPPR, we do not believe establishing a 
standardized process for replacing it is warranted at this time.
    Comment: Some commenters supported our proposal to adopt the 
SNFPPR, including the measure's intent, and recognized that the measure 
will provide incentives for SNFs to coordinate care post-discharge. 
Some commenters specifically stated their support for the infectious 
conditions defined as potentially preventable, stating that many of 
these conditions are preventable using appropriate infection prevention 
interventions.
    Response: We agree that the measure will provide strong incentives 
for care coordination and will appropriately capture preventable 
readmissions, including infection-related readmissions.
    Comment: One commenter stated that SNFs should not be penalized for 
readmissions when the conditions that prompted them are unrelated to 
the reasons the patient was admitted to the SNF. The commenter also 
called on us to account for differences in each SNF's mix of low-income 
patients when calculating readmissions.
    Response: We note that the SNF VBP Program's statute requires that 
the measures required under sections 1888(g)(1) and (2) of the Act must 
be ``all-condition hospital readmission'' measures, which we believe 
necessitates attributing readmissions to SNFs even in the case the 
commenter specifies.
    We believe that the proposed risk adjustment methodology 
appropriately adjusts for SNFs' patient mix when calculating 
readmissions, particularly because the measure's risk adjustments were 
developed to harmonize with the Hospital Wide Readmission (HWR) measure 
(NQF #1789), and the SNFRM. We describe the risk adjustment variables 
in more detail in the draft SNF PPR technical report, which is 
available on our Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNFPPR-Technical-Report.pdf. We respond to commenter's point about 
sociodemographic or socioeconomic adjustments below in a subsequent 
response.
    Comment: One commenter stated that we should develop additional 
criteria for SNFs that have implemented programs and policies to 
mitigate unplanned events. The commenter suggested that SNFs with 
standard fall precautions should not be penalized if a well-managed, 
low-risk dementia patient falls and sustains a fracture.
    Response: We believe that SNFs with programs and policies that 
reduce the incidence of unplanned events may generally experience fewer 
readmissions over time. However, a potentially preventable readmission 
still presents the potential for harm to the patient and generates 
costs for the Medicare program. We wish to clarify that this is a 
measure of potentially preventable readmissions and that not all 
readmissions are preventable. The PPR rate is not expected to be 0. The 
focus of this measure is to identify excess PPR rates for the purposes 
of quality improvement. We believe the Program will encourage SNFs to 
take appropriate, effective steps to minimize this outcome for SNF 
patients.
    Comment: One commenter suggested that we adopt a minimum 
denominator size for the SNFPPR measure of 25 stays, though they 
preferred 30, stating that 30 stays would produce more reliable results 
for low-volume SNFs. The commenter noted that observed variability 
increases substantially between 30 and 20 stays, and requested that we 
provide data on the variation in SNFPPR rates for SNFs with small 
denominator sizes.
    Response: We wish to clarify that we did not propose a minimum 
denominator size for the SNFPPR measure. We acknowledge that increasing 
the denominator size for this measure may increase its reliability. 
However, doing so would exclude a substantial number of SNFs from the 
measure calculation and thus the SNF VBP Program However, as stated in 
the SNF PPR technical report available on our Web site (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNFPPR-Technical-Report.pdf), we found 1 year of data to be sufficient to calculate this 
measure in a statistically reliable manner.
    Comment: One commenter supported the proposed risk adjustment 
methodology for the SNFPPR, noting that the adjustments will provide a 
valid assessment of a facility's care quality in preventing unplanned, 
preventable hospital readmissions.
    Response: We thank the commenter for their comment.
    Comment: One commenter expressed concern about our proposal to use 
claims-based data for quality measurement. The commenter believes that 
claims-based data are not accurate compared to other types of quality 
measure data, and the commenter cautioned that having performance data 
is not the same as having highly reliable and accurate data. The 
commenter suggested that claims data may be better

[[Page 51991]]

used as a supplement to traditional HAI surveillance after validation.
    Response: With respect to the use of claims data to calculate this 
measure, multiple studies have been conducted to examine the validity 
of using Medicare hospital claims for several NQF-endorsed quality 
measures used in public reporting and value-based purchasing 
programs.20 21 22 These studies supported the use of claims 
data as a valid means for risk adjustment and assessing similar 
outcomes. Additionally, although assessment and other data sources may 
be valuable for risk adjustment, we are not aware of another data 
source aside from Medicare claims data that could be used to reliably 
assess the outcome of potentially preventable hospital readmissions 
during this readmission window.
---------------------------------------------------------------------------

    \20\ Bratzler DW, Normand SL, Wang Y, et al. An administrative 
claims model for profiling hospital 30-day mortality rates for 
pneumonia patients. PLoS One 2011;6(4):e17401.
    \21\ Keenan PS, Normand SL, Lin Z, et al. An administrative 
claims measure suitable for profiling hospital performance on the 
basis of 30-day all-cause readmission rates among patients with 
heart failure. Circulation 2008;1(1):29-37.
    \22\ Krumholz HM, Wang Y, Mattera JA, et al. An administrative 
claims model suitable for profiling hospital performance based on 
30-day mortality rates among patients with heart failure. 
Circulation 2006;113:1693-1701.
---------------------------------------------------------------------------

    Comment: One commenter expressed concerns about the use of 
readmissions measures for SNFs, stating that the sickest individuals 
are the most likely to be readmitted. The commenter also noted that the 
sickest individuals are the most likely to die, so facilities with 
excessive mortality rates may have lower readmission rates. Some 
commenters were concerned that facilities may be incentivized to delay 
needed care in order to improve their readmission scores and suggested 
that we include ER visits in the measure.
    Response: We believe that the risk adjustment approach used in 
calculating the SNFPPR measure appropriately adjusts for patient case-
mix even among patients that may be at end-of-life. We intend to 
conduct ongoing evaluation and monitoring to ensure that the measure 
does not result in unintended consequences for patients, such as 
increased mortality rates.
    With respect to emergency room visits, we note while such visits 
can certainly be negative outcomes for patients, they are not 
readmissions within the definitions we have adopted for measures of 
readmissions. We agree with commenters that mortality is also an 
important clinical outcome, but in other settings where we assess both 
readmission and mortality rates, the two types of measures seem to 
correlate,\23\ which suggests that we do not see reductions in 
readmission rates as a consequence of increasing mortality rates.
---------------------------------------------------------------------------

    \23\ See Medicare Hospital Quality Chartbook 2010, p. 12, 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/downloads/HospitalChartBook.pdf.
---------------------------------------------------------------------------

    Comment: One commenter suggested that we allow additional time 
between when we specify a quality measure for the Program and when we 
begin using the measures for payment purposes. The commenter stated 
that more lead time would better enable providers to understand new 
measures and address quality improvement issues.
    Response: While we understand the commenter's concern, we must 
implement the Program in accordance with the deadlines specified in 
statute, and quality measure development is a lengthy process requiring 
significant time and testing to ensure that measures are clinically and 
statistically valid. We were required under section 1888(g)(1) of the 
Act to specify a skilled nursing facility all-cause, all-condition 
hospital readmission measure not later than October 1, 2015. Similarly, 
under section 1888(g)(2) of the Act, we are required to specify a 
measure of all-condition risk-adjusted potentially preventable hospital 
readmissions for skilled nursing facilities not later than October 1, 
2016. Additionally, under section 1888(h)(1)(B) of the Act, we are 
required to begin making value-based incentive payments to SNFs on 
October 1, 2018 (the beginning of FY 2019). However, we intend to work 
with SNFs and other stakeholders to raise awareness and understanding 
of program requirements. For example, the confidential feedback reports 
required by PAMA are one mechanism through which we can educate SNFs 
about the measures and their performance on the measures prior to 
implementation.
    Comment: One commenter was concerned that SNFs would not 
necessarily be able to verify the accuracy of the risk adjustment 
model, as they are unlikely to have access to complete information on 
sociodemographic characteristics, principal diagnosis during the 
proximal hospital stay, body system specific surgical indicators, 
comorbidities, length of stay during the proximal hospital stay, 
intensive care utilization, ESRD status, and the number of hospital 
stays during the prior year. The commenter suggested that we provide 
SNFs with verifiable prior hospitalization information used to 
calculate the risk adjustment.
    Response: We thank the commenter for their concern over providers' 
ability to verify the accuracy of the data used for risk adjustment and 
to calculate this measure. We will take this comment under 
consideration as we determine which data elements would enable SNFs to 
verify their data and risk-standardized PPR rate. We refer readers to 
the review and correction subsection of this final rule for additional 
information.
    Comment: One commenter recommended that we describe readmissions as 
``potentially preventable,'' not ``preventable,'' stating that the 
literature on readmissions shows that they occur even when ideal care 
that conforms to all clinical guidelines is provided. The commenter 
noted that ambulatory care sensitive conditions and Patient Quality 
Indicators developed by AHRQ were intended to assess the availability 
of and access to ambulatory care services in a community, but have not 
been focused on individual hospitals and other providers. The commenter 
did not object to this focus, but requested that we modify our language 
and measure construction to account for the measure's use in tracking 
individual providers rather than the community. The commenter stated 
that our goal should not be zero readmissions, as SNFPPR rates of zero 
can only be achieved by denying hospital services to individuals.
    Response: The readmissions to be measured in the SNFPPR are defined 
as those believed to be ``potentially preventable,'' as we understand 
that some SNF patients might be readmitted to the hospital even if they 
receive excellent care from the SNF. Both the SNFPPR and the SNFRM 
calculate facility-level risk-standardized readmission rates in order 
to provide quality of care information about individual providers 
rather than community-level characteristics. Given that the SNFPPR is 
capturing ``potentially preventable'' readmissions, the goal is not to 
reach zero readmissions, but is to identify excess rates of 
readmissions that could potentially have been avoided in order to 
assess the quality of care being furnished by individual SNFs.
    Comment: Several commenters urged us to consider adjusting the 
SNFPPR for socioeconomic and/or sociodemographic factors. The commenter 
also urged us to conduct additional testing on the categories and codes 
used to identify PPRs.
    Response: The categories and specific conditions used to identify 
potentially preventable readmissions were

[[Page 51992]]

developed based on existing evidence and were vetted by a TEP, which 
included clinicians and post-acute care experts. We also conducted a 
comprehensive environmental scan to identify conditions for which 
readmissions may be considered potentially preventable. Results of this 
environmental scan and details of the TEP input received were made 
available on the CMS Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Readmissions may be considered potentially preventable even if they 
may not appear to be clinically related to the patient's original 
reason for SNF admission. There is substantial evidence that the 
conditions included in the definition are preventable with sufficient 
medical monitoring and appropriate patient treatment during the SNF 
stay or adequately planned, explained, and implemented post-discharge 
instructions, including effective care coordination ensuring 
appropriate follow-up care after SNF discharge. Furthermore, this 
measure is based on Medicare claims data and it may not always be 
feasible to determine whether a subsequent readmission is or is not 
clinically related to the reason why the patient was admitted to the 
SNF.
    With respect to socioeconomic or sociodemographic adjustment, we 
note that the NQF is currently undertaking a 2-year trial period in 
which new measures and measures undergoing maintenance review will be 
assessed to determine if risk-adjusting for sociodemographic factors is 
appropriate. This trial entails temporarily allowing inclusion of 
sociodemographic factors in the risk-adjustment approach for some 
performance measures. At the conclusion of the trial, NQF will issue 
recommendations on future permanent inclusion of sociodemographic 
factors. During the trial, measure developers are encouraged to submit 
information such as analyses and interpretations as well as performance 
scores with and without sociodemographic factors in the risk adjustment 
model. Several measures developed by CMS have been brought to NQF since 
the beginning of the trial. We, consistent with NQF's guidance to 
measure developers, have tested sociodemographic factors in the 
measures' risk models and made recommendations about whether or not to 
include these factors in the endorsed measure. We intend to continue 
engaging in the NQF process as we consider the appropriateness of 
adjusting for sociodemographic factors in our outcome measures.
    Furthermore, the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) is conducting research to examine the impact of 
sociodemographic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the IMPACT Act. We 
will closely examine the findings of the ASPE reports and related 
recommendations and consider how they apply to our quality programs at 
such time as they are available.
    Comment: One commenter expressed concern that the SNFPPR proposed 
for the Program differs from the SNF QRP's readmission measure. The 
commenter noted that the VBP Program's measure assesses both post-
discharge PPRs as well as those occurring during a SNF stay and 
includes an additional category of PPR of inadequate prevention of 
injury. The commenter urged us to consider a single measure for both 
programs.
    Response: We made a policy decision to use two different measures 
for the SNF VBP and QRP Programs. Our rationale for this decision was 
that the readmission window associated with each measure assesses 
different aspects of SNF care. The readmission window for the SNFPPR 
measure was developed to align with the SNFRM which was previously 
adopted for the SNF VBP Program, and both of which are required by the 
SNF VBP Program's statute. Both the SNFRM and SNFPPR measure 
specifications, including the readmission window, were designed to 
harmonize with CMS's Hospital Wide All-Cause Unplanned Readmission 
(HWR) measure used in the Hospital IQR Program. The advantage of this 
window is that it assesses readmissions both during the SNF stay and 
post-SNF discharge for most SNF patients, depending on the SNF length 
of stay (LOS). For these measures, the focus is on transitions to the 
SNF from the prior proximal hospital stay, and we believe the alignment 
to be appropriate since the SNF VBP Program's statute specifically 
directs us to adopt measures of hospital readmissions.
    The readmission window used for the SNF measure proposed for the 
SNF QRP to meet the IMPACT Act requirements was developed to align with 
other post-acute care readmission measures. The focus of this post-PAC 
discharge readmission window is on assessing potentially preventable 
hospital readmissions during the 30 days after discharge. We believe 
that assessing PPRs during each of these readmission windows provides 
valuable information for their respective programs.
    Comment: One commenter was concerned about the measure's ability to 
pinpoint the SNF's care for a short-stay resident who is expected to 
move on to the community setting, and commenter noted that SNFs often 
do not have easy access to information needed to improve on the 
measure. The commenter called on CMS to provide claims data to SNFs so 
that facilities can verify the measure, determine whether or not they 
are receiving necessary patient information, and conduct quality 
improvement efforts.
    Response: We appreciate the commenters' feedback. We are cognizant 
of providers' desire for more information on quality performance, and 
we are considering ways to provide the best information to SNFs. As 
required by statute and as discussed further below, we will provide 
quarterly confidential feedback reports to SNFs detailing their 
performance on measures specified for the Program, and we are 
interested in SNFs' feedback on the reports and on their contents once 
we provide them. We will take that feedback into account as we refine 
the quarterly reports to be most useful to SNFs for quality improvement 
efforts.
    Comment: Commenter noted that the SNF QRP version of the SNFPPR 
counts unplanned readmissions to LTCHs and asked us to clarify why the 
SNF VBP version of the measure does not include readmissions to LTCHs.
    Response: The SNFPPR was developed to harmonize with the SNFRM, 
previously adopted for the SNF VBP Program, and both measures do not 
count planned readmissions to LTCHs. However, the potentially 
preventable hospital readmission measure proposed for the SNF QRP to 
meet the requirements of the IMPACT Act does count readmissions to 
LTCHs in order to align with the other IMPACT Act measures. We intend 
to conduct analyses to determine the impact that including readmissions 
to LTCHs would have on the QRP measure performance; however, we expect 
that this will represent a relatively small number of readmissions and 
will have a minimal impact.
    Comment: Commenter was concerned that SNFs would not necessarily be 
able to verify the accuracy of the risk adjustment model, as they are 
unlikely to have access to complete information on sociodemographic 
characteristics, principal diagnosis during the proximal hospital stay, 
body system specific surgical indicators, comorbidities, length of stay 
during the proximal hospital stay, intensive care utilization,

[[Page 51993]]

ESRD status, and the number of hospital stays during the prior year. 
The commenter suggested that we provide SNFs with verifiable prior 
hospitalization information used to calculate the risk adjustment.
    Response: We thank the commenter for their concern over providers' 
ability to verify the accuracy of the data used to calculate this 
measure. We will take this comment under consideration as we determine 
which data elements would enable SNFs to verify their data and risk-
standardized PPR rate.
    Comment: Commenter supported our proposal to adopt claims-based 
measures rather than measures based on self-reported data, stating that 
the latter are susceptible to gaming. The commenter also applauded our 
choice to count within-stay and post-discharge hospital readmissions in 
the measure. However, the commenter stated that we should extend the 
measured time period to 90 days, suggesting that the proposed 30-day 
time period is too short to capture poor care provided by a SNF. 
Another commenter supported the adoption of the SNFPPR and suggested 
that both the proposed and previously adopted measure (SNFRM) 
readmission measures could be improved by extending the readmission 
window. The commenter noted that about one-third of SNF stays are 
longer than the proposed 30-day window, and suggested that the current 
proposal could create incentives for SNFs to delay care until after the 
30th day to avoid being penalized on the measure.
    Response: We appreciate the commenter's support for the proposed 
measure, including the support for using claims data as the source for 
the measure's calculation. We are not aware of another data source 
aside from Medicare claims data that could be used to reliably assess 
the outcome of potentially preventable hospital readmissions for this 
specific readmission window.
    The 30-day readmission window used in both the SNFRM (NQF #2510) 
and the proposed SNFPPR was developed to harmonize with measures used 
in the hospital setting, including the NQF-endorsed Hospital-Wide Risk-
Adjusted All-Cause Unplanned Readmission Measure (NQF #1789). This 
readmission window was also vetted by technical expert panels. We 
appreciate the suggestion to consider a 90-day readmission window; 
however, we believe it would be difficult to ensure that potentially 
preventable hospital readmissions occurring up to 90 days after prior 
hospital discharge are attributable to the SNF care received. As we 
noted previously in this section, the advantage of this window is that 
it assesses readmissions both during the SNF stay and post-SNF 
discharge for most SNF patients, depending on the SNF length of stay. 
For these measures, the focus is on transitions to the SNF from the 
prior proximal hospital stay, and we believe the alignment to be 
appropriate since the SNF VBP Program's statute specifically directs us 
to adopt measures of hospital readmissions.
    We intend to conduct ongoing evaluation and monitoring to assess 
for potential unintended consequences associated with the 
implementation of this measure. We will report results of our 
monitoring for potential unintended consequences--including the 
potential of SNFs to push needed care just past the 30-day window--in 
future SNF PPS rules.
    Comment: Commenter expressed concern about our proposal to include 
the number of hospitalizations during the previous year as a factor in 
risk-adjustment. The commenter stated that this factor could result in 
adjusting a facility's rate for potentially preventable readmissions 
that occurred during the previous year. The commenter stated that a 
facility that did poorly preventing preventable readmissions during the 
prior year would receive a lower readmission target rate as a result.
    Response: We agree with the comment that risk adjusting for the 
count of a beneficiary's prior year hospitalizations may include 
potentially preventable readmissions. However, we do not believe that 
the impact of risk adjusting for this will be driven by potentially 
preventable readmissions since this captures all hospital admissions as 
well as hospital readmissions. We have chosen to adjust for this factor 
at the patient-level because it is an indicator of several case-mix 
factors that we believe are important for risk adjustment. For example, 
a higher number of prior hospital stays may be indicative of a more 
complex or compromised clinical state. The number of prior hospital 
stays may also be related to otherwise unmeasured patient 
characteristics such as access, and patient compliance during the post-
discharge period. Furthermore, we do not believe that including this as 
a risk adjuster will have a major impact on SNFs' performance on the 
measure.
    Comment: Some commenters suggested that we adopt a measure that 
assesses the rate of readmissions of SNF beneficiaries to a hospital 
within 30 days of their discharge from the SNF to a lower level of care 
or the community.
    Response: We agree that a 30-day post-discharge from SNF measure 
would also be valuable for assessing potentially preventable hospital 
readmissions; however, given the Program is limited to one measure at a 
time, we believe that the readmission window selected for the SNFPRR 
provides specific advantages for the reasons described in this section. 
We note that we are adopting the Potentially Preventable 30-Day Post-
Discharge Readmission Measure for the SNF QRP. That measure assesses 
the rate of readmissions within 30 days of a SNF discharge.
    Comment: Commenters stated that the SNFPPR needs additional risk 
adjustment in order to avoid establishing incentives for facilities to 
avoid admitting challenging patients. Commenters specifically called 
for risk adjustment for socioeconomic status, functional status, 
medical complexity, and cognitive impairment. Commenters specifically 
stated that functional and cognitive status are among the strongest 
predictors of future health care utilization.
    Response: We developed a comprehensive claims-based risk-adjustment 
model that takes into account demographic and eligibility 
characteristics; principal diagnoses; types of surgery or procedure 
from the prior short-term hospital stay; comorbidities; length of stay 
and ICU/CCU utilization from the immediately prior short-term hospital 
stay; and number of admissions in the year preceding the SNF admission. 
We direct readers to the final measure specifications posted on the CMS 
Web site (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNF-VBP.html), 
which includes results of the final risk adjustment model. This 
comprehensive risk-adjustment model is similar to those developed for 
other NQF-endorsed readmission measures. Results of our testing are 
within range for similar outcome measures finalized in public reporting 
and value-based purchasing programs, including the SNFRM.
    We agree with the comment that functional and cognitive status are 
potentially important predictors of readmission outcomes. We intend to 
evaluate the feasibility of including functional and cognitive status 
in the future, including using standardized assessment data required by 
the IMPACT Act when they become available. We refer readers to our 
reply above on the topic of socioeconomic or sociodemographic 
adjustment.

[[Page 51994]]

    Comment: One commenter questioned why we exclude SNF stays where 
the patient had one or more intervening PAC admissions between the 
prior proximal hospital discharge and SNF admission or after the SNF 
discharge, within the 30-day risk window. The commenter also questioned 
why we exclude SNF admissions where the patient had multiple SNF 
admissions after the prior proximal hospitalization, within the 30-day 
risk window. The commenter believed that our stated rationale for this 
exclusion could apply to any PAC setting and therefore disagreed with 
the exclusion.
    Response: This measure was developed to align with the SNFRM 
previously adopted for the SNF VBP Program. Both measures exclude 
patients who have intervening IRF or LTCH admissions before their first 
SNF admission. In analyses conducted for the SNFRM (NQF #2510), we 
found that these patients started their SNF admission later in the 30-
day readmission window and received services different from those 
received by patients admitted directly from the hospital to the SNF. As 
a result, we determined patients with intervening stays present a 
different risk for readmission than patients admitted directly to the 
SNF. SNF patients with intervening IRF/LTCH stays had the lowest rates 
of all-cause readmission (8.6 percent) as compared with those with no 
intervening IRF/LTCH stay. Additionally, we found that those with 
intervening IRF/LTCH admissions had longer hospital lengths of stay and 
more prior proximal hospitalizations involving surgical procedures 
compared to those without an intervening stay.
    This issue also impacts a relatively small number of SNF stays; 
previous analyses showed that 6 percent of SNF stays had an intervening 
PAC stay (IRF, LTCH, or another SNF) or go home from their prior 
proximal hospitalization and are later admitted to a SNF within the 30-
day readmission window. Combined, these analyses provide justification 
for excluding SNF admissions with intervening IRF or LTCH admissions, 
or with multiple SNF stays, by showing these exclusions will not have a 
substantial effect on the SNFPPR. Additionally, concerns about 
attribution, given the mix of providers these patients have received 
services from during the risk period, states for the appropriateness of 
excluding these patients. Lastly, patients with multiple PAC stays do 
not cluster in a small group of facilities, so no facilities are 
disproportionately impacted by these exclusions. We will continue to 
monitor, among other unintended consequences of introducing this 
measure, whether patients are being shifted to other PAC providers or 
being sent home before arriving at SNFs.
    Comment: One commenter stated that we should not exclude SNF stays 
with a gap of greater than one day between discharge from the prior 
proximal hospitalization and admission to a SNF. The commenter stated 
that this exclusion criterion does not consider medically complex 
patients treated in IRFs and subsequently readmitted for issues that 
may be treated as comorbidities. The commenter stated that admissions 
to IRFs should be considered as proximal hospitalizations since IRFs 
are licensed as hospitals.
    Response: This measure was developed to harmonize with our other 
hospital readmission measures, the SNFRM, and other potentially 
preventable readmission measures which do not consider post-acute care 
settings, like IRFs, as proximal hospitalizations. Although IRFs are 
licensed as hospitals, we include them in the PAC continuum of care 
and, as such, we have proposed potentially preventable hospital 
readmission measures for the IRF QRP.
    Comment: Commenter stated that we should not finalize the SNFPPR 
because the measure specifications were not published for the Technical 
Expert Panel or the MAP to review prior to the proposed rule's display. 
The commenter also noted that the risk adjustment model is new, and 
stated that the measure should not be rushed to meet an artificial 
deadline.
    Response: In order to be as transparent as possible with the 
public, we made the specifications we had completed available to the 
TEP and the MAP. We then continued developing the measure in order to 
meet the deadline under section 1888(g)(2) of the Act to specify the 
measure by October 1, 2016. We also wish to note that although we were 
not required to make the specifications available to the MAP prior to 
proposing to adopt it for the SNF VBP, we did make the final 
specifications available to the MAP for comments and feedback. The 
risk-adjustment model developed for the SNFPPR measure was also made 
available at the time of the proposed rule.
    Comment: Commenter stated that we should not finalize the SNFPPR 
because the MAP only recommended the measure as ``encourage further 
development,'' and did not vote to ``support'' or ``support with 
conditions.'' The commenter suggested that we should submit the measure 
for NQF endorsement. The commenter also noted that the SNF VBP statute 
specifies that the measure should be adopted ``as soon as 
practicable,'' and stated their belief that measures that will affect 
beneficiary access and quality as well as providers should undergo 
consensus review.
    Response: Although the measure is not currently NQF-endorsed, we 
did conduct additional testing subsequent to the December 2015 MAP 
meeting where this measure was discussed. Based on that testing, we 
were able to complete the risk adjustment model and evaluate 
facilities' PPR rates, and we made the results of our analyses 
available at the time of the proposed rule. We found that testing 
results were similar to the SNFRM (NQF #2510) and allowed us to 
conclude that the measure is sufficiently developed, valid and reliable 
for adoption in the SNF VBP Program.
    Comment: One commenter also stated that we should await NQF 
endorsement of the SNFPPR before we adopt it for use in the SNF VBP 
Program and at a minimum, should wait until at least 2 years after the 
SNFRM has been used in the Program.
    Response: We intend to submit the SNFPPR to NQF for consideration 
of endorsement. With regard to the waiting at least 2 years before we 
adopt the SNFPPR for use in the SNF VBP, we will take this comment 
under consideration.
    Comment: Commenter stated that we should use an ``actual 
readmission rate'' to calculate SRRs rather than predicted 
readmissions, or we should show how predicted and actual readmissions 
result in significantly different rankings in order to justify their 
use in the methodology. The commenter understood the statistical 
rationale for using the risk-adjusted estimate instead of actual 
readmission rate in the SRR, but did not believe that this approach 
provides superior or more accurate information than the actual 
readmission rate, and will instead be more confusing. The commenter 
called on us to use a simpler method.
    Response: The statistical approach for this measure, including the 
use of the predicted to expected PPR rate, is used in several other 
quality measures, including the NQF-endorsed all-cause unplanned 
readmission measures for post-acute care and the hospital-wide all-
cause readmission measure (NQF #1789) and other hospital readmission 
measures used in the Hospital Inpatient Quality Reporting (IQR) 
Program. Our decision to use this approach was influenced by work we 
became aware of by an independent committee appointed by the Committee 
of Presidents of Statistical Societies. In its White Paper

[[Page 51995]]

report, the committee approved CMS's approach as a valid modeling 
approach with preferred statistical characteristics.\24\ We believe 
that this approach makes providers with small numbers of eligible 
patient stays less vulnerable to reported rates driven by the influence 
of random variation in performance, and, thus, will maximize the value 
of assessing SNFs' performance in SNF VBP. We would also like to note 
that facilities will be given their observed or actual readmission 
rates in their reports.
---------------------------------------------------------------------------

    \24\ The COPSS-CMS White Paper Committee. Statistical Issues in 
Assessing Hospital Performance. January 2012. Available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Statistical-Issues-in-Assessing-Hospital-Performance.pdf.
---------------------------------------------------------------------------

    Comment: Commenter stated that the SNFPPR should not exclude 
individuals who died during the SNF stay, noting that individuals who 
died could still have been hospitalized for a PPR prior to dying. 
Commenter stated that excluding these patients will overestimate 
readmission rates in SNFs with high rates of within-SNF stay mortality 
and could create incentives to let patients die in SNFs rather than 
sending them to the hospital.
    Response: We wish to clarify that the SNFPPR measure does not 
exclude patients who die during the 30-day window. If an individual 
died and was hospitalized for a PPR prior to dying, this readmission 
would in fact be included in the numerator for the facility. For 
additional information on the SNFPPR's calculation and methodology, we 
refer readers to the final specification that we will post on the SNF 
VBP Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNF-VBP.html.
    Comment: Commenter called on us to harmonize the SNFPPR with other 
PAC PPR measures, noting that the SNFPPR is the only one of several 
measures that counts readmissions during a patient's stay and after 
discharge, depending on the SNF length of stay. The commenter stated 
that the MAP recommended that the measure track ``within stay'' 
readmissions in order to align with other measures and avoid 
duplication of efforts, and noted that readmissions will be counted in 
both the SNFPPR and the Potentially Preventable 30-Day Post-Discharge 
Readmission Measure for the SNF QRP measure. The commenter acknowledged 
our concern that not counting post-discharge hospitalizations may 
create incentives for SNFs to discharge patients prematurely, but 
stated that we have not presented any evidence that this will, in fact, 
occur and that we have numerous other programs available to monitor any 
such behavior by SNFs. This commenter stated that, if nothing else, we 
should reduce the readmission window to seven days post-discharge, 
suggesting that readmissions after seven days are more reflective of 
quality and access to ambulatory care.
    Response: Our decision to develop the SNFPPR using this specific 
readmission window was intended to balance the relative advantages 
associated with assessing the outcome both during the SNF stay and 
potentially post-discharge with any possible incentives to discharge 
patients who represent the highest risk for readmission in order to 
avoid penalty. Given that this measure is the sole determinant of a 
value-based purchasing program for SNFs, we were limited to selecting 
one readmission window for the measure and believe that counting 
readmissions that may occur post-discharge but within the 30-day window 
would be most valuable, even though other quality programs outside the 
VBP may be available to monitor premature discharges in SNFs.
    The 30-day window reflects a transitional time period wherein the 
acute care hospital and skilled nursing facility are responsible for 
coordinating the care of a patient moving from one setting to another 
and is consistent with readmission measures used in other value-based 
purchasing programs, such as the ESRD Quality Incentive Program and the 
Hospital Readmission Reduction Program, as well as readmission measures 
used in a number of quality reporting programs that apply to post-acute 
care providers. Furthermore, our analysis of readmission rates showed 
no patterns indicating that using a shorter or longer period would 
produce very different comparative results, though the overall rates 
would change. In addition, the NQF Standing Committee generally agreed 
that 30 days post-hospital discharge is an accepted standard for 
measuring readmissions. Longer windows may be subject to greater 
``noise'' in the readmission rate. The measure as specified has the 
potential for this unintended consequence of delaying hospital care 
beyond the 30-day readmission window, but this is a danger that would 
be associated with any selected day threshold. In addition, we will 
continue to analyze whether there are changes in the number of days to 
hospital readmission over time in order to assess whether a change to 
the readmissions window is needed for this measure in the future.
    After consideration of the public comments that we received, we are 
finalizing our proposal to adopt the SNF 30-Day Potentially Preventable 
Readmission Measure (SNFPPR) for the SNF VBP Program.
    Section 1888(h)(2)(B) of the Act requires the Secretary to apply 
the all-condition risk-adjusted potentially preventable hospital 
readmission measure specified under paragraph (g)(2) instead of the 
measure specified under paragraph (g)(1) as soon as practicable. We 
will apply the measure specified under paragraph (g)(1) beginning in 
performance year CY 2017 for payment year FY 2019, and we will apply it 
until such a time as the measure specified under paragraph (g)(2) 
replaces the measure specified under paragraph (g)(1). We intend to 
propose the timing for the change to the paragraph (g)(2) measure in 
future rulemaking. We sought comment on when we should propose this 
change for the SNF VBP Program. The comments we received on this topic, 
with their responses, appear below.
    Comment: One commenter stated that the SNFPPR should replace the 
SNFRM as soon as possible because the SNFPPR holds providers 
accountable for conditions that can be managed in the SNF. The 
commenter suggested that we could replace the SNFRM for scoring 
beginning in October 2019, after the first Program year. Still other 
commenters suggested that we transition the measure once it receives 
unconditional endorsement from NQF, or that we allow at least a full 
year for SNFs to receive and understand their SNFPPR data before we 
implement the measure. Another commenter suggested that we defer 
transitioning the Program from the SNFRM to the SNFPPR, citing the 
MAP's vote to recommend the measure to ``encourage further 
development'' and the commenter's belief that the measure should be 
subjected to additional public comments prior to its adoption.
    Response: We thank commenters for these suggestions. We will 
consider these comments when we develop a future proposal to replace 
the SNFRM with the SNFPPR.
    As noted previously in this section, we also intend to submit the 
SNFPPR to the NQF for consideration of endorsement as soon as possible.
c. Performance Standards
i. Background
    Sections 1888(h)(3)(A) of the Act requires the Secretary to 
establish performance standards for the SNF VBP Program. Under 
paragraph (3)(B) of section 1888(h) of the Act, the

[[Page 51996]]

performance standards must include levels of achievement and 
improvement, and under paragraph (3)(C) of such section, must be 
established and announced not later than 60 days prior to the beginning 
of the performance period for the FY involved.
    In the FY 2016 SNF PPS final rule (80 FR 46419 through 46422), we 
summarized public comments we received on possible approaches to 
calculating performance standards under the SNF VBP Program. We 
specifically sought comment on the approaches that we have adopted for 
other Medicare VBP programs such as the Hospital VBP Program (Hospital 
VBP Program), the Hospital-Acquired Conditions Reduction Program (HAC 
Reduction Program), the Hospital Readmissions Reduction Program (HRRP), 
and the End-Stage Renal Disease Quality Incentive Program (ESRD QIP). 
We also sought comment on the best possible approach to measuring 
improvement, particularly given the SNF VBP Program's limitation to one 
measure for each program year.
ii. Proposed Performance Standards Calculation Methodology
    We believe that an essential goal of the SNF VBP program is to 
provide incentives for all SNFs to improve the quality of care that 
they furnish to their residents. In determining what level of SNF 
performance would be appropriate to select as the performance standard 
for the quality measures specified under the SNF VBP program, we 
focused on selecting levels that would challenge SNFs to improve 
continuously or to maintain high levels of performance. To achieve this 
aim, we analyzed SNFRM data and examined how different achievement 
performance standards would impact SNFs' scores under the proposed 
scoring methodology described further below. As more data becomes 
available, we will continue to assess the appropriateness of these 
performance standards for the SNF VBP program and, if necessary, 
propose to refine these standards' definitions and calculation 
methodologies to better incentivize the provision of high-quality care.
(a) Proposed Achievement Performance Standard and Benchmark
    Beginning with the FY 2019 SNF VBP program, we proposed to define 
the achievement performance standard (which we will refer to as the 
``achievement threshold'') for quality measures specified under the SNF 
VBP program as the 25th percentile of national SNF performance on the 
quality measure during the applicable baseline period. We believe this 
achievement threshold definition represents an achievable standard of 
excellence and will reward SNFs appropriately for their performance on 
the quality measures specified for the SNF VBP program. We further 
believe this achievement threshold definition will provide strong 
incentives for SNFs to improve their performance on the measures 
specified for the SNF VBP Program continuously and will result in a 
wide range of SNF measure scores that can be used in public reporting.
    We further proposed to define the ``benchmark'' for quality 
measures specified under the SNF VBP program as the mean of the top 
decile of SNF performance on the quality measure during the applicable 
baseline period. We believe this definition represents demonstrably 
high but achievable standards of excellence; in other words, the 
benchmark will reflect observed scores for the group of highest-
performing SNFs on a given measure. This proposed benchmark policy 
aligns with that used by the Hospital VBP Program. As stated in the FY 
2016 SNF PPS final rule (80 FR 46419 through 46420), we believe the 
Hospital VBP Program's performance standards methodology is a well-
understood methodology under which health care providers and suppliers 
can be rewarded both for providing high-quality care and for improving 
their performance over time. We therefore believe it is appropriate to 
align with the Hospital VBP Program in setting benchmarks for the SNF 
VBP Program.
    We also proposed that SNFs would receive points along an 
achievement range, which is the scale between the achievement threshold 
and the benchmark. Under this proposal, SNFs would receive achievement 
points if they meet or exceed the achievement threshold for the 
specified measure, and could increase their achievement score based on 
higher levels of performance. (We described the proposed scoring 
methodology, including how we proposed to award points for both 
achievement and improvement, in the scoring methodology section of the 
proposed rule). This proposed achievement range policy aligns with that 
used by the Hospital VBP Program. We refer readers to the FY 2016 SNF 
PPS final rule (80 FR 46419 through 46420) for a discussion of the 
rationale behind aligning SNF VBP Program policies with the Hospital 
VBP Program. As stated in that rule, we believe that the Hospital VBP 
Program's performance standards methodology is well-understood and 
would allow us to reward SNFs both for providing high-quality care and 
for improving their performance over time. We stated our intent to 
publish the final performance standards using complete data from CY 
2015 in the FY 2017 SNF PPS final rule, and we have updated the 
numerical values in Table.
    The comments we received on this topic, with their responses, 
appear below.
    Comment: Commenters supported our proposed performance standards 
calculations, including our proposal to define the achievement 
threshold as the 25th percentile of national SNF performance during the 
baseline period. Commenters also supported our proposal to define the 
benchmark as the mean of the top decile of all SNFs' performance on 
proposed measures. Some commenters requested that we establish and 
announce the achievement threshold and benchmark earlier in the year in 
order to give SNFs additional time to develop quality improvement 
strategies.
    Response: We thank the commenters for their support. However, we do 
not believe we can establish and announce the achievement threshold and 
the benchmark earlier in the year given the time needed to compile 
claims data and compute the readmissions measures.
    We also sought comment on whether we should consider adopting 
either the 50th or 15th percentiles of national SNFs' performance on 
the quality measure during the applicable baseline period. We sought 
comment on data or other analysis that we should consider regarding the 
impact on SNFs' financial viability and service delivery to 
beneficiaries at either the higher or lower alternative standard. For 
example, while the 50th percentile would represent a more challenging 
threshold for care quality improvement, that standard would align with 
the Hospital VBP Program and would likely result in higher value-based 
incentive payments to top-performing SNFs than other definitions, 
though the actual distribution of value-based incentive payments would 
depend on all SNFs' performance and on the statutory rules governing 
their distribution. Such a standard would likely result in lower value-
based incentive payments to lower-performing SNFs, which could create 
substantial payment disparities among participating SNFs. Conversely, 
the 15th percentile would likely result in higher value-based incentive 
payments for lower-performing SNFs than other thresholds, with the 
corresponding result of lower value-based incentive-payments for top-
performing SNFs compared to other thresholds. The comments we received

[[Page 51997]]

on this topic, with their responses, appear below.
    Comment: Commenter stated that we should not increase the proposed 
achievement threshold to 50 percent, noting that meeting such a 
standard may be difficult for small, rural, or frontier facilities with 
limited resources and low volume. The commenter also suggested that we 
should test the two-pronged process for performance standards for 
reliability and validity prior to payment and public reporting. Other 
commenters stated that the 2 percent withhold has a significant enough 
impact on providers that they need to take time to understand how to 
minimize payment penalties.
    Response: As discussed further below, we are finalizing the 
definition of the achievement threshold as the 25th percentile of SNFs' 
performance during the applicable baseline period. We intend to monitor 
the effects of the performance standards' definition on SNFs' 
performance and on the provision of care to Medicare beneficiaries.
    We are required by statute to implement the 2 percent withhold from 
Medicare payments for SNFs. We intend to monitor the Program's effects 
on the impact of care by SNFs. However, as explained more fully above, 
we do not believe we can allow SNFs more time than we have proposed in 
order to understand how to minimize payment penalties.
    Comment: One commenter recommended that we adopt the 50th 
percentile for the achievement threshold, stating that we should 
maintain consistency across settings when calculating achievement 
scores.
    Response: While we agree with the commenter in general that 
consistency across settings in our value-based purchasing programs is 
important, we also recognize that we must implement these programs 
differently where statutory language differs or where the different 
care setting necessitates a policy change from other programs. We 
remain concerned that adopting the 50th percentile for the definition 
of the achievement threshold would result in about half of SNFs 
receiving no points for achievement under the Program, which would mean 
that we are effectively unable to reward their performance, 
particularly in cases where they do not qualify for improvement points. 
Our intention with the SNF VBP Program is to provide strong incentives 
for SNFs to improve their performance on the Program's measures 
continuously, and we do not believe that effectively excluding about 
half of SNFs from receiving achievement points will further that 
objective. We balanced that intention with our desire to ensure that we 
award points under the Program for quality performance, and do not 
award substantial points for what we have measured as poor-quality 
care. Upon further consideration of the comments, we believe the 25th 
percentile appropriately balances those goals.
    Comment: Commenter expressed concerns about the alternative levels 
of the achievement threshold presented in the rule, suggesting that the 
25th percentile represents the best chance to balance incentive 
payments between low and high performers. The commenter urged us to 
test these alternatives prior to implementation and public reporting.
    Response: We thank the commenter for their support, and as 
discussed further above, we share the commenter's concerns about the 
alternatives to the 25th percentile for the achievement threshold. 
Accordingly, we are finalizing the definition of the achievement 
threshold as the 25th percentile of SNFs' performance on the Program's 
measures during the applicable baseline period.
    Comment: One commenter was concerned about the proposed definition 
for the benchmark under the Program, explaining their preference for 
additional testing of the benchmark prior to its public reporting and 
use in calculating incentive payments. The commenter was concerned 
about unintended consequences for nursing homes and medically-complex 
or otherwise high-risk patients.
    Response: We intend to monitor the Program's effects on SNFs' 
provision of high-quality care to Medicare beneficiaries. However, as 
we stated in the proposed rule (81 FR 24246), we believe that the 
proposed definition of the benchmark represents a demonstrably high but 
achievable standard of excellence for all SNFs, including those SNFs 
that treat high-risk patients. We note further that the measures 
specified under the Program are risk adjusted for medically-complex or 
otherwise high-risk patients, and we believe that adjustment will 
mitigate the commenter's concerns about unintended consequences. We 
intend to monitor the effects of the measures' risk adjustment policy 
to ensure that SNFs serving those patients are scored appropriately and 
are not penalized for treating medically-complex or high-risk patients.
(b) Improvement Performance Standard
    Beginning with the FY 2019 SNF VBP program, we proposed to define 
the improvement performance standard (which we will refer to as the 
``improvement threshold'') for quality measures specified under the SNF 
VBP program as each specific SNF's performance on the specified measure 
during the applicable baseline period. As discussed further below, we 
will measure SNFs' performance during both the proposed performance and 
baseline periods, and we will award improvement points by comparing 
SNFs' performance to the improvement threshold. We believe this 
improvement performance standard ensures that SNFs will be adequately 
incentivized to improve continuously their performance on the quality 
measures specified under the SNF VBP Program, and we believe it 
appropriately balances our view that we should both reward SNFs for 
high performance and encourage improved performance over time.
    We invited public comment on this proposal. The comments we 
received on this topic, with their responses, appear below.
    Comment: Some commenters expressed concern about the proposed 
improvement points formula, suggesting that the formula should not 
require unrealistic levels of improvement from providers that are 
already high achievers based on their baseline period scores. Other 
commenters noted that we have in other rules explained that measures 
should be dropped or changed when performance reaches a uniformly high 
level.
    Response: SNFs that are already high achievers based on their 
baseline period scores will be able to score achievement points under 
the proposed scoring methodology. While the commenter is correct that 
it may be difficult for a SNF to score a substantial number of 
improvement points if that SNF has a high baseline period score, the 
proposed methodology allows SNFs to earn ten additional points for 
achievement than they are able to earn for improvement. We therefore 
believe that SNFs that are already high achievers are well-positioned 
to earn high scores under the Program so long as they maintain their 
high performance on the specified measures.
    We thank commenters for the suggestion that we should adopt a 
policy to drop measures or change them when performance reaches a 
uniformly high level. In other contexts, we have described this as a 
``topped-out'' measures policy. We have not considered adopting such a 
policy for the SNF VBP Program to date, but we will consider whether or 
not to do so in future rulemaking.

[[Page 51998]]

(c) Publication of Performance Standard Numerical Values
    Section 1888(h)(3)(C) of the Act requires the Secretary to 
establish and announce the performance standards for a given SNF VBP 
program year not later than 60 days prior to the beginning of the 
performance period for the FY involved. Based on the proposed 
performance period of CY 2017 for the FY 2019 SNF VBP Program, we 
believe that we must establish and announce performance standards for 
the FY 2019 Program not later than November 1, 2016. We intend to 
establish and announce performance standards for the Program in the 
annual SNF PPS rule, which is effective on October 1 of each year.
    However, finalizing numerical values of these performance standards 
is often logistically difficult because it requires the collection and 
analysis of large amounts of quality measure data in a short period of 
time. For example, the data file for a full year of SNF claims data is 
typically completed around May of the following year. To calculate a 
numerical value for a performance standard, we must perform multiple 
levels of analyses on the data to ensure that all appropriate SNFs and 
patients are included in measure calculations; perform the measure 
calculations themselves; and then use those calculations to determine 
the numerical value for the performance standards. If any individual 
step of this process is delayed, it may preclude us from publishing 
finalized numerical values for the finalized performance standards in 
the applicable SNF PPS final rule, which is typically displayed 
publicly by August 1 of each year.
    To retain the flexibility needed to ensure that numerical values 
published for the finalized performance standards are accurate, we 
proposed to publish these numerical values no later than 60 days prior 
to the beginning of the performance period but, if necessary, outside 
of notice-and-comment rulemaking. As noted, we intend to publish 
numerical values for those performance standards in the final rule when 
practicable. However, in instances in which we cannot complete the 
necessary analyses in time to include them in the SNF PPS final rule, 
we proposed to publish the numerical values for the performance 
standards on the QualityNet Web site used by SNFs to receive VBP 
information as soon as practicable but in no event later than the 
statutorily required 60 days prior to the beginning of the performance 
period for the fiscal year involved. In this instance, we would notify 
SNFs and the public of the publication of the performance standards 
using a listserv email and posting on the QualityNet News portion of 
the Web site.
    We welcomed public comment on this proposal. The comments we 
received on this topic, with their responses, appear below.
    Comment: One commenter supported our proposed timing and method for 
publishing the numerical values of the performance standards and for 
payment adjustments. The commenter appreciated the complexity of 
calculating hospital readmission rates and understood that we may need 
to publish performance standards or payment information outside of 
rulemaking. The commenter believed this to be a reasonable trade-off in 
order to have the performance period occur as close to the payment 
adjustment as possible.
    Response: We thank the commenter for their support.
    After consideration of the public comments that we received, we are 
finalizing our performance standards policies as proposed. 
Specifically, we are finalizing our definition of the achievement 
performance standard, which we refer to as the ``achievement 
threshold,'' for quality measures specified under the SNF VBP Program 
as the 25th percentile of national SNF performance on the quality 
measure during the applicable baseline period. We are finalizing our 
proposal to define the ``benchmark'' for quality measures specified 
under the SNF VBP Program as the mean of the top decile of SNF 
performance on the applicable quality measure during the applicable 
baseline period. We are also finalizing our proposals that SNFs would 
receive points along an achievement range, which is the scale between 
the achievement threshold and the benchmark.
    We are also finalizing our proposal to define the improvement 
performance standard (which we refer to as the ``improvement 
threshold'') for quality measures specified under the SNF VBP Program 
as each specific SNF's performance on the specified measure during the 
applicable baseline period.
    We are also finalizing our proposal to publish the numerical values 
of the achievement threshold and the benchmark no later than 60 days 
prior to the beginning of the performance period, but if necessary, 
outside of notice-and-comment rulemaking.
    The final values for the achievement threshold and the benchmark 
for the FY 2019 Program are displayed below in Table 10. For clarity, 
and as discussed further above, we have inverted the SNFRM rate so that 
a higher rate represents better performance.

                         Table 10--Final FY 2019 SNF VBP Program Performance Standards *
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                  Measure ID                           Measure description           threshold       Benchmark
----------------------------------------------------------------------------------------------------------------
SNFRM.........................................  SNF 30-Day All-Cause Readmission         0.79590         0.83601
                                                 Measure (NQF #2510).
----------------------------------------------------------------------------------------------------------------
* Note: Performance standards were calculated as of July 14, 2016 using CY 2015 data.

d. FY 2019 Performance Period and Baseline Period
i. Background
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46422) 
for discussion of the considerations that we intend to take into 
account when specifying a performance period under the SNF VBP Program. 
We also explained our view that the SNF VBP Program necessitates 
adoption of a baseline period, similar to those adopted under the 
Hospital VBP Program and ESRD QIP, which we would use to establish 
performance standards and measure improvement.
    We received public comments on this topic, and we refer readers to 
the FY 2016 SNF PPS final rule for a summary of those comments and our 
responses. We considered those comments when developing our performance 
and baseline period proposals for this proposed rule.
ii. Proposed FY 2019 Performance Period
    In considering various performance periods that could apply for the 
FY 2019 SNF VBP Program, we recognized that we must balance the length 
of the performance period used to collect quality measure data and the 
amount of data needed to calculate reliable, valid

[[Page 51999]]

measure rates with the need to finalize a performance period through 
notice and comment rulemaking. We therefore proposed to adopt CY 2017 
(January 1, 2017 through December 31, 2017) as the performance period 
for the FY 2019 SNF VBP Program, with a 90-day run out period 
immediately thereafter for claims processing, based on the following 
considerations.
    We strive to link performance furnished by SNFs as closely as 
possible to the payment year to ensure clear connections between 
quality measurement and value-based payment. We also strive to measure 
performance using a sufficiently reliable population of patients that 
broadly represent the total care provided by SNFs. As such, we 
anticipate that our annual performance period end date must provide 
sufficient time for SNFs to submit claims for the patients included in 
our measure population. Based on past experience with claims processing 
in other quality reporting and value-based purchasing programs, this 
time lag between care delivered to patients who are included in 
readmission measures and application of a payment consequence linked to 
reporting or performance on those measures has historically been close 
to 1 year. We also recognize that other factors contribute to the delay 
between data collection and payment impacts, including: The processing 
time needed to calculate measure rates using multiple sources of claims 
needed for statistical modeling; time for determining achievement and 
improvement scores; time for providers to review their measure rates 
and included patients; and processing time needed to determine whether 
a payment adjustment needs to be made to a provider's reimbursement 
rate under the applicable PPS based on its performance. Further, our 
preference is to adopt at least a 12-month period as the performance 
period, consistent with our view that using a full year's performance 
period provides sufficient levels of data accuracy and reliability for 
scoring SNF performance on the SNFRM and SNFPPR. We also believe that 
adopting a 12-month period for the performance period supports the 
direction provided of section 1888(g)(3) of the Act that the quality 
measures specified under the SNF VBP Program shall be designed to 
achieve a high level of reliability and validity. Specifically, we 
believe using a full year of claims data better ensures that the 
variation found among SNF performance on the measures is due to real 
differences between SNFs, and not within-facility variation due to 
issues such as seasonality. Additionally, we believe that adopting 12-
month performance and baseline periods enables us to measure SNFs' 
performance on the specified measures in sequence, which we believe is 
necessary in order to measure SNFs on both achievement and improvement, 
as required by section 1888(h)(3)(B) of the Act.
    Finally, we also considered the time necessary to calculate SNF-
specific performance on the SNFRM after the conclusion of the 
performance period and to develop and provide SNF VBP scoring reports, 
including the requirement under section 1888(h)(7) of the Act that we 
inform each SNF of the adjustments to the SNF's payments as a result of 
the program not later than 60 days prior to the FY involved. Based on 
the requirements and concerns discussed above, we believe a 12-month 
time period is the only operationally feasible performance period for 
the SNF VBP Program.
    We invited public comments on this proposal, and we respond to them 
in the next section.
iii. Proposed FY 2019 Baseline Period
    As we have done in the Hospital VBP Program and the ESRD QIP, we 
proposed to adopt a baseline period for use in the SNF VBP Program.
    We proposed to adopt calendar year 2015 claims (January 1, 2015 
through December 31, 2015) as the baseline period for the FY 2019 SNF 
VBP Program and to use that baseline period as the basis for 
calculating performance standards. We stated that, as with the 
performance period, we will allow for a 90-day claims run out following 
the last date of discharge (December 31, 2015) before incorporating the 
2015 claims in our database into the measure calculation.
    We welcomed public comment on this proposal. The comments we 
received on this topic, as well as the comments that we received on the 
proposed performance period, with their responses, appear below.
    Comment: One commenter supported our baseline and performance 
period proposals, stating their appreciation that we proposed a 
performance period as close to the payment period as possible.
    Response: We thank the commenter for the support and agree. When 
developing these policies, we attempted to balance the length of the 
performance period with its proximity to the payment period, and we 
believe we have appropriately balanced those two factors.
    Comment: One commenter was concerned about the delay between 
quality measurement and incentive payments or penalties, stating that 
providers need a clear link between practice and outcomes.
    Response: As explained previously in this section, we believe that 
the proposed performance period is as close to the payment period as we 
can implement practically given the time necessary for claims 
submission and processing, as well as for scoring under the Program.
    Comment: One commenter recommended that we expand the performance 
period for low-volume SNFs (which the commenter defined as SNFs having 
less than 25 stays) to 24 months, and that we exclude from the program 
SNFs that have fewer than 25 stays during the 2-year performance 
period. The commenter stated that this suggested exemption's effects 
would be insignificant on SNFs' scores in the aggregate, pointing to 
analysis that a similarly-structured 20-stay exclusion would only 
exempt about 7.4 percent of SNFs and just 1 percent of stays. The 
commenter noted that increasing the minimum stays count to 25 would 
increase the number of exempted SNFs to approximately 9.2 percent of 
all SNFs and about 1.6 percent of Medicare SNF stays, but also noted 
that expanding the performance period for low-volume SNFs would reduce 
the number of exempted SNFs and stays to 4.8 percent and 0.4 percent 
respectively. The commenter believed that these relatively low numbers 
of exempted SNFs and stays are justifiable since those SNFs are likely 
serving isolated areas or providing specialized care.
    Response: We are sensitive to the effects the SNF VBP could have on 
beneficiaries' access to SNF care, and especially how the program might 
affect access to SNF care in rural and low-volume facilities.
    However, while we appreciate the commenters' intent to ensure as 
broad participation as possible in the Program, we do not believe that 
a separate performance period for low-volume SNFs is feasible. Under 
section 1888(h)(3)(C) of the Act, we are required to establish and 
announce performance standards for a fiscal year not later than 60 days 
prior to the beginning of the performance period for that fiscal year. 
We do not believe we would comply with that requirement by establishing 
a longer performance period for certain SNFs. In addition, because we 
would not know which SNFs would have had fewer than 25 stays in their 
measure denominator until after the performance period concluded, it 
would be impossible for us to have provided the appropriate notice to 
those SNFs as required under section 1888(h)(3)(C) of

[[Page 52000]]

the Act. Moreover, unless we established a separate baseline period for 
low-volume SNFs, we would be comparing performance and baseline periods 
of different durations, which raises questions about the validity of 
those performance comparisons over time. Further, we do not believe 
that a separate 24-month baseline period is appropriate, as it would 
require wholly separate calculations of measured performance using an 
additional year's claims data, which is both time-consuming and costly. 
Finally, we do not believe that low-volume SNFs are penalized by 
participating in the Program. The measures of readmissions adopted 
under the Program include an adjustment that reduces variability in 
low-volume SNFs' measured performance called ``shrinkage estimation,'' 
and we believe that this adjustment ensures that the measures are 
sufficiently reliable for the Program's purposes. However, we will 
continue to test and evaluate the Program's measures and will take this 
recommendation under consideration prior to transitioning from the 
SNFRM to the proposed SNFPPR measure in the SNF VBP Program.
    After consideration of the public comments that we received, we are 
finalizing our proposals to adopt CY 2015 as the baseline period for 
the FY 2019 SNF VBP Program, and CY 2017 as the performance period for 
the same Program year.
e. SNF VBP Performance Scoring
i. Background
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46422 
through 46425) for a discussion of other Medicare VBP scoring 
methodologies, including the methodologies used by the Hospital VBP 
Program and HAC Reduction Program. We also discussed policy 
considerations related to the Hospital Readmission Reduction Program 
and the ESRD QIP in the performance standards section of that final 
rule (80 FR 46420 through 46421). We also discussed the potential 
application of an exchange function (80 FR 46424 through 46425) to 
translate SNF performance scores into value-based incentive payments 
under the SNF VBP Program.
    We considered those issues, as well as comments we received on 
these issues, when developing our performance scoring policy below.
ii. SNF VBP Program Scoring Methodology
    Section 1888(h)(4)(A) of the Act requires the Secretary develop a 
methodology for assessing the total performance of each SNF based on 
the performance standards established under section 1888(h)(3) of the 
Act for the measure applied under section 1888(h)(2) of the Act. 
Section 1888(h)(3)(B) of the Act further requires that these 
performance standards include levels of achievement and improvement and 
that, in calculating a facility's SNF performance score, the Secretary 
use the higher of either improvement or achievement.
    After carefully reviewing and evaluating a number of scoring 
methodologies for the SNF VBP Program, we proposed to adopt a scoring 
model for the SNF VBP Program similar conceptually to that used by the 
Hospital VBP Program and the ESRD QIP, with certain modifications to 
allow us to better differentiate between SNFs' performance on the 
quality measures specified under the SNF VBP Program.\25\ We believe 
this hybrid appropriately accounts for the SNF VBP Program's statutory 
limitation to a single measure, will maintain consistency and alignment 
with other VBP programs already in place, and in doing so, will better 
enable SNFs to understand the SNF VBP Program. Specifically, we 
proposed to implement a 0 to 100-point scale for achievement scoring 
and a 0 to 90-point scale for improvement scoring. In addition, as 
discussed previously, we proposed to set the achievement threshold for 
the SNF VBP Program at the 25th percentile of SNF national performance 
on the quality measure during the baseline period rather than the 50th 
percentile achievement threshold used in the Hospital VBP Program, 
though as noted above, we also sought comment on whether or not we 
should consider adopting the 50th percentile or the 15th percentile.
---------------------------------------------------------------------------

    \25\ We refer readers to the FY 2013 IPPS final rule for a 
discussion of the Hospital VBP Program scoring methodology (76 FR 
2466 through 2470).
---------------------------------------------------------------------------

    We believe using wider scales of 0 to 100 points and 0 to 90 points 
instead of the 0 to 10 and 0 to 9 scales used in the Hospital VBP 
Program and ESRD QIP will allow us to calculate more granular 
performance scores for individual SNFs and provide greater 
differentiation between facilities' performance. We further believe 
that setting the achievement threshold for the SNF VBP Program at the 
25th percentile of national SNF performance on the quality measure 
during the baseline period is preferable to the Hospital VBP Program's 
achievement threshold of the 50th percentile of national facility 
performance for this Program because it accounts for the statutory 
requirement that the SNF VBP Program include only one quality measure 
at a time. Unlike the Hospital VBP Program, which contains many 
measures across multiple domains, the SNF VBP Program is limited by 
statute to a single quality measure at a time. As a result, a hospital 
participating in the Hospital VBP Program could perform below the 50th 
percentile of national performance on one or more measures without 
experiencing a dramatic drop in its Total Performance Score because the 
hospital's performance on other measures would contribute to its total 
performance score. By contrast, if the SNF VBP Program used an 
achievement threshold of the 50th percentile of national SNF 
performance, approximately one-half of all SNFs nationwide would 
automatically receive 0 achievement points assuming no national 
improvement trends between baseline and performance periods. While 
these SNFs could still receive improvement points, we believe it is 
preferable to set a lower achievement threshold that would award the 
majority of SNFs at least some achievement points, thereby enabling us 
to differentiate performance among the lower-performing half of SNFs 
and enabling SNFs to continually increase their achievement score based 
on higher levels of performance. As stated above, as more data becomes 
available, we will continue to assess the appropriateness of this 
achievement threshold for the SNF VBP program and, if necessary, 
propose to refine these standards' definitions and calculation 
methodologies to better incentivize the provision of high-quality care.
    For these reasons, we proposed to adopt the following scoring 
methodology beginning with the FY 2019 SNF VBP Program.

(a) Scoring of SNF Performance on the SNFRM

    Because the SNF VBP Program uses only one measure to incentivize 
and assess facility performance and improvement, we believe it is 
important to ensure that SNFs and the public are able to understand 
these measure scores easily. SNFRM rates represent the percentage of 
qualifying patients at a facility that were readmitted within the risk 
window for the measure. As a result, lower SNFRM rates indicate lower 
rates of readmission, and are therefore an indicator of higher quality 
care. For example, a SNFRM rate of 0.14159 means that approximately 
14.2 percent of qualifying patients discharged from that SNF were 
readmitted during the risk window.

[[Page 52001]]

    We understand that the use of a ``lower is better'' rate could 
cause confusion among SNFs and the public. Therefore, we proposed to 
calculate scores under the Program by first inverting SNFRM rates using 
the following calculation:

SNFRM Inverted Rate = 1-Facility's SNFRM Rate

This calculation inverts SNFs' SNFRM rates such that higher SNFRM 
performance reflects better performance on the SNFRM. As a result, the 
same SNFRM rate presented above (0.14159) would result in a SNFRM 
inverted rate of 0.85841, which means that approximately 86 percent of 
qualifying patients discharged from that SNF were not readmitted during 
the risk window. We believe this inversion is important to incentivize 
improvement in a clear and understandable manner, and will also 
simplify public reporting of SNF performance for use in consumer, 
family, and caregiver decision-making. Further, under this proposal, 
all SNFRM inverted rates would be rounded to the fifth significant 
digit.

(b) Scoring SNFs' Performance Based on Achievement

    We proposed that a SNF would earn an achievement score of 0 to 100 
points based on where its performance on the specified measure fell 
relative to the achievement threshold (which we proposed above to 
define for the quality measures specified under the SNF VBP program as 
the 25th percentile of SNF performance on the quality measure during 
the applicable baseline period) and the benchmark (which we proposed to 
define as the mean of the top decile of SNF performance on the measure 
during the baseline period). As with the Hospital VBP Program, we 
proposed to award points to SNFs based on their performance as follows:
     If a SNF's SNFRM inverted rate was equal to or greater 
than the benchmark, the SNF would receive 100 points for achievement;
     If a SNF's SNFRM inverted rate was less than the 
achievement threshold (that is, the lower bound of the achievement 
range), the SNF would receive 0 points for achievement.
     If a SNF's SNFRM inverted rate was equal to or greater 
than the achievement threshold, but less than the benchmark, we would 
award between 0 and 100 points to the SNF according to the following 
formula:
[GRAPHIC] [TIFF OMITTED] TR05AU16.011

The results of this formula would be rounded to the nearest whole 
number.
    The SNF achievement score would therefore range between 0 and 100 
points, with a higher achievement score indicating higher performance.

(c) Scoring SNF Performance Based on Improvement

    We proposed that a SNF would earn an improvement score of 0 to 90 
points based on how much its performance on the specified measure 
during the performance period improved from its performance on the 
measure during the baseline period. Under this proposal, a unique 
improvement range would be established for each SNF that defines the 
distance between the SNF's baseline period score and the national 
benchmark for the measure (which we propose to define as the mean of 
the top decile of SNF performance on the measure during the baseline 
period). We would then calculate a SNF improvement score for each SNF 
depending on its performance period score:
     If the SNF's performance period score was equal to or 
lower than its improvement threshold, the SNF would receive 0 points 
for improvement.
     If the SNF's performance period score was equal to or 
higher than the benchmark, the SNF would receive 90 points for 
improvement.
     If the SNF's performance period score was greater than its 
improvement threshold, but less than the benchmark, we would award 
between 0 and 90 points for improvement according to the following 
formula:
[GRAPHIC] [TIFF OMITTED] TR05AU16.012

The results of this formula would be rounded to the nearest whole 
number.

(d) Establishing SNF Performance Scores

    Consistent with sections 1888(h)(3)(B) and 1888(h)(4)(A) of the 
Act, we proposed to use the higher of a SNF's achievement and 
improvement scores to serve as the SNF's performance score for a given 
year of the SNF VBP Program. The resulting SNF performance score would 
be used as the basis for ranking SNF performance on the quality 
measures specified under the SNF VBP Program and establishing the 
value-based incentive payment percentage for each SNF for a given FY.

(e) Examples of the Proposed FY 2019 SNF VBP Program Scoring 
Methodology

    In the proposed rule, we provided two examples to illustrate the 
proposed scoring methodology for the FY 2019 SNF VBP Program using 
hypothetical SNFs A, B, and C. The benchmark calculated for the SNFRM 
for all of these hypotheticals is 0.83915 (the mean of the top decile 
of SNF performance on the SNFRM in 2014), and the achievement threshold 
is 0.79551 (the 25th percentile of national SNF performance on the 
SNFRM in 2014). We noted that, as discussed previously, our proposal 
for scoring SNF performance on the SNFRM inverts the measure rates so 
that a higher rate represents better performance.
    Figure AA shows the scoring for SNF A. SNF A's SNFRM rate of 
0.15025 means that approximately 15 percent of qualifying patients 
discharged from SNF A were readmitted during the 30-day risk window. 
Under the proposed SNFRM scoring methodology, SNF A's SNFRM inverted 
rate would be calculated as follows:

Facility a SNFRM Inverted Rate = 1-0.15025


[[Page 52002]]


    As a result of this calculation, Facility A's SNFRM inverted rate 
would be 0.84975 on the SNFRM for the performance period. This result 
indicates that approximately 85 percent of SNF A's qualifying patients 
were not readmitted during the 30-day risk window. Because SNF A's 
SNFRM inverted rate of 0.84975 exceeds the benchmark (that is, the mean 
of the top decile of facility performance, or 0.83915), SNF A would 
receive 100 points for achievement. Because SNF A has earned the 
maximum number of points possible for the SNFRM, its improvement score 
would not be calculated.
[GRAPHIC] [TIFF OMITTED] TR05AU16.013

    Figure BB shows the scoring for SNF B. As can be seen below, SNF 
B's performance on the SNFRM went from 0.21244, for a SNFRM inverted 
rate of 0.78756 (below the achievement threshold) in the baseline 
period to 0.18322, for a SNFRM inverted rate of 0.81668 (above the 
achievement threshold) in the performance period. Applying the 
achievement scoring methodology proposed above, SNF B would earn [49] 
achievement points for this measure, calculated as follows:
[GRAPHIC] [TIFF OMITTED] TR05AU16.014

    However, because SNF B's performance during the performance period 
is greater than its performance during the baseline period, but below 
the benchmark, we would calculate an improvement score as well. 
According to the improvement scale, based on SNF B's improved SNFRM 
inverted rate from 0.78756 to 0.81668, SNF B would receive 51 
improvement points, calculated as follows:

[[Page 52003]]

[GRAPHIC] [TIFF OMITTED] TR05AU16.044

[GRAPHIC] [TIFF OMITTED] TR05AU16.015

    In Figure CC, SNF C's performance on the SNFRM drops from 0.19487, 
for a SNFRM inverted rate of 0.80513, in the baseline period to 
0.21148, for a SNFRM inverted rate 0.78852, in the performance period 
(a decline of 0.01661). Because this SNF's performance during the 
performance period is lower than the achievement

[[Page 52004]]

threshold of 0.79551, it receives 0 points based on achievement. It 
would also receive 0 points for improvement, because its performance 
during the performance period is lower than its performance period 
during the baseline period. In this example, SNF C would receive 0 
points for its SNF performance score.
[GRAPHIC] [TIFF OMITTED] TR05AU16.016

    The comments we received on this topic, with their responses, 
appear below.
    Comment: One commenter supported the proposed scoring methodology, 
characterizing it as a reasonable approach that appropriately rewards 
achievement more than improvement.
    Response: We thank the commenter for this feedback and agree. We 
believe the proposed scoring methodology complies with the Program's 
statutory requirement to score SNFs on both achievement and improvement 
while reserving the maximum scores for SNFs that are high achievers.
    Comment: Some commenters appreciated our proposal to invert SNFs' 
performance rates on readmission measures to show that higher 
performance is better, particularly given the requirement to rank SNFs 
under the program.
    Response: We thank the commenters for this feedback.
    Comment: Some commenters supported the proposed 0 to 100 scoring 
approach, and called on us to monitor performance over time to ensure 
that the scores continue to reflect meaningful differences in care. 
Other commenters noted the proposed methodology's similarity to the 
HVBP program and expressed their support accordingly. Commenters also 
supported our proposed improvement scoring methodology, expressing 
appreciation that we intend to award fewer improvement points than 
achievement points. Commenters agreed that including the improvement 
score creates strong incentives for all SNFs to improve over time.

[[Page 52005]]

    Response: We thank the commenters for their support.
    Comment: One commenter suggested that we consider two additional 
factors for scoring adjustments, including the best ways to encourage 
palliative care without harming performance scores and how to adjust 
for individuals with specialized conditions that present increased 
risks of hospitalizations.
    Response: We do not believe that the Program will discourage 
palliative care because the Program's measures do not hold SNFs 
accountable for admissions to hospice or other forms of palliative 
care, and we believe that the measures' risk adjustment appropriately 
controls for variations related to individuals' clinical status. 
However, we will monitor the Program's effects on access to care, and 
if necessary, will consider additional adjustments in the future.
    After consideration of the public comments that we received, we are 
finalizing the scoring methodology for the SNF VBP Program as proposed.
f. SNF Value-Based Incentive Payments
i. Background
    Paragraphs (5), (6), (7), and (8) of section 1888(h) of the Act 
outline several requirements for value-based incentive payments under 
the SNF VBP Program. Section 1888(h)(5)(A) of the Act requires that the 
Secretary increase the adjusted Federal per diem rate for skilled 
nursing facilities by the value-based incentive payment amount 
determined under section 1888(h)(5)(B) of the Act. That amount is to be 
determined by the product of the adjusted federal per diem rate and the 
value-based incentive payment percentage specified under section 
1888(h)(5)(C) of the Act for each SNF for a FY.
    Section 1888(h)(5)(C) of the Act requires that the value-based 
incentive payment percentage be based on the SNF performance score and 
must be appropriately distributed so that the highest-ranked SNFs 
receive the highest payments, the lowest-ranked SNFs receive the lowest 
payments, and that the payment rate for services furnished by SNFs in 
the lowest 40 percent of the rankings be less than would otherwise 
apply. Finally, the total amount of value-based incentive payments must 
be greater than or equal to 50 percent, but not greater than 70 
percent, of the total amount of the reductions to payments for the FY 
specified under section 1888(h)(6) of the Act, as estimated by the 
Secretary. As discussed further below, we will propose to adopt in 
future rulemaking an exchange function to ensure that the total amount 
of value-based incentive payments made under the program each year 
meets those criteria.
    Section 1888(h)(7) of the Act requires the Secretary, not later 
than 60 days prior to the fiscal year involved, to inform each SNF of 
the adjustments to its Medicare payments for services furnished by the 
SNF during the FY. Section 1888(h)(8) of the Act requires that the 
value-based incentive payment and payment reduction only apply for the 
FY involved, and not be taken into account in making payments to a SNF 
in a subsequent year.
    We received a number of comments on incentive payments that will be 
made under the Program.
    Comment: Several commenters recommended that we disburse the 
maximum 70 percent of payments withheld from SNFs as value-based 
incentive payments, stating that the larger the incentive, the greater 
the behavioral change. Commenters believed that making the largest 
amount of funds available would have the greatest impact on changing 
care practices.
    Response: We thank commenters for this feedback. We will address 
the topic of value-based incentive payments under the Program in future 
rulemaking. We agree with commenters that the Program's incentive 
payments should be substantial enough to promote quality improvement 
through changing care practices.
    Comment: One commenter stated that the SNF VBP Program should be 
budget-neutral, and suggested that we should reconsider the 50 to 70 
percent payback to facilities under the Program.
    Response: Section 1888(h)(5)(C)(ii)(III) of the Act requires that 
the total amount of value-based incentive payments available under the 
Program for a fiscal year range from between 50 percent and 70 percent 
of the total amount of the reductions to the adjusted Federal per diem 
rates otherwise applicable to skilled nursing facilities for that 
fiscal year, as estimated by the Secretary. As a result, we do not 
believe we have the authority to make the SNF VBP Program budget-
neutral, or to vary the total amount that we will disburse in value-
based incentive payments beyond the 50 to 70 percent range specified 
under the statute.
ii. Request for Comment on Exchange Function
    As we discussed in the FY 2016 SNF PPS final rule (80 FR 46424 
through 46425), we use a linear exchange function to translate a 
hospital's Total Performance Score under the Hospital VBP Program into 
the percentage multiplier to be applied to each Medicare discharge 
claim submitted by the hospital during the applicable FY. We intend to 
adopt a similar methodology to translate SNF performance scores into 
value-based incentive payment percentages under the SNF VBP Program. 
When considering that methodology, we sought public comments on the 
appropriate form and slope of the exchange function to determine how 
best to reward high performance and encourage SNFs to improve the 
quality of care provided to Medicare beneficiaries. As illustrated in 
Figure DD, we considered the following four mathematical exchange 
function options: Straight line (linear); concave curve (cube root 
function); convex curve (cube function); and S-shape (logistic 
function).

[[Page 52006]]

[GRAPHIC] [TIFF OMITTED] TR05AU16.017

    We received numerous public comments on the FY 2016 SNF PPS 
proposed rule, and we sought further public comments to inform our 
policies on this topic. We requested additional public comments on the 
specific form of the exchange function that we should propose in the 
future, including any additional forms beyond the four examples that we 
have illustrated above, and any considerations we should take into 
account when selecting an exchange function form that would best 
support quality improvement in SNFs.
    Additionally, we will determine the precise slope of the exchange 
function after the performance period has concluded, because the 
distribution of SNFs' performance scores will form the basis for value-
based incentive payments under the program. However, two additional 
considerations will affect the exchange function's slope. As required 
in section 1888(h)(5)(C)(ii)(II)(cc) of the Act, SNFs in the lowest 40 
percent of the ranking determined under paragraph (4)(B) must receive a 
payment that is less than the payment rate for such services that would 
otherwise apply. Additionally, as described in this section, section 
1888(h)(5)(C)(ii)(III) of the Act requires that the total amount of 
value-based incentive payments under the Program be greater than or 
equal to 50 percent, but not greater than 70 percent, of the total 
amount of reductions to SNFs' payments for the FY, as estimated by the 
Secretary. We intend to ensure that both of these requirements, as well 
as all other statutory requirements under the Program, are fulfilled 
when we specify the exchange function's slope.
    We invited public comments on this topic. The comments we received 
on this topic, with their responses, appear below.
    Comment: Commenter offered several principles for us to consider 
when developing our exchange function proposals in the future. The 
commenter suggested that top performing SNFs should receive an increase 
in their Medicare rates, that we should maximize the number of SNFs 
that do not receive a cut in their rates, that we should allow for 
continuous improvement, even for SNFs that are already high performers, 
and that differences in rehospitalization scores should be tied to 
meaningful differences in incentive payments. The commenter recommended 
that we adopt the logistic function and recommended against the cube 
root function, stating that the former balances incentives for low and 
high performers and that the latter creates very little incentive for 
performance improvement.
    Response: We thank the commenter for this feedback, and we will 
take it into account as we develop proposals for the exchange function 
in the future.
g. SNF VBP Reporting
i. Confidential Feedback Reports
    Section 1888(g)(5) of the Act requires that we provide quarterly 
confidential feedback reports to SNFs on their performance on the 
measures specified under sections 1888(g)(1) and (2) of the Act. 
Section 1888(g)(5) of the Act also requires that we begin providing 
those reports on October 1, 2016.
    In order to meet the statutory deadline, we are developing the 
feedback reports, operational systems, and implementation guidance 
related to those reports. We intend to provide these reports to SNFs 
via the QIES system CASPER files currently used by SNFs to report 
quality performance.
    We invited public comments on the appropriateness of the QIES 
system, and any considerations we should take into account when 
designing and providing

[[Page 52007]]

these feedback reports. The comments we received on this topic, with 
their responses, appear below.
    Comment: One commenter supported our proposal to use the QIES 
system to deliver feedback reports to SNFs. The commenter suggested 
that we provide these reports in a spreadsheet-based format to allow 
data aggregation within organizations.
    Response: We thank the commenter for this feedback.
    Comment: One commenter requested that trade organizations and other 
organizations that represent the interests of SNFs be provided access 
to SNFs' quarterly feedback reports. The commenter believed that these 
organizations can assure that SNF VBP data affecting each SNF will be 
protected and only shared with representatives for that particular SNF. 
The commenter noted that many SNFs are members of larger organizations, 
and that allowing further data distribution would enable these 
organizations to aggregate these reports rather than manually enter 
data voluntarily provided by each SNF. Commenter also requested that we 
provide a national data file with SNF VBP performance to these 
organizations that can help disseminate performance information to 
individual SNFs or their parent organizations.
    Response: Section 1888(g)(5) of the Act requires us to provide 
confidential feedback reports to SNFs. We do not believe that we have 
the authority to share those confidential feedback reports with other 
entities.
    Comment: One commenter requested that we consider using the QIES 
system to provide real-time data updates, or as close to real-time 
updates as possible. Commenter noted that we update our MDS data weekly 
to capture SNFs' most current measure rates in order to facilitate 
quality improvement efforts and suggested that we could do something 
similar with Part A claims and the Program's measures.
    Response: Although we agree that SNFs would benefit from receiving 
the most up-to-date information as possible, it is not operationally 
feasible to provide SNFs with real-time data updates at this time. 
Unlike MDS data, claims-based measures require significant time to 
compute and are based on large pools of data. While we will, as 
described above, provide quarterly confidential feedback reports, we do 
not believe more frequent updates are possible at this time.
    Comment: One commenter suggested several data elements that we 
could consider including in SNFs' quarterly reports, including 
readmission counts during and after the Part A stay, names of 
beneficiaries triggering readmissions, number of readmissions by PPR 
diagnosis, predicted and expected rates used to calculate the SSR for 
the prior rolling 12-month window, and national rates used to calculate 
achievement and improvement scores.
    Response: We thank the commenter for this feedback. As we continue 
the Program's implementation, we will refine the quarterly reports in 
accordance with SNFs' feedback, and will take these suggestions into 
consideration.
ii. Proposed Two-Phase SNF VBP Data Review and Correction Process
(a) Background
    Section 1888(g)(6) of the Act requires the Secretary to establish 
procedures to make public performance information on the measures 
specified under paragraphs (1) and (2) of such section. The procedures 
must ensure that a SNF has the opportunity to review and submit 
corrections to the information that will be made public for the 
facility prior to its being made public. This public reporting is also 
required by statute to begin no later than October 1, 2017. 
Additionally, section 1888(h)(9) of the Act requires the Secretary to 
make available to the public information regarding SNFs' performance 
under the SNF VBP Program, specifically including each SNF's 
performance score and the ranking of SNFs for each fiscal year.
    Accordingly, we proposed to adopt a two-phase review and correction 
process for (1) SNFs' measure data that will be made public under 
section 1888(g)(6) of the Act, which will consist of each SNFs' 
performance on the measures specified under sections 1888(g)(1) and (2) 
of the Act, and (2) SNFs' performance information that will be made 
public under section 1888(h)(9) of the Act.
(b) Phase One: Review and Correction of SNFs' Quality Measure 
Information
    We view the quarterly confidential feedback reports described 
previously in this section, as one possible means to provide SNFs an 
opportunity to review and provide corrections to their performance 
information. However, collecting SNF measure data and calculating 
measure performance scores takes a number of months following the end 
of a measurement period. Because it is not feasible to provide SNFs 
with an updated measure rate for each quarterly report or engage in 
review and corrections on a quarterly basis, we proposed to use one of 
the four reports each year to provide SNFs an opportunity to review 
their data slated for public reporting. In this specific quarterly 
report, we intend to provide SNFs: (1) A count of readmissions; (2) the 
number of eligible stays at the SNF; (3) the SNF's risk-standardized 
readmissions ratio; and (4) the national SNF measure performance rate. 
In addition, we intend to provide the patient-level information used in 
calculating the measure rate. However, we sought comment on what 
patient-level information would be most useful to SNFs and how we 
should make this information available if requested. We intend to 
address the topic of what specific information will be provided if 
requested in this specific quarterly report in future rulemaking, where 
we intend to propose a process for SNFs' requests for patient-level 
data. We intend to notify SNFs of this report's release via listserv 
email and posting on the QualityNet News portion of the Web site.
    Therefore, we proposed to fulfill the statutory requirement that 
SNFs have an opportunity to review and correct information that is to 
be made public under section 1888(g)(6) of the Act by providing SNFs 
with an annual confidential feedback report that we intend to provide 
via the QIES system CASPER files. We further proposed that SNFs must, 
if they believe the report's contents to be in error, submit a 
correction request to [email protected] with the following 
information:
     SNF's CMS Certification Number (CCN).
     SNF Name.
     The correction requested and the SNF's basis for 
requesting the correction. More specifically, the SNF must identify the 
error for which it is requesting correction, and explain its reason for 
requesting the correction. The SNF must also submit documentation or 
other evidence, if available, supporting the request. Additionally, any 
requests made during phase one of the proposed process will be limited 
to the quality measure information at issue.
    We further proposed that SNFs must make any correction requests 
within 30 days of posting the feedback report via the QIES system 
CASPER files, not counting the posting date itself. For example, if we 
provide reports on October 1, 2017, SNFs must review those reports and 
submit any correction requests by October 31, 2017. We will not 
consider any requests for correction to quality measure data that are 
received after the close of the first phase of the proposed review and 
correction process. As discussed further in this section, any 
corrections sought during phase two of

[[Page 52008]]

the proposed process will be limited to the SNF performance score 
calculation and the ranking.
    We will review all timely phase one correction requests that we 
receive and will provide responses to SNFs that have requested 
corrections as soon as practicable.
(c) Phase Two: Review and Correction of SNF Performance Scores and 
Ranking
    As required by section 1888(h)(7) of the Act, we intend to inform 
each SNF of its payment adjustments as a result of the SNF VBP Program 
not later than 60 days prior to the fiscal year involved. For the FY 
2019 SNF VBP Program, we intend to notify SNFs of those payment 
adjustments via a SNF performance score report not later than 60 days 
prior to October 1, 2018. We intend to address the specific contents of 
that report in future rulemaking.
    In that report, however, we also intend to provide SNFs with their 
SNF performance scores and ranking. By doing so, we intend to use the 
performance score report's provision to SNFs as the beginning of the 
second phase of the proposed review and correction process. By 
completing phase one, SNFs will have an opportunity to verify that 
their quality measure data are fully accurate and complete and as a 
result, phase two will be limited only to corrections to the SNF 
performance score's calculation and the SNF's ranking. Any requests to 
correct quality measure data that are received during phase two will be 
denied.
    We intend to set out specific requirements for phase two of the 
proposed review and correction process in future rulemaking. To inform 
those proposals, we sought comments on what information would be most 
useful for us to provide to SNFs to facilitate their review of their 
SNF performance scores and ranking. As with the phase one process, we 
intend to adopt a 30-day time period for phase two review and 
corrections, beginning with the date on which we provide SNF 
performance score reports.
    We invited public comments on this proposed two-phase review and 
correction process. The comments we received on this topic, with their 
responses, appear below.
    Comment: One commenter only supported the 30-day deadline for 
correction requests if sufficient information is included in the 
quarterly reports. The commenter noted that SNFs may not be able to 
submit documentation or other evidence supporting a correction request 
within 30 days if they do not receive the names of the beneficiaries 
who were readmitted, when the readmission occurred, and the readmission 
diagnosis. Commenter appreciated that we may receive many correction 
requests, and suggested that we consider allowing corrections for 
missing data only annually, but corrections for when patients' 
admissions are listed incorrectly quarterly in order to streamline our 
reviews of correction requests. Another commenter requested that we 
provide SNF and hospital inpatient Part A claims to SNFs on a quarterly 
basis, both to facilitate quality improvement and correction requests. 
Commenter suggested that we could provide patient identifiable files to 
organizations that have a Business Associate Agreement with the SNF and 
allow the organizations to share data with the SNF. Commenter noted 
that many facilities do not have the capacity to analyze claims data, 
but many large organizations are working with SNFs to provide this 
service. Another commenter opposed the ability of SNFs to request data 
corrections in phase two of the proposed review and correction process 
unless all data in phase two is also included in the quarterly feedback 
reports in phase one, and the last quarterly report in phase one 
includes the final data used to calculate the rehospitalization score. 
Commenter explained that if SNFs will not be able to file correction 
requests based on phase two feedback reports, all of the data used to 
calculate the rehospitalization score needs to be in the phase one 
reports.
    Response: We thank the commenters for this feedback. As we discuss 
further below in response to other comments, we are finalizing a policy 
whereby we will accept corrections on any quarterly report provided 
during a calendar year until the following March 31.
    However, the feedback reports that we must provide to SNFs under 
the requirements at section 1888(g)(5) of the Act are specifically 
required to remain confidential. We do not believe that we have the 
authority to share those confidential feedback reports with other 
organizations than SNFs themselves. We note that SNFs are free to share 
their feedback reports with other organizations at their discretion.
    We would like to clarify the distinction between the two phases of 
the proposed review and correction process. As we discussed in the 
proposed rule (81 FR 24255), the first phase is intended to allow SNFs 
to review and correct patient-level information that we used to 
calculate the measure rates. The second phase is intended to allow SNFs 
to review and correct only their performance scores and the ranking, 
not their measure rates. Although the two phases are separate, they 
will, taken together, provide SNFs with an opportunity to correct both 
the measure rates that are used to generate their performance scores 
and ranking, as well as their actual performance scores and ranking. We 
do not believe that we should conflate the two, or allow corrections to 
quality measure data (that is, phase one requests) during the phase two 
process, because the two phases are aimed at two separate purposes. We 
believe it to be necessary to finalize the claims data that SNFs will 
be able to correct in phase one so that those data may form the basis 
for performance calculations that SNFs will be able to review in phase 
two.
    Comment: One commenter recommended that SNFs be provided access to 
the information used to calculate their rehospitalization scores and 
also information to estimate their adjustment factor based on the final 
exchange function. Commenter explained that SNFs will want to replicate 
their scores, so they will need their predicted rates, expected rates, 
national average, baseline period rates, and major ``cut points'' used 
to determine achievement and improvement points. The commenter also 
suggested that the ranking of achievement and improvement scores could 
be helpful to SNFs as well.
    Response: We will take these comments into account as we develop 
the first quarterly feedback reports for SNFs, and look forward to 
additional feedback from SNFs after we provide them.
    Comment: Commenter expressed support for the proposed review and 
corrections process
    Response: We thank the commenter for their support.
    Comment: Commenter supported our proposal to provide feedback 
reports to SNFs via the QIES system. However, the commenter did not 
support our plan to allow SNFs to seek corrections on an annual basis, 
and commenter recommended instead that we allow corrections on a 
quarterly basis with an annual deadline. The commenter suggested that 
the quarterly data that we provide should be sufficient to allow SNFs 
to verify the accuracy of their measured performance and suggested as a 
result that SNFs should be allowed to submit corrections quarterly.
    Response: We understand the commenter's concern about the deadline 
following each quarterly confidential feedback report, and we will 
instead finalize a policy under which we will accept corrections to any 
quarterly report provided during a calendar year

[[Page 52009]]

until the following March 31. We believe that this policy appropriately 
balances our desire to ensure that the measure data are sufficiently 
accurate with SNFs' need for sufficient information with which to 
evaluate the accuracy of those reports, and provides SNFs with more 
time to review each quarter's data than the 30 days that we initially 
proposed.
    After consideration of the public comments that we received, we are 
finalizing the two-phase review and correction process as proposed, 
with the exception stated above that we will accept corrections to 
SNFs' quarterly confidential feedback reports during a calendar year 
until the following March 31.
iii. SNF VBP Public Reporting
    Section 1888(h)(9)(A) of the Act requires that we make available to 
the public on the Nursing Home Compare Web site or its successor 
information regarding the performance of individual SNFs with respect 
to a FY, including the performance score for each SNF for the FY and 
each SNF's ranking, as determined under section 1888(h)(4)(B) of the 
Act. Additionally, section 1888(h)(9)(B) of the Act requires that we 
periodically post aggregate information on the SNF VBP Program on the 
Nursing Home Compare Web site or its successor, including the range of 
SNF performance scores, and the number of SNFs receiving value-based 
incentive payments and the range and total amount of those payments.
    We intend to address this topic in future rulemaking. However, we 
invited public comments on the best means by which to display the SNF-
specific and aggregate performance information for public consumption. 
The comments we received on this topic, with their responses, appear 
below.
    Comment: Commenter supported public posting of SNFs performance 
scores, but not their rehospitalization rates, achievement or 
improvement scores. The commenter stated that achievement and 
improvement scores are not required to be posted publicly by statute 
and that they are not necessarily helpful to consumers. The commenter 
also stated against posting the risk adjusted SNFRM or SNFPPR rates, 
noting that these measures differ from other rehospitalization measures 
publicly posted by CMS.
    Response: We thank the commenter for this feedback. We will propose 
details on public reporting of SNF VBP Program performance information 
in the future and will take these comments into account at that time.
    Comment: Commenter supported posting of the aggregate value-based 
incentive payments, as well as the range of those payments and the 
number of SNFs receiving payment adjustments, but did not support 
posting individual SNF payments. The commenter noted that individual 
SNF payments are the product of rehospitalization scores, volume of 
admissions and patient case mix RUG payments, so actual payment 
adjustments could be confusing to the public.
    Response: We thank the commenter for this feedback and agree that 
we will need to communicate clearly with the public about the 
information that we post publicly. We will take these comments into 
account when we propose details on public posting of SNF VBP payments 
information in the future.
iv. Ranking SNF Performance
    Section 1888(h)(4)(B) of the Act requires ranking the SNF 
performance scores determined under paragraph (A) of such section from 
low to high. Additionally, and as discussed in this section, we are 
required to publish the ranking of SNF performance scores for a FY on 
Nursing Home Compare or a successor Web site.
    To meet these requirements, we proposed to order SNF performance 
scores from low to high and publish those rankings on both the Nursing 
Home Compare and QualityNet Web sites. However, because SNF performance 
scores will not be calculated until after the performance period 
concludes after CY 2017 (that is, during CY 2018), and because SNFs 
must be provided their value-based incentive payment adjustments not 
later than 60 days prior to the FY involved, we intend to publish the 
ranking for FY 2019 SNF VBP payment implications after August 1, 2018.
    We invited public comments on the most appropriate format and Web 
site for the ranking's publication. The comments we received on this 
topic, with their responses, appear below.
    Comment: Commenter stated that any public posting of SNFs' ranking 
under the Program must be clearly indicated, and suggested that rank 
number 1 should be reserved for the SNF with the best rehospitalization 
score, not the worst score. Commenter explained that the public may be 
confused about the ranking unless clear and easy to understand 
information on the ranking's direction is posted. Commenter also 
supported our plan to post the ranking on the Nursing Home Compare Web 
site.
    Response: We thank the commenter for this feedback and will take it 
into account as we develop the ranking that will be publicly posted. We 
agree with the commenter that we will need to be clear about what the 
ranking means when it is posted. We note that section 1888(h)(4)(B) of 
the Act directs that the ranking of SNF performance scores (not SNF 
rehospitalization rates) under the Program be ordered from low to high, 
and we intend to be as clear as possible about SNFs' placements on the 
ranking.
    We will address this topic further in future rulemaking. We note 
that, because we will compute FY 2019 SNF performance scores after the 
completion of the performance period (finalized above as CY 2017), we 
will not publish the ranking or other SNF-specific performance 
information for the FY 2019 Program until at least the summer of CY 
2018.
2. Skilled Nursing Facility (SNF) Quality Reporting Program (QRP)
a. Background and Statutory Authority
    We seek to promote higher quality and more efficient health care 
for Medicare beneficiaries, and our efforts are furthered by QRPs 
coupled with public reporting of that information.
    The Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act) added section 1899B to the Act that imposed new data 
reporting requirements for certain PAC providers, including SNFs, and 
required that the Secretary implement a SNF quality reporting program 
(SNF QRP). Section 1888(e)(6)(B)(i)(II) of the Act requires that each 
SNF submit, for FYs beginning on or after the specified application 
date (as defined in section 1899B(a)(2)(E) of the Act), data on quality 
measures specified under section 1899B(c)(1) of the Act and data on 
resource use and other measures specified under section 1899B(d)(1) of 
the Act in a manner and within the time frames specified by the 
Secretary. In addition, section 1888(e)(6)(B)(i)(III) of the Act 
requires, for FYs beginning on or after October 1, 2018, that each SNF 
submit standardized patient assessment data required under section 
1899B(b)(1) of the Act in a manner and within the time frames specified 
by the Secretary. Section 1888(e)(6)(A)(i) of the Act requires that, 
for FYs beginning with FY 2018, if a SNF does not submit data, as 
applicable, on quality and resource use and other measures in 
accordance with section 1888(e)(6)(B)(i)(II) of the Act and on 
standardized patient assessment in accordance with section 
1888(e)(6)(B)(i)(III) of the Act for such FY, the Secretary must reduce 
the

[[Page 52010]]

market basket percentage described in section 1888(e)(5)(B)(ii) of the 
Act by 2 percentage points. The SNF QRP applies to freestanding SNFs, 
SNFs affiliated with acute care facilities, and all non-CAH swing-bed 
rural hospitals.
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46427 
through 46429) for information on the requirements of the IMPACT Act
    In the FY 2016 SNF PPS final rule, we finalized the general 
timeline and sequencing of activities under the SNF QRP. Please refer 
to the FY 2016 SNF PPS final rule (80 FR 46427 through 46429) for more 
information on these topics.
    In addition, in implementing the SNF QRP and IMPACT Act 
requirements in the FY 2016 SNF PPS final rule, we established our 
approach for identifying cross-setting measures and processes for the 
adoption of measures including the application and purpose of the 
Measure Application Partnership (MAP) and the notice and comment 
rulemaking process. For more information on these topics, please refer 
to the FY 2016 SNF PPS final rule (80 FR 46427 through 46429).
b. General Considerations Used for Selection of Measures for the SNF 
QRP
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46429 
through 46431) for a detailed discussion of the considerations we apply 
in measure selection for the SNF QRP, such as alignment with the CMS 
Quality Strategy,\26\ which incorporates the three broad aims of the 
National Quality Strategy.\27\ Overall, we strive to promote high 
quality and efficiency in the delivery of health care to the 
beneficiaries we serve. Performance improvement leading to the highest 
quality health care requires continuous evaluation to identify and 
address performance gaps and reduce the unintended consequences that 
may arise in treating a large, vulnerable, and aging population. QRPs, 
coupled with public reporting of quality information, are critical to 
the advancement of health care quality improvement efforts. Valid, 
reliable, and relevant quality measures are fundamental to the 
effectiveness of our QRPs. Therefore, selection of quality measures is 
a priority for CMS in all of its QRPs.
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    \26\ http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html.
    \27\ http://www.ahrq.gov/workingforquality/nqs/nqs2011annlrpt.htm.
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    In the FY 2017 SNF PPS proposed rule, we proposed to adopt for the 
SNF QRP one measure that we are specifying under section 1899B(c)(1)(C) 
of the Act to meet the Medication Reconciliation domain: (1) Drug 
Regimen Review Conducted with Follow-Up for Identified Issues--Post-
Acute Care Skilled Nursing Facility Quality Reporting Program. Further, 
we proposed to adopt for the SNF QRP three measures to meet the 
resource use and other measure domains identified in section 
1899B(d)(1) of the Act: (1) Medicare Spending per Beneficiary--Post-
Acute Care Skilled Nursing Facility Quality Reporting Program; (2) 
Discharge to Community--Post Acute Care Skilled Nursing Facility 
Quality Reporting Program; and (3) Potentially Preventable 30-Day Post-
Discharge Readmission Measure for Skilled Nursing Facility Quality 
Reporting Program.
    In our development and specification of measures, we employ a 
transparent process in which we seek input from stakeholders and 
national experts and engage in a process that allows for pre-rulemaking 
input on each measure, as required by section 1890A of the Act.
    To meet this requirement, we provided the following opportunities 
for stakeholder input. Our measure development contractor convened 
technical expert panels (TEPs) that included stakeholder experts and 
patient representatives on July 29, 2015 for the Drug Regimen Review 
Conducted with Follow-Up for Identified Issues--PAC SNF QRP, on August 
25, 2015, September 25, 2015, and October 5, 2015 for the Discharge to 
Community--PAC SNF QRP, on August 12 and 13, 2015 and October 14, 2015 
for the Potentially Preventable 30-Day Post-Discharge Readmission 
Measure for SNF QRP, and on October 29 and 30, 2015 for the Medicare 
Spending per Beneficiary measures. In addition, we released draft 
quality measure specifications for public comment on the Drug Regimen 
Review Conducted with Follow-Up for Identified Issues--PAC SNF QRP from 
September 18, 2015 to October 6, 2015, for the Discharge to Community--
PAC SNF QRP from November 9, 2015 to December 8, 2015, for the 
Potentially Preventable 30-Day Post-Discharge Readmission Measure for 
SNF QRP from November 2, 2015 to December 1, 2015, and for the Medicare 
Spending per Beneficiary measures from January 13, 2016 to February 5, 
2016. Further, we implemented a public mailbox, 
[email protected], for the submission of public 
comments. This PAC mailbox is accessible on our post-acute care quality 
initiatives Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-of-2014-Data-Standardization-and-Cross-Setting-MeasuresMeasures.html.
    Additionally, we sought public input from the MAP PAC, Long-Term 
Care Workgroup during the annual in-person meeting held December 14 and 
15, 2015. The final MAP report is available at http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx. The MAP is composed of multi-stakeholder groups convened 
by the NQF, our current contractor under section 1890(a) of the Act, 
tasked to provide input on the selection of quality and efficiency 
measures described in section 1890(b)(7)(B) of the Act.
    The MAP reviewed each measure that we proposed in the proposed rule 
for use in the SNF QRP. For more information on the MAP, we refer 
readers to the FY 2016 SNF PPS final rule (80 FR 46430 through 46431). 
Further, for more information on the MAP's recommendations, we refer 
readers to the MAP 2015-2016 Considerations for Implementing Measures 
in Federal Programs public report at http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx.
    We received a number of general comments on our measure selection 
process.
    Comment: Many commenters supported the goals of the IMPACT Act, 
including the implementation of cross-setting measures across PAC 
settings. One of these commenters stated that the use of standardized 
and interoperable patient assessment data will allow for better cross-
setting comparisons of quality and will support the development of 
better quality measures with uniform risk standardization. The 
commenter also recognized that the standardization of data collected 
across PAC settings is an ongoing process and will require continued 
refinement.
    Response: We appreciate the commenters' support for the 
implementation of cross-setting measures across PAC settings as 
required by the IMPACT Act. We believe that standardizing patient 
assessment data will allow for the exchange of data among PAC providers 
in order to facilitate care coordination and improve patient outcomes.
    Comment: Several commenters expressed concern with the compressed 
timeline in which CMS is adopting measures for the SNF QRP.

[[Page 52011]]

Additionally, one commenter believes the ``hurried pace'' of the 
development process may lead to negative unintended consequences and 
may preclude stakeholder input. The commenter suggested that a less 
compressed comment period and implementation timeline provided would be 
less disruptive to measure development. Several commenters suggested 
that the measures be refined further prior to their implementation in 
the SNF QRP.
    Response: We recognize the timeline and pace to implement the 
requirements of the IMPACT Act is ambitious. However, we have taken 
steps to ensure the scientific rigor of measure development, including 
testing measures under development and soliciting stakeholder feedback 
during both the measure development and rulemaking process. We have 
also worked to be responsive to stakeholder concerns about the length 
of various comment periods, and in response to those concerns, we have 
extended our public comment periods for measures under development on 
several occasions. We also encourage feedback through our IMPACT Act 
PAC Quality Initiative resource and feedback mailbox at 
[email protected] or at the SNF QRP resource and 
feedback mailbox at [email protected]. We intend to 
continually monitor, refine, and update all measures if necessary to 
ensure that they do not result in unintended consequences. With regard 
to refining measures prior to their implementation, we interpret this 
to refer to further refinement of the measures prior to adoption. We 
understand and agree that measures should be developed prior to 
adoption and have engaged in several activities to ensure further 
refinement which are described in the specifc measure sections below.
    Comment: One commenter expressed concern that SNFs will be held 
responsible for outcomes of care when other care coordination 
arrangements such as Accountable Care Organizations, Medicare bundled 
payments, and Medicaid managed care arrangements for dual eligibles are 
available. The commenter believes that overlapping care coordination 
initiatives and SNF QRP measures will cause confusion and diffuse 
accountability for the outcomes of care. One commenter suggested 
streamlining measures to reduce the redundancy of reporting. Another 
commenter was concerned that SNFs would be confused by the various 
measures, and thought that there would be unintended consequences as a 
result.
    Response: Although we recognize that there might be some overlap 
along the lines suggested by the commenters, the SNF QRP is being 
designed to assess the quality care specific furnished by SNFs to 
Medicare beneficiaires. We believe that this information will be 
important for quality improvement purposes. We will continue to provide 
outreach and education to SNFs including trainings and National 
Provider Calls to help them understand the requirements and measures 
adopted for the SNF QRP. We also appreciate the concern that SNF QRP 
measures be aligned to minimize reporting requirements when possible. 
We will nonetheless seek, where feasible, to align the SNF QRP with 
existing reporting requirements.
    Comment: We received several comments regarding NQF endorsement of 
the proposed measures. One commenter voiced support of the measures and 
encouraged submission of the measures for NQF endorsement. Several 
commenters expressed concern about the lack of NQF endorsement for 
measures and suggested additional measure testing and development. One 
commenter requested that CMS provide a timeline for submission of the 
measures to NQF. Additionally, commenters recommended NQF endorsement 
prior to public reporting.
    Response: We recognize the importance of consensus endorsement and, 
where possible, seek to adopt measures for the SNF QRP that are 
endorsed by the NQF. To the extent that we adopt measures under our 
exception authority, we intend to seek NQF-endorsement of those 
measures and will do so as soon as is feasible. Regardless of whether 
the measures are or are not NQF-endorsed at the time we adopt them, 
they have all been tested for reliability and validity, and we believe 
that the results of that testing support our conclusion that they are 
sufficiently reliable and valid to warrant their adoption in the SNF 
QRP. The results of our reliability and validity testing for these 
measures may be found in Measure Specifications for Measures Adopted in 
the FY 2017 SNF QRP Final Rule, posted on the CMS SNF QRP Web page at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    Comment: Several commenters stated that the NQF MAP committee did 
not support the proposed measures; instead, they recommended that we 
delay measure implementation until the measures are fully developed and 
tested and brought back to the MAP for further consideration. One 
commenter suggested that TEP members and other stakeholders who 
provided feedback in the measure development process did not support 
the measures moving forward without further testing.
    Response: We interpret this comment to address the activities of 
the Measures Application Partnership, a multi-stakeholder partnership 
convened by NQF that provides input to the U.S. Department of Health 
and Human Services (HHS) on its selection of measures for certain 
Medicare programs. We would like to clarify that the MAP provided the 
recommendation of ``encourage continued development'' for the proposed 
measures. According to the MAP, the term ``encourage continued 
development,'' is applied when a measure addresses a critical program 
objective or promotes alignment but is in an earlier stage of 
development. In contrast, the MAP uses the phrase ``do not support'' 
when it does not support a measure at all.
    Since the MAP recommendation of ``encourage continued development'' 
for the proposed measures during the December 2015 NQF-convened PAC LTC 
MAP meeting, we have further refined the measure specifications based 
on additional validity and reliability testing. Our efforts included: A 
pilot test in 12 post-acute care settings, including SNFs, to determine 
the feasibility of assessment items for use in calculation of the Drug 
Regimen Review Conducted with Follow-Up for Identified Issues measure 
and further development of risk-adjusted models for the Discharge to 
Community, Medicare Spending per Beneficiary and Potentially 
Preventable Readmissions measures. Additional information regarding 
testing that was performed since the MAP Meeting, TEP meetings, and 
public comment periods is further described below in our responses to 
comments on individual proposed measures.
    For these reasons, we believe that the measures have been fully and 
robustly developed, and believe they are appropriate for implementation 
and should not be delayed.
    Comment: One commenter expressed concern about a lack of 
consistency and comparability of measures across PAC settings and 
believed it inappropriate to compare performance across provider types 
due to the lack of appropriate risk adjustment. We also received 
comments from MedPAC conveying that findings from their work on a 
unified PAC payment system suggest overlap in where Medicare 
beneficiaries are treated for similar care in PAC settings. As a result 
of this work, MedPAC

[[Page 52012]]

recommended that the IMPACT Act measures use a uniform definition, 
specification, and risk adjustment method to facilitate quality 
comparison across PAC settings to inform Medicare beneficiary choice, 
and so that Medicare can evaluate the value of services it pays for. 
MedPAC further noted that differences in rates should reflect 
differences in quality of care rather than differences in the way rates 
are constructed.
    Response: For each of the proposed measures, we applied consistent 
models where feasible in order to develop their definitions, other 
technical specifications and approach to risk-adjustment.
    However, there are nuances among the four PAC provider types which 
must be taken into account in order to address issues such as patient 
acuity and medical complexity. As a result, we have risk-adjusted 
measures and included provider-specific refinements. For example, for 
the Discharge to Community measure, risk adjustment for ventilator use 
is included in LTCH and SNF settings, but not IRF settings. We 
investigated the need for risk adjustment for ventilator use in IRFs, 
but found that less than 0.01 percent of the IRF population had 
ventilator use in the IRF. Given the low frequency of ventilator use in 
IRFs, any associated estimates would not be reliable; thus, ventilator 
use is not included as a risk adjuster in the IRF setting measure. We 
believe that the measures proposed for the SNF QRP will inform 
beneficiaries on the differences in quality rather than differences in 
measure construction because we have taken into account the factors 
necessary to ensure meaningful comparability within the SNF providers 
and as able, across the post-acute providers.
    Comment: A number of commenters expressed concerns regarding the 
validity and reliability of IMPACT Act measures and encouraged us to 
analyze data to ensure comparability across post-acute care settings, 
prior to implementation.
    Response: We have tested for validity and reliability all of the 
IMPACT Act measures, and the results of that testing is available in 
Measure Specifications for Measures Adopted in the FY 2017 SNF QRP 
Final Rule, posted on the CMS SNF QRP Web page at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    We intend to continue to monitor the reliability and validity of 
the SNF QRP measures, including whether the measures are reliable and 
valid for cross-setting purposes.
    Comment: One commenter expressed concern that the proposed measures 
could adversely affect low-volume or rural SNFs. Another commenter 
expressed concerns about the ability to compare measure rates across 
facilities due to varying patient volumes, recommending the use of 
patient days as the denominator for SNF quality measures.
    Response: We do not believe the proposed measures will adversely 
affect low-volume or rural SNFs. We wish to clarify that our measures 
and/or our proposals to implement these measures were designed to 
mitigate any potential impact that may be caused by low volume. For 
example, the statistical approach used for two of the claims-based 
measures incorporates a shrinkage estimator intended to ensure that 
smaller facilities are not vulnerable to rates driven by the influence 
of random variation in their raw rates. Additionally, for some of the 
measures, public reporting requirements exclude reporting of facilities 
with fewer than 25 resident stays during the reporting period. We would 
like to clarify that the quality, resource use and other measures in 
the SNF QRP are based on stay-level outcomes, not day-level outcomes. 
The measures examine events occurring at SNF discharge or after SNF 
discharge; therefore, the measures are based on number of discharges. 
For example, the proposed quality measure Drug Regimen Review Conducted 
with Follow-Up for Identified Issues--PAC SNF QRP would not be 
appropriate for data calculation on a daily basis. The data collected 
for this measure is at admission and discharge and reflects data 
recorded throughout the entire patient stay.
    Comment: One commenter expressed concern that the proposed measures 
will incentivize SNFs to avoid admitting medically complex residents, 
which would result in unintended consequences.
    Response: To mitigate the risk of creating incentives for SNFs to 
avoid admitting medically complex residents, who may be at higher risk 
for poor outcomes and higher costs, we have included factors related to 
medical complexity in the risk adjustment methodology used in our 
measures. We also intend to conduct ongoing monitoring to assess for 
potential unintended consequences associated with the implementation of 
these measures.
c. Policy for Retaining SNF QRP Measures Adopted for Future Payment 
Determinations
    In the FY 2016 SNF PPS final rule (80 FR 46431 through 46432), we 
finalized our policy for measure removal and also finalized that when 
we adopt a measure for the SNF QRP for a payment determination, this 
measure will be automatically retained in the SNF QRP for all 
subsequent payment determinations unless we propose to remove, suspend, 
or replace the measure. We did not propose any new policies related to 
measure retention or removal in the FY 2017 SNF PPS proposed rule. For 
further information on how measures are considered for removal, 
suspension, or replacement, please refer to the FY 2016 SNF PPS final 
rule (80 FR 46431 through 46432).
d. Process for Adoption of Changes to SNF QRP Measures
    In the FY 2016 SNF PPS final rule (80 FR 46432), we finalized our 
policy pertaining to the process for adoption of non-substantive and 
substantive changes to SNF QRP measures. We did not propose to make any 
changes to this policy.
e. Quality Measures Previously Finalized for Use in the SNF QRP
    The SNF QRP quality measures for the FY 2018 payment determinations 
and subsequent years are presented in Table 11. Measure specifications 
for the previously adopted measures adapted from non-SNF settings are 
available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html under the downloads section at 
the bottom of the page.

[[Page 52013]]



                     Table 11--Quality Measures Previously Finalized for Use in the SNF QRP
----------------------------------------------------------------------------------------------------------------
                                 SNF PPS final                                   Annual payment determination:
   Measure title and NQF #           rule         Data collection start date   Initial and subsequent APU years
----------------------------------------------------------------------------------------------------------------
Percent of Residents or        Adopted in the    October 1, 2016............  FY 2018 and subsequent years.
 Patients with Pressure         FY 2016 SNF PPS
 Ulcers That Are New or         Final Rule (80
 Worsened (Short Stay) (NQF     FR 46433
 #0678).                        through 46440).
Application of the NQF-        Adopted in the    October 1, 2016............  FY 2018 and subsequent years.
 endorsed Percent of            FY 2016 SNF PPS
 Residents Experiencing One     Final Rule (80
 or More Falls with Major       FR 46440
 Injury (Long Stay) (NQF        through 46444).
 #0674).
Application of Percent of      Adopted in the    October 1, 2016............  FY 2018 and subsequent years.
 Long-Term Care Hospital        FY 2016 SNF PPS
 Patients with an Admission     Final Rule (80
 and Discharge Functional       FR 46444
 Assessment and a Care Plan     through 46453).
 That Addresses Function (NQF
 #2631).
----------------------------------------------------------------------------------------------------------------

f. SNF QRP Quality, Resource Use and Other Measures for FY 2018 Payment 
Determinations and Subsequent Years
    For the FY 2018 payment determination and subsequent years, in 
addition to the quality measures identified in Table 11 that we are 
retaining under our policy described in section V.B.3., we proposed to 
adopt three new measures for the SNF QRP. These three measures were 
developed to meet the requirements of the IMPACT Act. They are: (1) 
Medicare Spending per Beneficiary--PAC SNF QRP; (2) Discharge to 
Community--PAC SNF QRP; and (3) Potentially Preventable 30-Day Post-
Discharge Readmission Measure for SNF QRP. Through the use of 
standardized quality measures and standardized data, the intent of the 
Act, among other obligations, is to enable interoperability and access 
to longitudinal information for such providers to facilitate 
coordinated care, improved outcomes, and overall quality comparisons. 
The measures are described in more detail below.
    For the risk adjustment of the resource use and other measures, we 
understand the important role that sociodemographic status plays in the 
care of patients. However, we continue to have concerns about holding 
providers to different standards for the outcomes of their patients of 
diverse sociodemographic status because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes of 
disadvantaged populations. We routinely monitor the impact of 
sociodemographic status on providers' results on our measures.
    The NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is 
appropriate. For 2-years, NQF will conduct a trial of temporarily 
allowing inclusion of sociodemographic factors in the risk-adjustment 
approach for some performance measures. At the conclusion of the trial, 
NQF will issue recommendations on future permanent inclusion of 
sociodemographic factors. During the trial, measure developers are 
expected to submit information such as analyses and interpretations as 
well as performance scores with and without sociodemographic factors in 
the risk adjustment model.
    Furthermore, the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) is conducting research to examine the impact of 
sociodemographic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the IMPACT Act. We 
will closely examine the findings of the ASPE reports and related 
Secretarial recommendations and consider how they apply to our quality 
programs at such time as they are available.
    We invited public comment on how socioeconomic and demographic 
factors should be used in risk adjustment for the resource use and 
other measures. The comments we received on this topic, with their 
responses, appear below.
    Comment: Several commenters supported the inclusion of 
sociodemographic status adjustment in quality measures, resource use, 
and other measures. Commenters suggested that failure to account for 
these patient characteristics could penalize SNFs for providing care to 
a more medically-complex and socioeconomically disadvantaged patient 
population and affect provider performance. Some commenters expressed 
concerns about standardization and interoperability of the measures as 
it pertains to risk-adjusting, particularly for SDS characteristics. 
Many commenters recommended incorporating socioeconomic factors as 
risk-adjustors for the measures and several commenters suggested 
conducting additional testing and/or NQF endorsement prior to 
implementation of these measures. In addition, many commenters 
recommended including functionality as an additional risk-adjustment 
factor, and several commenters suggested risk-adjustment for cognitive 
impairment. One commenter recommended varied standards for patient 
outcomes with individuals of diverse SDS statuses.
    A few commenters, including MedPAC, did not support risk-adjustment 
of measures by SES or SDS status. One commenter did not support risk-
adjustment because it can hide disparities and create different 
standards of care for SNFs based on the demographics in the facility. 
MedPAC stated that risk adjustment can hide disparities in care and 
suggested that risk-adjustment reduces pressure on providers to improve 
quality of care for low-income Medicare beneficiaries. Instead, MedPAC 
supported peer provider group comparisons with providers of similar 
low-income beneficiary populations. Another commenter stated that SDS 
factors should not be included in measures that assess the resident 
outcome during a SNF stay, but should only be considered for measures 
evaluating care after the SNF discharge.
    Response: We appreciate the considerations and suggestions conveyed 
in relation to the measures and the importance in balancing appropriate 
risk adjustment along with ensuring access to high quality care. We 
note that in the measures that are risk adjusted we do take into 
account characteristics associated with medical complexity, as well as 
factors such as age where appropriate to do so. For those cross-setting 
post-acute measures such as those intended to satisfy the IMPACT Act 
domains that use the

[[Page 52014]]

patient assessment-based data elements for risk adjustment, we have 
either made such items standardized, or intend to do so as feasible. 
With regard to the incorporation of additional factors, such as 
cognitive impairment and function, we have and will continue to take 
such factors into account, which would include further testing as part 
of our ongoing measure development monitoring activities. As discussed 
previously, we intend to seek NQF endorsement for our measures.
    We also received suggestions pertaining to the incorporation of 
socioeconomic factors as risk-adjustors for the measures, including in 
those measures that pertain to after the resident was discharged from 
the SNF, additional testing and/or NQF endorsement prior to 
implementation of these measures, and comments that pertain to 
potential consequences associated with such risk adjustors and 
alternative approaches to grouping comparative data. We wish to 
reiterate that as previously discussed, NQF is currently undertaking a 
2-year trial period in which new measures and measures undergoing 
maintenance review will be assessed to determine if risk-adjusting for 
sociodemographic factors is appropriate. This trial entails temporarily 
allowing inclusion of sociodemographic factors in the risk-adjustment 
approach for some performance measures. At the conclusion of the trial, 
NQF will issue recommendations on future permanent inclusion of 
sociodemographic factors. During the trial, measure developers are 
encouraged to submit information such as analyses and interpretations 
as well as performance scores with and without sociodemographic factors 
in the risk adjustment model. Several measures developed by CMS have 
been brought to NQF since the beginning of the trial. CMS, in 
compliance with NQF's guidance, has tested sociodemographic factors in 
the measures' risk models and made recommendations about whether or not 
to include these factors in the endorsed measure. We intend to continue 
engaging in the NQF process as we consider the appropriateness of 
adjusting for sociodemographic factors in our outcome measures.
    Furthermore, the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) is conducting research to examine the impact of 
sociodemographic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the IMPACT Act. We 
will closely examine the findings of the ASPE reports and related 
Secretarial recommendations and consider how they apply to our quality 
programs at such time as they are available.
i. Measure That Addresses the IMPACT Act Domain of Resource Use and 
Other Measures: Total Estimated MSPB-PAC SNF QRP
    We proposed an MSPB-PAC SNF QRP measure for inclusion in the SNF 
QRP for the FY 2018 payment determination and subsequent years. Section 
1899B(d)(1)(A) of the Act requires the Secretary to specify resource 
use measures, including total estimated Medicare spending per 
beneficiary, on which PAC providers consisting of SNFs, Inpatient 
Rehabilitation Facilities (IRFs), Long-Term Care Hospitals (LTCHs), and 
Home Health Agencies (HHAs) are required to submit necessary data 
specified by the Secretary.
    Rising Medicare expenditures for post-acute care as well as wide 
variation in spending for these services underlines the importance of 
measuring resource use for providers rendering these services. Between 
2001 and 2013, Medicare PAC spending grew at an annual rate of 6.1 
percent and doubled to $59.4 billion, while payments to inpatient 
hospitals grew at an annual rate of 1.7 percent over this same 
period.\28\ A study commissioned by the Institute of Medicine found 
that variation in PAC spending explains 73 percent of variation in 
total Medicare spending across the United States.\29\
---------------------------------------------------------------------------

    \28\ MedPAC, ``A Data Book: Health Care Spending and the 
Medicare Program,'' (2015). 114.
    \29\ Institute of Medicine, ``Variation in Health Care Spending: 
Target Decision Making, Not Geography,'' (Washington, DC: National 
Academies 2013). 2.
---------------------------------------------------------------------------

    We reviewed the NQF's consensus-endorsed measures and were unable 
to identify any NQF-endorsed resource use measures for PAC settings. As 
such, we proposed this MSPB-PAC SNF QRP measure under the Secretary's 
authority to specify non--NQF-endorsed measures under section 
1899B(e)(2)(B) of the Act. Given the current lack of resource use 
measures for PAC settings, our MSPB-PAC SNF QRP measure would provide 
valuable information to SNF providers on their relative Medicare 
spending in delivering services to approximately 1.7 million Medicare 
beneficiaries.\30\
---------------------------------------------------------------------------

    \30\ 2013 figures. MedPAC, ``Medicare Payment Policy,'' Report 
to the Congress (2015). xvii-xviii.
---------------------------------------------------------------------------

    The MSPB-PAC SNF QRP episode-based measure would provide actionable 
and transparent information to support SNF providers' efforts to 
promote care coordination and deliver high quality care at a lower cost 
to Medicare. The MSPB-PAC SNF QRP measure holds SNF providers 
accountable for the Medicare payments within an ``episode of care'' 
(episode), which includes the period during which a patient is directly 
under the SNF's care, as well as a defined period after the end of the 
SNF treatment, which may be reflective of and influenced by the 
services furnished by the SNF. MSPB-PAC SNF QRP episodes, constructed 
according to the methodology described below, have high levels of 
Medicare spending with substantial variation. In FY 2014, Medicare FFS 
beneficiaries experienced 1,534,773 MSPB-PAC SNF QRP episodes. The mean 
payment-standardized, risk-adjusted episode spending for these episodes 
is $26,279. There is substantial variation in the Medicare payments for 
these MSPB-PAC SNF QRP episodes--ranging from approximately $6,090 at 
the 5th percentile to approximately $60,050 at the 95th percentile. 
This variation is partially driven by variation in payments occurring 
after SNF treatment.
    Evaluating Medicare payments during an episode creates a continuum 
of accountability between providers that should improve post-treatment 
care planning and coordination. While some stakeholders throughout the 
measure development process supported the MSPB-PAC measures and felt 
that measuring Medicare spending was critical for improving efficiency, 
others believed that resource use measures did not reflect quality of 
care in that they do not take into account patient outcomes or 
experience beyond those observable in claims data. However, SNFs 
involved in the provision of high-quality PAC care as well as 
appropriate discharge planning and post-discharge care coordination 
would be expected to perform well on this measure since beneficiaries 
would likely experience fewer costly adverse events (for example, 
avoidable hospitalizations, infections, and emergency room usage). 
Further, it is important that the cost of care be explicitly measured 
so that, in conjunction with other quality measures, we can publicly 
report which SNFs provide high quality care at lower cost.
    We developed a MSPB-PAC measure for each of the four PAC settings. 
We proposed an LTCH-specific MSPB-PAC measure in the FY 2017 IPPS/LTCH 
proposed rule (81 FR 25216 through 25220), an IRF-specific MSBP-PAC 
measure in the FY 2017 IRF proposed rule (81 FR 24197 through 24201), a 
SNF-specific MSPB-PAC measure in the FY 2017 SNF proposed rule (81 FR 
24258 through 24262), and a HHA-specific MSBP-PAC measure in the CY

[[Page 52015]]

2017 HH proposed rule (81 FR 43760 through 43764). The four setting-
specific MSPB-PAC measures are closely aligned in terms of episode 
construction and measure calculation. Each MSPB-PAC measure assesses 
Medicare Part A and Part B spending within an episode, and the 
numerator and denominator are defined similarly. However, setting-
specific measures allow us to account for differences between settings 
in payment policy, the types of data available, and the underlying 
health characteristics of beneficiaries.
    The MSPB-PAC measures mirror the general construction of the 
inpatient prospective payment system (IPPS) hospital MSPB measure, 
which was adopted for the Hospital IQR Program beginning with the FY 
2014 program, and was implemented in the Hospital VBP Program beginning 
with the FY 2015 program. The measure was endorsed by the NQF on 
December 6, 2013 (NQF #2158).\31\ The hospital MSPB measure evaluates 
hospitals' Medicare spending relative to the Medicare spending for the 
national median hospital during a hospital MSPB episode. It assesses 
Medicare Part A and Part B payments for services performed by hospitals 
and other healthcare providers within a hospital MSPB episode, which is 
comprised of the periods immediately prior to, during, and following a 
patient's hospital stay.32 33 Similarly, the MSPB-PAC 
measures assess all Medicare Part A and Part B payments for fee-for-
service (FFS) claims with a start date during the episode window 
(which, as discussed in this section, is the time period during which 
Medicare FFS Part A and Part B services are counted towards the MSPB-
PAC SNF QRP episode). There are differences between the MSPB-PAC 
measures and the hospital MSPB measure to reflect differences in 
payment policies and the nature of care provided in each PAC setting. 
For example, the MSPB-PAC measures exclude a limited set of services 
(for example, for clinically unrelated services) provided to a 
beneficiary during the episode window, while the hospital MSPB measure 
does not exclude any services.
---------------------------------------------------------------------------

    \31\ QualityNet, ``Measure Methodology Reports: Medicare 
Spending per Beneficiary (MSPB) Measure,'' (2015). http://www.qualitynet.org/dcs/ContentServer?pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772053996.
    \32\ QualityNet, ``Measure Methodology Reports: Medicare 
Spending per Beneficiary (MSPB) Measure,'' (2015). http://www.qualitynet.org/dcs/ContentServer?pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772053996.
    \33\ FY 2012 IPPS/LTCH PPS Final Rule (76 FR 51619).
---------------------------------------------------------------------------

    MSPB-PAC episodes may begin within 30 days of discharge from an 
inpatient hospital as part of a patient's trajectory from an acute to a 
PAC setting. A SNF stay beginning within 30 days of discharge from an 
inpatient hospital would therefore be included once in the hospital's 
MSPB measure, and once in the SNF provider's MSPB-PAC measure. Aligning 
the hospital MSPB and MSPB-PAC measures in this way creates continuous 
accountability and aligns incentives to improve care planning and 
coordination across inpatient and PAC settings.
    We sought and considered the input of stakeholders throughout the 
measure development process for the MSPB-PAC measures. We convened a 
TEP consisting of 12 panelists with combined expertise in all of the 
PAC settings on October 29 and 30, 2015 in Baltimore, Maryland. A 
follow-up email survey was sent to TEP members on November 18, 2015 to 
which seven responses were received by December 8, 2015. The MSPB-PAC 
TEP Summary Report is available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Technical-Expert-Panel-on-Medicare-Spending-Per-Beneficiary.pdf. The measures were also presented to the 
MAP Post-Acute Care/Long-Term Care (PAC/LTC) Workgroup on December 15, 
2015. As the MSPB-PAC measures were under development, there were three 
voting options for members: Encourage continued development, do not 
encourage further consideration, and insufficient information.\34\ The 
MAP PAC/LTC workgroup voted to ``encourage continued development'' for 
each of the MSPB-PAC measures.\35\ The MAP PAC/LTC workgroup's vote of 
``encourage continued development'' was affirmed by the MAP 
Coordinating Committee on January 26, 2016.\36\ The MAP's concerns 
about the MSPB-PAC measures, as outlined in their final report ``MAP 
2016 Considerations for Implementing Measures in Federal Programs: 
Post-Acute Care and Long-Term Care'' and Spreadsheet of Final 
Recommendations, were taken into consideration during the measure 
development process and are discussed as part of our responses to 
public comments, described below.37 38
---------------------------------------------------------------------------

    \34\ National Quality Forum, Measure Applications Partnership, 
``Process and Approach for MAP Pre-Rulemaking Deliberations, 2015-
2016'' (February 2016) http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81693.
    \35\ National Quality Forum, Measure Applications Partnership 
Post-Acute Care/Long-Term Care Workgroup, ``Meeting Transcript--Day 
2 of 2'' (December 15, 2015) 104-106 http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81470.
    \36\ National Quality Forum, Measure Applications Partnership, 
``Meeting Transcript--Day 1 of 2'' (January 26, 2016) 231-232 http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81637.
    \37\ National Quality Forum, Measure Applications Partnership, 
``MAP 2016 Considerations for Implementing Measures in Federal 
Programs: Post-Acute Care and Long-Term Care'' Final Report, 
(February 2016) http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx.
    \38\ National Quality Forum, Measure Applications Partnership, 
``Spreadsheet of MAP 2016 Final Recommendations'' (February 1, 2016) 
http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
---------------------------------------------------------------------------

    Since the MAP's review and recommendation of continued development, 
CMS continued to refine risk adjustment models and conduct measure 
testing for the IMPACT Act measures consistent with the MAP's 
recommendations. The IMPACT Act measures are consistent with the 
information submitted to the MAP and support the scientific 
acceptability of these measures for use in quality reporting programs.
    In addition, a public comment period, accompanied by draft measures 
specifications, was open from January 13 to 27, 2016 and extended to 
February 5. A total of 45 comments on the MSPB-PAC measures were 
received during this 3.5 week period. The comments received also 
covered each of the MAP's concerns as outlined in their Final 
Recommendations.\39\ The MSPB-PAC Public Comment Summary Report is 
available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/2016_03_24_mspb_pac_public_comment_summary_report.pdf and the MSPB-PAC 
Public Comment Supplementary Materials are available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/2016_03_24_mspb_pac_public_comment_summary_report_supplementary_materials.pdf: These documents contain the public comments, along with our 
responses including statistical analyses. The MSPB-PAC SNF QRP measure, 
along with the other MSPB-PAC measures, as applicable, will be 
submitted for NQF endorsement when feasible.
---------------------------------------------------------------------------

    \39\ National Quality Forum, Measure Applications Partnership, 
``Spreadsheet of MAP 2016 Final Recommendations'' (February 1, 2016) 
http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
---------------------------------------------------------------------------

    To calculate the MSPB-PAC SNF QRP measure for each SNF provider, we 
first

[[Page 52016]]

define the construction of the MSPB-PAC SNF QRP episode, including the 
length of the episode window as well as the services included in the 
episode. Next, we apply the methodology for the measure calculation. 
The specifications are discussed further in this section. More detailed 
specifications for the MSPB-PAC measures, including the MSPB-PAC SNF 
QRP measure, are available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    The comments we received on this topic, with their responses, 
appear below.
    Comment: Several commenters expressed concern about the lack of NQF 
endorsement for proposed measures; some believed that the measure 
should not be finalized until NQF endorsement is obtained.
    Response: We thank the commenters for their concern regarding the 
lack of NQF endorsement and refer readers to section III.D.2.b. where 
we also discuss this topic.
    Comment: Several commenters noted the NQF MAP committee did not 
endorse the proposed measure, believing that the measure should not be 
finalized until the support of the MAP is obtained.
    Response: We appreciate the comments about the NQF MAP committee, 
and direct readers to section III.D.2.b. where we also discuss this 
topic.
    Comment: Some commenters recommended the use of uniform single 
MSPB-PAC measure that could be used to compare providers' resource use 
across settings, but they also recognized that we do not have a uniform 
PPS for all the PAC settings currently. In the absence of a single PAC 
PPS, they recommend a single MSPB-PAC measure for each setting that 
could be used to compare providers within a setting. Under a single 
measure, the episode definitions, service inclusions/exclusions, and 
risk adjustment methods would be the same across all PAC settings.
    Response: We thank the commenters. The four separate MSPB-PAC 
measures reflect the unique characteristics of each PAC setting and the 
population it serves. The four setting specific MSPB-PAC measures are 
defined as consistently as possible across settings given the 
differences in the payment systems for each setting, and types of 
patients served in each setting. We have taken into consideration these 
differences and aligned the specifications, such as episode 
definitions, service inclusions/exclusions and risk adjustment methods 
for each setting, to the extent possible while ensuring the accuracy of 
the measures in each PAC setting.
    Each of the measures assess Medicare Part A and Part B spending 
during the episode window which begins upon admission to the provider's 
care and ends 30 days after the end of the treatment period. The 
service-level exclusions are harmonized across settings. The definition 
of the numerator and denominator is the same across settings. However, 
specifications differ between settings when necessary to ensure that 
the measures accurately reflect patient care and align with each 
setting's payment system. For example, Medicare pays LTCHs and IRFs a 
stay-level payment based on the assigned MS-LTC-DRG and CMG, 
respectively, while SNFs are paid a daily rate based on the RUG level, 
and HHA providers are reimbursed based on a fixed 60-day period for 
standard home health claims. While the definition of the episode window 
is consistent across settings and is based on the period of time that a 
beneficiary is under a given provider's care, the duration of the 
treatment period varies to reflect how providers are reimbursed under 
the PPS that applies to each setting. The length of the post-treatment 
period is consistent between settings. There are also differences in 
the services covered under the PPS that applies to each setting: For 
example, durable medical equipment, prosthetics, orthotics, and 
supplies (DMEPOS) claims are covered LTCH, IRF, and SNF services but 
are not covered HHA services. This affects the way certain first-day 
service exclusions are defined for each measure.
    We recognize that beneficiaries may receive similar services as 
part of their overall treatment plan in different PAC settings, but 
believe that there are some important differences in beneficiaries' 
care profiles that are difficult to capture in a single measure that 
compares resource use across settings.
    Also, the risk adjustment models for the MSPB-PAC measures share 
the same covariates to the greatest extent possible to account for 
patient case mix. However, the measures also incorporate additional 
setting-specific information where available to increase the predictive 
power of the risk adjustment models. For example, the MSPB-PAC LTCH QRP 
risk adjustment model uses MS-LTC-DRGs and Major Diagnostic Categories 
(MDCs) and the MSPB-PAC IRF QRP model includes Rehabilitation 
Impairment Categories (RICs). The HH and SNF settings do not have 
analogous variables that directly reflect a patient's clinical profile.
    We will continue to work towards a more uniform measure across 
settings as we gain experience with these measures, and we plan to 
conduct further research and analyses about comparability of resource 
use measures across settings for clinically similar patients, different 
treatment periods and windows, risk adjustment, service exclusions, and 
other factors.
    Comment: A few commenters noted that the MSPB-PAC measures are 
resource use measures that are not a standalone indicator of quality.
    Response: We appreciate the comment regarding the proposed MSPB-PAC 
measures as resource use measures. The MSPB-PAC SNF QRP measure is one 
of four QRP measures that were proposed in the FY 2017 SNF PPS proposed 
rule for inclusion in the SNF QRP: In addition to the MSPB-PAC SNF QRP 
measure, these proposed measures were the Discharge to Community--PAC 
SNF QRP measure (81 FR 24262 through 24264), the Potentially 
Preventable 30-Day Post-Discharge Readmission Measure for SNF QRP (81 
FR 24264 through 24267), and the Drug Regimen Review Conducted With 
Follow-Up for Identified Issues--PAC SNF QRP measure (81 FR 24267 
through 24269). As part of the SNF QRP, the MSPB-PAC SNF QRP measure 
will be paired with quality measures; we direct readers to section 
III.D.2.e. for a discussion of quality measures previously finalized 
for use in the SNF QRP. We believe it is important that the cost of 
care be explicitly measured so that, in conjunction with other quality 
measures, we can publicly report which SNF providers are involved in 
the provision of high quality care at lower cost.
    Comment: One commenter expressed concern over the short timeframe 
available for stakeholder input.
    Response: We appreciate the feedback regarding the timing issues 
related to IMPACT Act implementation. It is our intent to move forward 
with IMPACT Act implementation in a manner in which the measure 
development process continues to be transparent, and includes input and 
collaboration from experts, the PAC provider community, and the public 
at large. It is of the utmost importance to us to continue to engage 
stakeholders, including providers as well as residents and their 
families, throughout the measure development lifecycle through their 
participation in our measure development public comment periods,

[[Page 52017]]

the pre-rulemaking process, TEPs convened by our measure development 
contractors, open door forums and other opportunities. We have provided 
multiple opportunities for stakeholder input on the MSPB-PAC measures, 
including the TEP, NQF MAP public comment period and in-person meeting, 
pre-rulemaking public comment period, and 60-day public comment period 
on the proposed SNF QRP rule. A summary of TEP proceedings, the MSPB-
PAC Public Comment Summary Report and MSPB-PAC Public Comment 
Supplementary Materials are available at the links provided above. We 
thank all stakeholders for their thoughtful feedback on and engagement 
with the measure development and rulemaking process.
(a) Episode Construction
    An MSPB-PAC SNF QRP episode begins at the episode trigger, which is 
defined as the patient's admission to a SNF. The admitting facility is 
the attributed provider, for whom the MSPB-PAC SNF QRP measure is 
calculated. The episode window is the time period during which Medicare 
FFS Part A and Part B services are counted towards the MSPB-PAC SNF QRP 
episode. Because Medicare FFS claims are already reported to the 
Medicare program for payment purposes, SNF providers would not be 
required to report any additional data to CMS for calculation of this 
measure. Thus, there would be no additional data collection burden from 
the implementation of this measure.
    The episode window is comprised of a treatment period and an 
associated services period. The treatment period begins at the trigger 
(that is, on the day of admission to the SNF) and ends on the day of 
discharge from that SNF. Readmissions to the same facility occurring 
within 7 or fewer days do not trigger a new episode, and instead are 
included in the treatment period of the original episode. When two 
sequential stays at the same SNF occur within 7 or fewer days of one 
another, the treatment period ends on the day of discharge for the 
latest SNF stay. The treatment period includes those services that are 
provided directly or reasonably managed by the SNF provider that are 
directly related to the beneficiary's care plan. The associated 
services period is the time during which Medicare Part A and Part B 
services (with certain exclusions) are counted towards the episode. The 
associated services period begins at the episode trigger and ends 30 
days after the end of the treatment period. The distinction between the 
treatment period and the associated services period is important 
because clinical exclusions of services may differ for each period. 
Certain services are excluded from the MSPB-PAC SNF QRP episodes 
because they are clinically unrelated to SNF care, and/or because SNF 
providers may have limited influence over certain Medicare services 
delivered by other providers during the episode window. These limited 
service-level exclusions are not counted towards a given SNF provider's 
Medicare spending to ensure that beneficiaries with certain conditions 
and complex care needs receive the necessary care. Certain services 
that are determined to be outside of the control of a SNF provider 
include planned hospital admissions, management of certain preexisting 
chronic conditions (for example, dialysis for end-stage renal disease 
(ESRD), and enzyme treatments for genetic conditions), treatment for 
preexisting cancers, organ transplants, and preventive screenings (for 
example, colonoscopy and mammograms). Exclusion of such services from 
the MSPB-PAC SNF QRP episode ensures that facilities do not have 
disincentives to treat patients with certain conditions or complex care 
needs.
    An MSPB-PAC episode may begin during the associated services period 
of an MSPB-PAC SNF QRP episode in the 30 days post-treatment. One 
possible scenario occurs where a SNF provider discharges a beneficiary 
who is then admitted to an IRF within 30 days. The IRF claim would be 
included once as an associated service for the attributed provider of 
the first MSPB-PAC SNF QRP episode and once as a treatment service for 
the attributed provider of the second MSPB-PAC IRF QRP episode. As in 
the case of overlap between hospital and PAC episodes discussed 
earlier, this overlap is necessary to ensure continuous accountability 
between providers throughout a beneficiary's trajectory of care, as 
both providers share incentives to deliver high quality care at a lower 
cost to Medicare. Even within the SNF setting, one MSPB-PAC SNF QRP 
episode may begin in the associated services period of another MSPB-PAC 
SNF QRP episode in the 30 days post-treatment. The second SNF claim 
would be included once as an associated service for the attributed SNF 
provider of the first MSPB-PAC SNF QRP episode and once as a treatment 
service for the attributed SNF provider of the second MSPB-PAC SNF QRP 
episode. Again, this ensures that SNF providers have the same 
incentives throughout both MSPB-PAC SNF QRP episodes to deliver quality 
care and engage in patient-focused care planning and coordination. If 
the second MSPB-PAC SNF QRP episode were excluded from the second SNF 
provider's MSPB-PAC SNF QRP measure, that provider would not share the 
same incentives as the first SNF provider of first MSPB-PAC SNF QRP 
episode. The MSPB-PAC SNF QRP measure was designed to benchmark the 
resource use of each attributed provider against what its spending is 
expected to be as predicted through risk adjustment. As discussed 
further in this section, the measure takes the ratio of observed 
spending to expected spending for each episode and then takes the 
average of those ratios across all of the attributed provider's 
episodes. The measure is not a simple sum of all costs across a 
provider's episodes, thus mitigating concerns about double counting.
    The comments we received on this topic, with their responses, 
appear below.
    Comment: One commenter expressed concern about how claims are 
counted and attributed to providers.
    Response: We appreciate the commenter's concern, but note that 
there were no further specifics detailing the nature of this concern. 
We designed the attribution process to hold SNF providers accountable 
for the Medicare payments within an ``episode of care'' (episode), 
which includes the period during which a patient is directly under the 
SNF's care, as well as a defined period after the end of the SNF 
treatment. An MSPB-PAC SNF QRP episode begins at the episode trigger, 
which is defined as the patient's admission to a SNF. The admitting 
facility is the attributed provider, for whom the MSPB-PAC SNF QRP 
measure is calculated. The episode window is the time period during 
which Medicare FFS Part A and Part B services are counted towards the 
MSPB-PAC SNF QRP episode. The standardized allowed amounts on the 
claims for those services are summed to calculate observed episode 
spending. Further details on episode construction and attribution, as 
they relate to how claims are counted are in the MSPB-PAC Measure 
Specifications, a link for which has been provided above.
(b) Measure Calculation
    Medicare payments for Part A and Part B claims for services 
included in MSPB-PAC SNF QRP episodes, defined according to the 
methodology above, are used to calculate the MSPB-PAC SNF QRP measure. 
Measure calculation involves determination of the episode exclusions, 
the approach for standardizing payments for geographic payment 
differences, the methodology

[[Page 52018]]

for risk adjustment of episode spending to account for differences in 
patient case mix, and the specifications for the measure numerator and 
denominator.
(i) Exclusion Criteria
    In addition to service-level exclusions that remove some payments 
from individual episodes, we exclude certain episodes in their entirety 
from the MSPB-PAC SNF QRP measure to ensure that the MSPB-PAC SNF QRP 
measure accurately reflects resource use and facilitates fair and 
meaningful comparisons between SNF providers. The episode-level 
exclusions are as follows:
     Any episode that is triggered by a SNF claim outside the 
50 states, DC, Puerto Rico, and U.S. Territories.
     Any episode where the claim(s) constituting the attributed 
SNF provider's treatment have a standard allowed amount of zero or 
where the standard allowed amount cannot be calculated.
     Any episode in which a beneficiary is not enrolled in 
Medicare FFS for the entirety of a 90-day lookback period (that is, a 
90-day period prior to the episode trigger) plus episode window 
(including where the beneficiary dies), or is enrolled in Part C for 
any part of the lookback period plus episode window.
     Any episode in which a beneficiary has a primary payer 
other than Medicare for any part of the 90-day lookback period plus 
episode window.
     Any episode where the claim(s) constituting the attributed 
SNF provider's treatment include at least one related condition code 
indicating that it is not a prospective payment system bill.
    The comments we received on this topic, with their responses, 
appear below.
    Comment: One commenter expressed general support for the list of 
episode-level exclusions proposed for the MSPB-PAC SNF QRP measure.
    Response: We thank the commenter for its support.
(ii) Standardization and Risk Adjustment
    Section 1899B(d)(2)(C) of the Act requires that the MSPB-PAC 
measures are adjusted for the factors described under section 
1886(o)(2)(B)(ii) of the Act, which include adjustment for factors such 
as age, sex, race, severity of illness, and other factors that the 
Secretary determines appropriate. Medicare payments included in the 
MSPB-PAC SNF QRP measure are payment standardized and risk-adjusted. 
Payment standardization removes sources of payment variation not 
directly related to clinical decisions and facilitates comparisons of 
resource use across geographic areas. We proposed to use the same 
payment standardization methodology that was used in the NQF-endorsed 
hospital MSPB measure. This methodology removes geographic payment 
differences, such as wage index and geographic practice cost index 
(GPCI), incentive payment adjustments, and other add-on payments that 
support broader Medicare program goals including indirect graduate 
medical education (IME) and hospitals serving a disproportionate share 
of uninsured patients (DSH).\40\
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    \40\ QualityNet, ``CMS Price (Payment) Standardization--Detailed 
Methods'' (Revised May 2015) https://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772057350.
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    Risk adjustment uses patient claims history to account for case-mix 
variation and other factors that affect resource use but are beyond the 
influence of the attributed SNF provider. To assist with risk 
adjustment, we create mutually exclusive and exhaustive clinical case 
mix categories using the most recent institutional claim in the 60 days 
prior to the start of the MSPB-PAC SNF QRP episode. The beneficiaries 
in these clinical case mix categories have a greater degree of clinical 
similarity than the overall SNF patient population, and allow us to 
more accurately estimate Medicare spending. Our MSPB-PAC SNF QRP 
measure, adapted for the SNF setting from the NQF-endorsed hospital 
MSPB measure uses a regression framework with a 90-day hierarchical 
condition category (HCC) lookback period and covariates including the 
clinical case mix categories, HCC indicators, age brackets, indicators 
for originally disabled, ESRD enrollment, and long-term care status, 
and selected interactions of these covariates where sample size and 
predictive ability make them appropriate. We sought and considered 
public comment regarding the treatment of hospice services occurring 
within the MSPB-PAC SNF QRP episode window. Given the comments 
received, we proposed to include the Medicare spending for hospice 
services but risk adjust for them, such that MSPB-PAC SNF QRP episodes 
with hospice services are compared to a benchmark reflecting other 
MSPB-PAC SNF QRP episodes with hospice services. We believe this 
strikes a balance between the measure's intent of evaluating Medicare 
spending and ensuring that providers do not have incentives against the 
appropriate use of hospice services in a patient-centered continuum of 
care.
    We understand the important role that sociodemographic factors, 
beyond age, play in the care of patients. However, we continue to have 
concerns about holding providers to different standards for the 
outcomes of their patients of diverse sociodemographic status because 
we do not want to mask potential disparities or minimize incentives to 
improve the outcomes of disadvantaged populations. We will monitor the 
impact of sociodemographic status on providers' results on our 
measures.
    The NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is 
appropriate. For 2 years, NQF will conduct a trial of temporarily 
allowing inclusion of sociodemographic factors in the risk-adjustment 
approach for some performance measures. At the conclusion of the trial, 
NQF will issue recommendations on future permanent inclusion of 
sociodemographic factors. During the trial, measure developers are 
expected to submit information such as analyses and interpretations as 
well as performance scores with and without sociodemographic factors in 
the risk adjustment model.
    Furthermore, the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) is conducting research to examine the impact of 
sociodemographic status on quality measures, resource use, and other 
measures under the Medicare program as required by the IMPACT Act. We 
will closely examine the findings of the ASPE reports and related 
Secretarial recommendations and consider how they apply to our quality 
programs at such time as they are available.
    While we conducted analyses on the impact of age by sex on the 
performance of the MSPB-PAC SNF QRP risk-adjustment model, we did not 
propose to adjust the MSPB-PAC SNF QRP measure for socioeconomic 
factors. As this MSPB-PAC SNF QRP measure would be submitted for NQF 
endorsement, we prefer to await the results of this trial and study 
before deciding whether to risk adjust for socioeconomic factors. We 
will monitor the results of the trial, studies, and recommendations. We 
invited public comment on how socioeconomic and demographic factors 
should be used in risk adjustment for the MSPB-PAC SNF QRP measure. The 
comments we received on this topic, with their responses, appear below.

[[Page 52019]]

    Comment: Several commenters recommended that the risk adjustment 
model for the MSPB-PAC SNF QRP measure include variables for SES/SDS 
factors. A commenter recommended that a ``fairer'' approach than using 
SES/SDS factors as risk adjustment variables would be to compare 
resource use levels that have not been adjusted for SES/SDS factors 
across peer providers (that is, providers with similar shares of 
beneficiaries with similar SES characteristics).
    Response: With regard to the suggestions that the model include 
sociodemographic factors and the suggestion pertaining to an approach 
with which to convey data comparisons, we refer readers to section 
III.D.2.f. where we also discuss these topics.
    Comment: Some commenters recommended that additional variables be 
included in risk adjustment to better capture clinical complexity. A 
few commenters suggested the inclusion of functional and cognitive 
status and other patient assessment data. Commenters recommended that 
additional variables should include obesity, amputations, CVAs 
(hemiplegia/paresis), and ventilator status.
    Response: We thank the commenters for their suggestions. The HCC 
indicators that are already included in the risk adjustment model 
account for amputations, hemiplegia, and paresis. We believe that the 
other risk adjustment variables adequately adjust for ventilator 
dependency and obesity by accounting for HCCs, clinical case mix 
categories, and prior inpatient and ICU length of stay.
    We recognize the importance of accounting for beneficiaries' 
functional and cognitive status in the calculation of predicted episode 
spending. We considered the potential use of functional status 
information in the risk adjustment models for the MSPB-PAC measures. 
However, we decided to not include this information derived from 
current setting-specific assessment instruments given the move towards 
standardized data as mandated by the IMPACT Act. We will revisit the 
inclusion of functional status in these measures' risk adjustment 
models in the future when the standardized functional status data 
mandated by the IMPACT Act-mandated become available. Once they are 
available, we will take a gradual and systematic approach in evaluating 
how they might be incorporated. We intend to implement any changes if 
appropriate based on testing.
    Comment: One commenter expressed concern that the measures will 
give incentive to SNFs to avoid admitting medically complex residents, 
which would result in unintended consequences.
    Response: To mitigate the risk of creating incentives for SNFs to 
avoid admitting medically complex residents, who may be at higher risk 
for poor outcomes and higher costs, we have included factors related to 
medical complexity in the risk adjustment methodology for the MSPB-PAC 
SNF QRP measure. We also intend to conduct ongoing monitoring to assess 
for potential unintended consequences associated with the 
implementation of this measure.
    Comment: One commenter recommended that SNFs providing palliative 
care should be treated the same way as SNFs providing hospice care.
    Response: We thank the commenter for their concern and note that 
the risk adjustment model used in the MSPB-PAC SNF QRP measure does not 
adjust for the type of care provided in the SNF, such as hospice-type 
or palliative care services. However, the episode spending for 
beneficiaries who receive hospice care within the episode window is 
benchmarked only against the expected episode-level spending of similar 
beneficiaries. This is achieved through the inclusion of a risk 
adjustment indicator for beneficiaries for whom Medicare pays hospice 
claims during the episode window. We adjust for beneficiaries with 
hospice claims as these patients have different characteristics from 
those who are not receiving hospice care services; one requirement of 
eligibility for hospice services under Part A is that beneficiaries 
must be terminally ill with a life expectancy of 6 months or less. In 
contrast, palliative care services can encompass any comfort care 
services (such as pain medication) at any stage of treatment of illness 
or condition. Given the challenges of identifying the range of services 
that could indicate palliative care and the wide variety of patients 
receiving this type of care, we believe that adjusting for the presence 
of hospice claims and not palliative care services supports the goal of 
providing fair comparisons between providers.
(iii) Measure Numerator and Denominator
    The MPSB-PAC SNF QRP measure is a payment-standardized, risk-
adjusted ratio that compares a given SNF provider's Medicare spending 
against the Medicare spending of other SNF providers within a 
performance period. Similar to the hospital MSPB measure, the ratio 
allows for ease of comparison over time as it obviates the need to 
adjust for inflation or policy changes.
    The MSPB-PAC SNF QRP measure is calculated as the ratio of the 
MSPB-PAC Amount for each SNF provider divided by the episode-weighted 
median MSPB-PAC Amount across all SNF providers. To calculate the MSPB-
PAC Amount for each SNF provider, one calculates the average of the 
ratio of the standardized episode spending over the expected episode 
spending (as predicted in risk adjustment), and then multiplies this 
quantity by the average episode spending level across all SNF providers 
nationally. The denominator for a SNF provider's MSPB-PAC SNF QRP 
measure is the episode-weighted national median of the MSPB-PAC Amounts 
across all SNF providers. An MSPB-PAC SNF QRP measure of less than 1 
indicates that a given SNF provider's resource use is less than that of 
the national median SNF provider during a performance period. 
Mathematically, this is represented in equation (A) below:
[GRAPHIC] [TIFF OMITTED] TR05AU16.018

Where

 Yij = attributed standardized spending for episode i and 
provider j
 Yij = expected standardized spending for episode i and 
provider j, as predicted from risk adjustment

[[Page 52020]]

 nj = number of episodes for provider j
 n = total number of episodes nationally
 i [egr] {Ij{time}  = all episodes i in the set of episodes 
attributed to provider j.

    The comments we received on this topic, with their responses, 
appear below.
    Comment: A few commenters expressed concern about comparing mean to 
median values leading to inaccurate measure calculation. Commenters 
requested clarification on proposed values to ensure fairness.
    Response: We appreciate the commenters' concerns. As noted in the 
MSPB-PAC Public Comment Summary Report for which a link has been 
provided above, we clarify that a provider's MSPB-PAC Amount is the 
average of observed over expected spending across a provider's 
episodes. Comparing a provider's MSPB-PAC Amount to the national median 
MSPB-PAC Amount does not affect the rank ordering of providers, and 
will therefore not lead to inaccurate measure calculations because the 
attributed provider's rank relative to the median will not change.
    Comment: One commenter recommended including payments made by the 
SNF to non-Medicare payers so that providers cannot simply shift costs 
to other payers.
    Response: We thank the commenter for the input and note that this 
measure only includes beneficiaries who are continuously enrolled in 
Medicare FFS for the entirety of a 90-day lookback period (that is, a 
90-day period prior to the episode trigger) plus episode window. We do 
not have the ability to assess payments made by private payers or track 
beneficiary coinsurance or deductibles paid for plans outside of 
Medicare. CMS will monitor this issue using administrative claims data 
from Medicare as a part of ongoing measure monitoring and evaluation.
    Comment: One commenter recommended that a geographic-specific (for 
example, state or regional) median should be used instead of the 
national median, citing differences in cost, patient population, and 
regulation.
    Response: We appreciate the commenter's input. As noted in the 
proposed rule, (81 FR 24260), we proposed to use the same payment 
standardization methodology as that used in the NQF-endorsed hospital 
MSPB measure to account for variation in Medicare spending. This 
methodology removes geographic payment differences, such as wage index 
and geographic practice cost index (GPCI), incentive payment 
adjustments, and other add-on payments that support broader Medicare 
program goals including indirect graduate medical education (IME) and 
hospitals serving a disproportionate share of uninsured patients (DSH). 
We believe that this approach accounts for the differences that the 
commenter raises while also maintaining consistency with the NQF-
endorsed hospital MSPB measure's methodology for addressing regional 
variation through payment standardization.
(c) Data Sources
    The MSPB-PAC SNF QRP resource use measure is an administrative 
claims-based measure. It uses Medicare Part A and Part B claims from 
FFS beneficiaries and Medicare eligibility files.
(d) Cohort
    The measure cohort includes Medicare FFS beneficiaries with a SNF 
treatment period ending during the data collection period.
(e) Reporting
    We intend to provide initial confidential feedback to providers, 
prior to public reporting of this measure, based on Medicare FFS claims 
data from discharges in CY 2016. We intend to publicly report this 
measure using claims data from discharges in CY 2017.
    We proposed to use a minimum of 20 episodes for reporting and 
inclusion in the SNF QRP. For the reliability calculation, as described 
in the measure specifications, a link for which has been provided 
above, we used data from FY 2014. The reliability results support the 
20 episode case minimum, and 100 percent of SNF providers had moderate 
or high reliability (above 0.4).
    The comments we received on this topic, with their responses, 
appear below.
    Comment: Several commenters supported a period during which 
providers would be able to preview and correct measure and quality 
data.
    Response: We appreciate the comments, and direct readers to section 
III.D.2.n. where we discuss this topic in detail.
    Comment: Some commenters recommended an initial confidential data 
preview period for providers, prior to public reporting.
    Response: Providers will receive a confidential preview report with 
30 days for review in advance of their data and information being 
publicly displayed.
    Comment: Some commenters recommended that the MSPB-PAC SNF QRP 
measure be tested for reliability and validity prior to finalization.
    Response: The MSPB-PAC SNF QRP measure has been tested for 
reliability using FY 2014 data. The reliability results support the 20 
episode case minimum, and 100 percent of SNF providers had moderate or 
high reliability (above 0.4). Further details on the reliability 
calculation are provided in the MSPB-PAC Measure Specifications, a link 
for which has been provided above.
    Comment: One commenter suggested that descriptive statistics on the 
measure score by provider-level characteristics (for example, rural/
urban status and bed size) would be useful to evaluate measure design 
decisions.
    Response: We thank the commenter for their input. The following 
table 12 shows the MSPB-PAC SNF provider scores by provider 
characteristics, calculated using FY 2014 data.

                                                Table 12--MSPB-PAC SNF Scores by Provider Characteristics
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Score percentile
              Provider characteristic                 Number of      Mean   ----------------------------------------------------------------------------
                                                      providers     score       1st        10th       25th       50th       75th       90th       99th
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Providers......................................       15,446       1.01       0.38       0.66       0.84       1.01       1.18       1.35       1.69
Urban/Rural:
    Urban..........................................       10,656       1.03       0.46       0.73       0.87       1.02       1.18       1.35       1.68
    Rural..........................................        4,786       0.96       0.29       0.56       0.74       0.96       1.16       1.35       1.71
    Unknown........................................            4       1.12       0.89       0.89       0.90       1.05       1.34       1.51       1.51
Ownership Type:
    For profit.....................................       10,705       1.07       0.47       0.77       0.92       1.06       1.22       1.39       1.72
    Non-profit.....................................        3,693       0.87       0.32       0.56       0.70       0.86       1.03       1.18       1.56
    Government.....................................        1,008       0.89       0.20       0.49       0.66       0.87       1.12       1.31       1.66
    Unknown........................................           40       0.52       0.18       0.31       0.38       0.52       0.62       0.79       0.89

[[Page 52021]]

 
Census Division:
    New England....................................          943       0.91       0.44       0.68       0.79       0.91       1.04       1.14       1.40
    Middle Atlantic................................        1,708       1.00       0.46       0.69       0.84       1.00       1.16       1.30       1.59
    East North Central.............................        3,009       1.07       0.50       0.76       0.92       1.06       1.21       1.39       1.69
    West North Central.............................        1,989       0.82       0.27       0.52       0.67       0.82       0.97       1.12       1.43
    South Atlantic.................................        2,369       1.03       0.41       0.75       0.90       1.03       1.17       1.31       1.60
    East South Central.............................        1,083       1.07       0.34       0.64       0.88       1.08       1.28       1.44       1.72
    West South Central.............................        2,076       1.13       0.40       0.75       0.96       1.13       1.31       1.49       1.79
    Mountain.......................................          732       0.90       0.23       0.61       0.78       0.92       1.05       1.15       1.46
    Pacific........................................        1,529       1.03       0.43       0.68       0.84       1.01       1.20       1.40       1.75
    Other..........................................            8       0.51       0.39       0.39       0.43       0.53       0.56       0.68       0.68
Bed Count:
    0-49...........................................        1,877       0.82       0.24       0.49       0.61       0.79       1.00       1.20       1.70
    50-99..........................................        5,799       1.00       0.36       0.64       0.82       0.99       1.17       1.36       1.70
    100-199........................................        6,846       1.06       0.52       0.78       0.91       1.05       1.20       1.36       1.67
    200-299........................................          726       1.08       0.55       0.78       0.91       1.06       1.23       1.42       1.69
    300 +..........................................          198       1.03       0.45       0.75       0.87       1.01       1.16       1.35       1.62
No. of Episodes:
    0-99...........................................       10,048       1.01       0.33       0.63       0.82       1.01       1.20       1.40       1.73
    100-249........................................        4,298       1.01       0.52       0.75       0.88       1.01       1.15       1.28       1.53
    250-499........................................          960       0.96       0.52       0.69       0.83       0.97       1.08       1.20       1.45
    500-1000.......................................          136       0.96       0.57       0.74       0.88       0.96       1.08       1.19       1.35
    1000 +.........................................            4       0.86       0.73       0.73       0.80       0.87       0.92       0.98       0.98
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In summary, after consideration of the public comments we received, 
we are finalizing the specifications of the MSPB-PAC SNF QRP resource 
use measure, as proposed. A link for the measure specifications has 
been provided above.
    Specifically, we are finalizing the definition of an MSPB-PAC SNF 
QRP episode, beginning from episode trigger. An episode window 
comprises a treatment period beginning at the trigger and ending upon 
discharge, and an associated services period beginning at the trigger 
and ending 30 days after the end of the treatment period. Readmissions 
to the same SNF within 7 or fewer days do not trigger a new episode and 
are instead included in the treatment period of the first episode.
    We exclude certain services that are clinically unrelated to SNF 
care and/or because SNF providers may have limited influence over 
certain Medicare services delivered by other providers during the 
episode window. We also exclude certain episodes in their entirety from 
the MSPB-PAC SNF QRP measure, such as where a beneficiary is not 
enrolled in Medicare FFS for the entirety of the lookback period plus 
episode window.
    We finalize the inclusion of Medicare payments for Part A and Part 
B claims for services included in the MSPB-PAC SNF QRP episodes to 
calculate the MSPB-PAC SNF QRP measure.
    We are finalizing our proposal to risk adjust using covariates 
including age brackets, HCC indicators, prior inpatient stay length, 
ICU stay length, clinical case mix categories, and indicators for 
originally disabled, ESRD enrollment, long-term care status, and 
hospice claim in episode window. The measure also adjusts for 
geographic payment differences such as wage index and GPCI, and adjusts 
for Medicare payment differences resulting from IME and DSH.
    We calculate the individual providers' MSPB-PAC Amount which is 
inclusive of MSPB-PAC SNF QRP observed episode spending over the 
expected episode spending as predicted through risk adjustment. 
Individual SNF providers' scores are calculated as their individual 
MSPB-PAC Amount divided by the median MSPB-PAC amount across all SNFs.
ii. Measure to Address the IMPACT Act Domain of Resource Use and Other 
Measures: Discharge to Community--Post Acute Care (PAC) Skilled Nursing 
Facility (SNF) Quality Reporting Program (QRP)
    Sections 1899B(d)(1)(B) and 1899B(a)(2)(E)(ii) of the Act require 
the Secretary to specify a measure to address the domain of discharge 
to community by SNFs, LTCHs, and IRFs by October 1, 2016, and HHAs by 
January 1, 2017. We proposed to adopt the measure, Discharge to 
Community--PAC SNF QRP, for the SNF QRP for the FY 2018 payment 
determination and subsequent years as a Medicare FFS claims-based 
measure to meet this requirement.
    This measure assesses successful discharge to the community from a 
SNF setting, with successful discharge to the community including no 
unplanned rehospitalizations and no death in the 31 days following 
discharge from the SNF. Specifically, this measure reports a SNF's 
risk-standardized rate of Medicare FFS residents who are discharged to 
the community following a SNF stay, and do not have an unplanned 
readmission to an acute care hospital or LTCH in the 31 days following 
discharge to community, and who remain alive during the 31 days 
following discharge to community. The term ``community'', for this 
measure, is defined as home or self care, with or without home health 
services, based on Patient Discharge Status Codes 01, 06, 81, and 86 on 
the Medicare FFS claim.41 42 This measure is conceptualized 
uniformly across the PAC settings, in terms of the definition of the 
discharge to community outcome, the approach to risk adjustment, and 
the measure calculation.
---------------------------------------------------------------------------

    \41\ National Uniform Billing Committee Official UB-04 Data 
Specifications Manual 2017, Version 11, July 2016, Copyright 2016, 
American Hospital Association.
    \42\ This definition is not intended to suggest that board and 
care homes, assisted living facilities, or other settings included 
in the definition of ``community'' for the purpose of this measure 
are the most integrated setting for any particular individual or 
group of individuals under the Americans with Disabilities Act (ADA) 
and section 504.
---------------------------------------------------------------------------

    Discharge to a community setting is an important health care 
outcome for

[[Page 52022]]

many residents for whom the overall goals of post-acute care include 
optimizing functional improvement, returning to a previous level of 
independence, and avoiding institutionalization. Returning to the 
community is also an important outcome for many residents who are not 
expected to make functional improvement during their SNF stay, and for 
residents who may be expected to decline functionally due to their 
medical condition. The discharge to community outcome offers a multi-
dimensional view of preparation for community life, including the 
cognitive, physical, and psychosocial elements involved in a discharge 
to the community.43 44
---------------------------------------------------------------------------

    \43\ El-Solh AA, Saltzman SK, Ramadan FH, Naughton BJ. Validity 
of an artificial neural network in predicting discharge destination 
from a postacute geriatric rehabilitation unit. Archives of physical 
medicine and rehabilitation. 2000;81(10):1388-1393.
    \44\ Tanwir S, Montgomery K, Chari V, Nesathurai S. Stroke 
rehabilitation: Availability of a family member as caregiver and 
discharge destination. European journal of physical and 
rehabilitation medicine. 2014;50(3):355-362.
---------------------------------------------------------------------------

    In addition to being an important outcome from a resident and 
family perspective, patients and residents discharged to community 
settings, on average, incur lower costs over the recovery episode, 
compared with those discharged to institutional 
settings.45 46 Given the high costs of care in institutional 
settings, encouraging SNFs to prepare residents for discharge to 
community, when clinically appropriate, may have cost-saving 
implications for the Medicare program.\47\ Also, providers have 
discovered that successful discharge to community was a major driver of 
their ability to achieve savings, where capitated payments for post-
acute care were in place.\48\ For residents who require long-term care 
due to persistent disability, discharge to community could result in 
lower long-term care costs for Medicaid and for residents' out-of-
pocket expenditures.\49\
---------------------------------------------------------------------------

    \45\ Dobrez D, Heinemann AW, Deutsch A, Manheim L, Mallinson T. 
Impact of Medicare's prospective payment system for inpatient 
rehabilitation facilities on stroke patient outcomes. American 
journal of physical medicine & rehabilitation/Association of 
Academic Physiatrists. 2010;89(3):198-204.
    \46\ Gage B, Morley M, Spain P, Ingber M. Examining Post Acute 
Care Relationships in an Integrated Hospital System. Final Report. 
RTI International;2009.
    \47\ Ibid.
    \48\ Doran JP, Zabinski SJ. Bundled payment initiatives for 
Medicare and non-Medicare total joint arthroplasty patients at a 
community hospital: Bundles in the real world. The journal of 
arthroplasty. 2015;30(3):353-355.
    \49\ Newcomer RJ, Ko M, Kang T, Harrington C, Hulett D, Bindman 
AB. Health Care Expenditures After Initiating Long-term Services and 
Supports in the Community Versus in a Nursing Facility. Medical 
Care. 2016; 54(3):221-228.
---------------------------------------------------------------------------

    Analyses conducted for ASPE on PAC episodes, using a 5 percent 
sample of 2006 Medicare claims, revealed that relatively high average, 
unadjusted Medicare payments are associated with discharge to 
institutional settings from IRFs, SNFs, LTCHs or HHAs, as compared with 
payments associated with discharge to community settings.\50\ Average, 
unadjusted Medicare payments associated with discharge to community 
settings ranged from $0 to $4,017 for IRF discharges, $0 to $3,544 for 
SNF discharges, $0 to $4,706 for LTCH discharges, and $0 to $992 for 
HHA discharges. In contrast, payments associated with discharge to non-
community settings were considerably higher, ranging from $11,847 to 
$25,364 for IRF discharges, $9,305 to $29,118 for SNF discharges, 
$12,465 to $18,205 for LTCH discharges, and $7,981 to $35,192 for HHA 
discharges.\51\
---------------------------------------------------------------------------

    \50\ Gage B, Morley M, Spain P, Ingber M. Examining Post Acute 
Care Relationships in an Integrated Hospital System. Final Report. 
RTI International;2009.
    \51\ Ibid.
---------------------------------------------------------------------------

    Measuring and comparing facility-level discharge to community rates 
is expected to help differentiate among facilities with varying 
performance in this important domain, and to help avoid disparities in 
care across resident groups. Variation in discharge to community rates 
has been reported within and across post-acute settings; across a 
variety of facility-level characteristics, such as geographic location 
(for example, regional location, urban or rural location), ownership 
(for example, for-profit or nonprofit), and freestanding or hospital-
based units; and across patient-level characteristics, such as race and 
gender.52 53 54 55 56 57 Discharge to community rates in the 
IRF setting have been reported to range from about 60 to 80 
percent.58 59 60 61 62 63 Longer-term studies show that 
rates of discharge to community from IRFs have decreased over time as 
IRF length of stay has decreased.64 65 Greater variation in 
discharge to community rates is seen in the SNF setting, with rates 
ranging from 31 to 65 percent.66 67 68 69 In the

[[Page 52023]]

SNF Medicare FFS population, using CY 2013 national claims data, we 
found that approximately 44 percent of residents were discharged to the 
community. A multi-center study of 23 LTCHs demonstrated that 28.8 
percent of 1,061 patients who were ventilator-dependent on admission 
were discharged to home.\70\ A single-center study revealed that 31 
percent of LTCH hemodialysis patients were discharged to home.\71\ One 
study noted that 64 percent of beneficiaries who were discharged from 
the home health episode did not use any other acute or post-acute 
services paid by Medicare in the 30 days after discharge.\72\ However, 
significant numbers of patients were admitted to hospitals (29 percent) 
and lesser numbers to SNFs (7.6 percent), IRFs (1.5 percent), home 
health (7.2 percent) or hospice (3.3 percent).\73\
---------------------------------------------------------------------------

    \52\ Reistetter TA, Karmarkar AM, Graham JE, et al. Regional 
variation in stroke rehabilitation outcomes. Archives of physical 
medicine and rehabilitation. 2014; 95(1):29-38.
    \53\ El-Solh AA, Saltzman SK, Ramadan FH, Naughton BJ. Validity 
of an artificial neural network in predicting discharge destination 
from a postacute geriatric rehabilitation unit. Archives of physical 
medicine and rehabilitation. 2000; 81(10):1388-1393.
    \54\ March 2015 Report to the Congress: Medicare Payment Policy. 
Medicare Payment Advisory Commission; 2015.
    \55\ Bhandari VK, Kushel M, Price L, Schillinger D. Racial 
disparities in outcomes of inpatient stroke rehabilitation. Archives 
of physical medicine and rehabilitation. 2005; 86(11):2081-2086.
    \56\ Chang PF, Ostir GV, Kuo YF, Granger CV, Ottenbacher KJ. 
Ethnic differences in discharge destination among older patients 
with traumatic brain injury. Archives of physical medicine and 
rehabilitation. 2008; 89(2):231-236.
    \57\ Berges IM, Kuo YF, Ostir GV, Granger CV, Graham JE, 
Ottenbacher KJ. Gender and ethnic differences in rehabilitation 
outcomes after hip-replacement surgery. American journal of physical 
medicine & rehabilitation/Association of Academic Physiatrists. 
2008; 87(7):567-572.
    \58\ Galloway RV, Granger CV, Karmarkar AM, et al. The Uniform 
Data System for Medical Rehabilitation: Report of patients with 
debility discharged from inpatient rehabilitation programs in 2000-
2010. American journal of physical medicine & rehabilitation/
Association of Academic Physiatrists. 2013; 92(1):14-27.
    \59\ Morley MA, Coots LA, Forgues AL, Gage BJ. Inpatient 
rehabilitation utilization for Medicare beneficiaries with multiple 
sclerosis. Archives of physical medicine and rehabilitation. 2012; 
93(8):1377-1383.
    \60\ Reistetter TA, Graham JE, Deutsch A, Granger CV, Markello 
S, Ottenbacher KJ. Utility of functional status for classifying 
community versus institutional discharges after inpatient 
rehabilitation for stroke. Archives of physical medicine and 
rehabilitation. 2010; 91(3):345-350.
    \61\ Gagnon D, Nadeau S, Tam V. Clinical and administrative 
outcomes during publicly-funded inpatient stroke rehabilitation 
based on a case-mix group classification model. Journal of 
rehabilitation medicine. 2005; 37(1):45-52.
    \62\ DaVanzo J, El-Gamil A, Li J, Shimer M, Manolov N, Dobson A. 
Assessment of patient outcomes of rehabilitative care provided in 
inpatient rehabilitation facilities (IRFs) and after discharge. 
Vienna, VA: Dobson DaVanzo & Associates, LLC; 2014.
    \63\ Kushner DS, Peters KM, Johnson-Greene D. Evaluating Siebens 
Domain Management Model for Inpatient Rehabilitation to Increase 
Functional Independence and Discharge Rate to Home in Geriatric 
Patients. Archives of physical medicine and rehabilitation. 2015; 
96(7):1310-1318.
    \64\ Galloway RV, Granger CV, Karmarkar AM, et al. The Uniform 
Data System for Medical Rehabilitation: Report of patients with 
debility discharged from inpatient rehabilitation programs in 2000-
2010. American journal of physical medicine & rehabilitation/
Association of Academic Physiatrists. 2013; 92(1):14-27.
    \65\ Mallinson T, Deutsch A, Bateman J, et al. Comparison of 
discharge functional status after rehabilitation in skilled nursing, 
home health, and medical rehabilitation settings for patients after 
hip fracture repair. Archives of physical medicine and 
rehabilitation. 2014; 95(2):209-217.
    \66\ El-Solh AA, Saltzman SK, Ramadan FH, Naughton BJ. Validity 
of an artificial neural network in predicting discharge destination 
from a postacute geriatric rehabilitation unit. Archives of physical 
medicine and rehabilitation. 2000; 81(10):1388-1393.
    \67\ Hall RK, Toles M, Massing M, et al. Utilization of acute 
care among patients with ESRD discharged home from skilled nursing 
facilities. Clinical journal of the American Society of Nephrology: 
CJASN. 2015; 10(3):428-434.
    \68\ Stearns SC, Dalton K, Holmes GM, Seagrave SM. Using 
propensity stratification to compare patient outcomes in hospital-
based versus freestanding skilled-nursing facilities. Medical care 
research and review: MCRR. 2006; 63(5):599-622.
    \69\ Wodchis WP, Teare GF, Naglie G, et al. Skilled nursing 
facility rehabilitation and discharge to home after stroke. Archives 
of physical medicine and rehabilitation. 2005; 86(3):442-448.
    \70\ Scheinhorn DJ, Hassenpflug MS, Votto JJ, et al. Post-ICU 
mechanical ventilation at 23 long-term care hospitals: A multicenter 
outcomes study. Chest. 2007;131(1):85-93.
    \71\ Thakar CV, Quate-Operacz M, Leonard AC, Eckman MH. Outcomes 
of hemodialysis patients in a long-term care hospital setting: A 
single-center study. American journal of kidney diseases: The 
official journal of the National Kidney Foundation. 2010;55(2):300-
306.
    \72\ Wolff JL, Meadow A, Weiss CO, Boyd CM, Leff B. Medicare 
home health patients' transitions through acute and post-acute care 
settings. Medical care. 2008;46(11):1188-1193.
    \73\ Ibid.
---------------------------------------------------------------------------

    Discharge to community is an actionable health care outcome, as 
targeted interventions have been shown to successfully increase 
discharge to community rates in a variety of post-acute 
settings.74 75 76 77 Many of these interventions involve 
discharge planning or specific rehabilitation strategies, such as 
addressing discharge barriers and improving medical and functional 
status.78 79 80 81 The effectiveness of these interventions 
suggests that improvement in discharge to community rates among post-
acute care residents is possible through modifying provider-led 
processes and interventions.
---------------------------------------------------------------------------

    \74\ Kushner DS, Peters KM, Johnson-Greene D. Evaluating Siebens 
Domain Management Model for Inpatient Rehabilitation to Increase 
Functional Independence and Discharge Rate to Home in Geriatric 
Patients. Archives of physical medicine and rehabilitation. 
2015;96(7):1310-1318.
    \75\ Wodchis WP, Teare GF, Naglie G, et al. Skilled nursing 
facility rehabilitation and discharge to home after stroke. Archives 
of physical medicine and rehabilitation. 2005;86(3):442-448.
    \76\ Berkowitz RE, Jones RN, Rieder R, et al. Improving 
disposition outcomes for patients in a geriatric skilled nursing 
facility. Journal of the American Geriatrics Society. 
2011;59(6):1130-1136.
    \77\ Kushner DS, Peters KM, Johnson-Greene D. Evaluating use of 
the Siebens Domain Management Model during inpatient rehabilitation 
to increase functional independence and discharge rate to home in 
stroke patients. PM & R: The journal of injury, function, and 
rehabilitation. 2015;7(4):354-364.
    \78\ Kushner DS, Peters KM, Johnson-Greene D. Evaluating Siebens 
Domain Management Model for Inpatient Rehabilitation to Increase 
Functional Independence and Discharge Rate to Home in Geriatric 
Patients. Archives of physical medicine and rehabilitation. 
2015;96(7):1310-1318.
    \79\ Wodchis WP, Teare GF, Naglie G, et al. Skilled nursing 
facility rehabilitation and discharge to home after stroke. Archives 
of physical medicine and rehabilitation. 2005;86(3):442-448.
    \80\ Berkowitz RE, Jones RN, Rieder R, et al. Improving 
disposition outcomes for patients in a geriatric skilled nursing 
facility. Journal of the American Geriatrics Society. 
2011;59(6):1130-1136.
    \81\ Kushner DS, Peters KM, Johnson-Greene D. Evaluating use of 
the Siebens Domain Management Model during inpatient rehabilitation 
to increase functional independence and discharge rate to home in 
stroke patients. PM & R: The journal of injury, function, and 
rehabilitation. 2015;7(4):354-364.
---------------------------------------------------------------------------

    A TEP convened by our measure development contractor was strongly 
supportive of the importance of measuring discharge to community 
outcomes, and implementing the measure, Discharge to Community--PAC SNF 
QRP in the SNF QRP. The panel provided input on the technical 
specifications of this measure, including the feasibility of 
implementing the measure, as well as the overall measure reliability 
and validity. A summary of the TEP proceedings is available on the PAC 
Quality Initiatives Downloads and Videos Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    We also solicited stakeholder feedback on the development of this 
measure through a public comment period held from November 9, 2015, 
through December 8, 2015. Several stakeholders and organizations, 
including the MedPAC, among others, supported this measure for 
implementation. The public comment summary report for the measure is 
available on the CMS Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    The NQF-convened MAP met on December 14 and 15, 2015, and provided 
input on the use of this Discharge to Community--PAC SNF QRP measure in 
the SNF QRP. The MAP encouraged continued development of the measure to 
meet the mandate of the IMPACT Act. The MAP supported the alignment of 
this measure across PAC settings, using standardized claims data. More 
information about the MAP's recommendations for this measure is 
available at http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx.
    Since the MAP's review and recommendation of continued development, 
we have continued to refine risk-adjustment models and conduct measure 
testing for this measure, as recommended by the MAP. This measure is 
consistent with the information submitted to the MAP, and the original 
MAP submission and our continued refinements support its scientific 
acceptability for use in quality reporting programs. As discussed with 
the MAP, we fully anticipate that additional analyses will continue as 
we submit this measure to the ongoing measure maintenance process.
    We reviewed the NQF's consensus-endorsed measures and were unable 
to identify any NQF-endorsed resource use or other measures for post-
acute care focused on discharge to community. In addition, we are 
unaware of any other post-acute care measures for discharge to 
community that have been endorsed or adopted by other consensus 
organizations. Therefore, we proposed the measure, Discharge to 
Community--PAC SNF QRP, under the Secretary's authority to specify 
non--NQF-endorsed measures under section 1899B(e)(2)(B) of the Act.
    We proposed to use data from the Medicare FFS claims and Medicare 
eligibility files to calculate this measure. We proposed to use data 
from the ``Patient Discharge Status Code'' on Medicare FFS claims to 
determine whether a resident was discharged to a community setting for 
calculation of this measure. In all PAC settings, we tested the 
accuracy of determining discharge to a community setting using the 
``Patient Discharge Status Code'' on the PAC claim by examining whether 
discharge to community coding based on PAC claim data agreed with 
discharge to community coding based on PAC assessment data. We found 
agreement between the two data sources in all PAC settings, ranging 
from 94.6 percent to 98.8 percent. Specifically, in the SNF setting, 
using 2013 data, we found 94.6 percent agreement in discharge to 
community codes when comparing discharge status codes on claims and the 
Discharge Status (A2100) on the Minimum Data Set (MDS) 3.0 discharge 
assessment, when the claims and MDS assessment had the same discharge 
date. We further examined the accuracy of the ``Patient Discharge 
Status Code'' on the PAC claim by assessing how frequently discharges 
to

[[Page 52024]]

an acute care hospital were confirmed by follow-up acute care claims. 
We discovered that 88 percent to 91 percent of IRF, LTCH, and SNF 
claims with acute care discharge status codes were followed by an acute 
care claim on the day of, or day after, PAC discharge. We believed 
these data support the use of the claims ``Patient Discharge Status 
Code'' for determining discharge to a community setting for this 
measure. In addition, this measure can feasibly be implemented in the 
SNF QRP because all data used for measure calculation are derived from 
Medicare FFS claims and eligibility files, which are already available 
to CMS.
    Based on the evidence discussed above, we proposed to adopt the 
measure, Discharge to Community--PAC SNF QRP, for the SNF QRP for FY 
2018 payment determination and subsequent years. This measure is 
calculated using 1 year of data. We proposed a minimum of 25 eligible 
stays in a given SNF for public reporting of the measure for that SNF. 
Since Medicare FFS claims data are already reported to the Medicare 
program for payment purposes, and Medicare eligibility files are also 
available, SNFs will not be required to report any additional data to 
CMS for calculation of this measure. The measure denominator is the 
risk-adjusted expected number of discharges to community. The measure 
numerator is the risk-adjusted estimate of the number of residents who 
are discharged to the community, do not have an unplanned readmission 
to an acute care hospital or LTCH in the 31-day post-discharge 
observation window, and who remain alive during the post-discharge 
observation window. The measure is risk-adjusted for variables such as 
age and sex, principal diagnosis, comorbidities, ventilator status, 
ESRD status, and dialysis, among other variables. For technical 
information about the proposed measure, including information about the 
measure calculation, risk adjustment, and denominator exclusions, we 
referred readers to the document titled, Proposed Measure 
Specifications for Measures Proposed in the FY 2017 SNF QRP Proposed 
Rule available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    We stated in the proposed rule that we intend to provide initial 
confidential feedback to SNFs, prior to public reporting of this 
measure, based on Medicare FFS claims data from discharges in CY 2016. 
We intend to publicly report this measure using claims data from 
discharges in CY 2017. We plan to submit this measure to the NQF for 
consideration for endorsement.
    We invited public comment on our proposal to adopt the measure, 
Discharge to Community--PAC SNF QRP, for the SNF QRP. The comments we 
received on this topic, with our responses, appear below.
    Comment: Several commenters, including MedPAC, supported the 
Discharge to Community--PAC SNF QRP measure, noting that it is a 
critical measure assessing the ability of a PAC provider to 
rehabilitate patients and enable them to return to the home and 
community-based setting. One commenter noted that measuring the rate 
that the various PAC settings discharge patients to the community, 
without an admission (or readmission) to an acute care hospital within 
30 days, is one of the most relevant patient-centered measures that 
exists in the post-acute care area. Commenters noted that most older 
adults want to live independently in their homes and communities, that 
returning home following care was an important concern of Medicare 
beneficiaries, and that successful transitions to community would 
decrease potentially preventable readmissions. Two commenters supported 
CMS's efforts to develop aligned yet distinctive risk-adjusted 
discharge to community measures for IRFs, SNFs and LTCHs, given the 
inherent variability in patient/resident profiles across these 
settings. Commenters agreed that discharge to community was an 
important outcome not just for patients expected to make functional 
improvement and return to their previous level of independence, but 
also for patients not expected to make functional improvement, or those 
who may be expected to decline functionally due to their medical 
condition. One commenter stated that achieving a standardized and 
interoperable patient assessment data set and stable quality measures 
as quickly as possible would allow for better cross-setting comparisons 
and the evolution of better quality measures with uniform risk 
standardization. One commenter expressed support for the use of claims 
data over assessment data in calculating the Discharge to Community--
PAC SNF QRP measure, stating that assessment data could be susceptible 
to gaming by providers.
    Response: We thank the commenters for their support of the 
Discharge to Community--PAC SNF QRP measure, and their recognition of 
its patient-centeredness, its relevance for patients with a range of 
functional abilities and prognosis, and its potential to reduce post-
discharge readmissions. We also thank commenters for their support of 
use of claims data, and their support of standardized and interoperable 
patient assessment data and quality measures. As mandated by the IMPACT 
Act, we are moving toward the goal of standardized patient assessment 
data and quality measures across PAC settings.
    Comment: One commenter interpreted our measure proposal language as 
suggesting that functional improvement is not a requirement, and 
encouraged that Medicare coverage for maintenance nursing and therapy 
be ensured and reflected by the measure.
    Response: Our intent in the measure proposal was to acknowledge 
that discharge to community can be an important goal even for patients 
who may not be able to make functional improvement. This measure does 
not impact Medicare coverage rules for maintenance nursing and therapy.
    Comment: Several commenters requested that ``home'' be defined 
broadly to reflect the place an individual calls ``home'', including 
assisted living facilities, residential care settings, or other 
congregate community housing.
    Response: We agree with the commenters that ``home'' should be 
defined broadly for the discharge to community measure. In addition to 
home, our definition of community includes settings such as group home, 
foster care, and independent living and other residential care 
arrangements.\82\ For further details on measure specifications, 
including the definition of community, we refer readers to the Measure 
Specifications for Measures Adopted in the FY 2017 SNF QRP Final Rule, 
posted on the CMS SNF QRP Web page at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
---------------------------------------------------------------------------

    \82\ National Uniform Billing Committee Official UB-04 Data 
Specifications Manual 2017, Version 11, July 2016, Copyright 2016, 
American Hospital Association.
---------------------------------------------------------------------------

    Comment: Several commenters expressed concerns regarding the use of 
the Patient Discharge Status Code variable to define community 
discharges. Commenters emphasized that it was important to ensure that 
only home and community based settings were included in the definition 
of

[[Page 52025]]

community, and were concerned that Code 01 (Discharge to home or self 
care), which is included in the definition of community, included 
institutional settings such as jail or law enforcement. One commenter 
expressed that many settings included under Code 01 do not satisfy the 
home and community based settings rule, and may be inconsistent with 
the integration mandate of the Americans with Disabilities Act. 
Commenters strongly recommended that we either revise discharge status 
code 01 to exclude non community-based settings, or use alternative 
variables to capture discharge to community.
    Response: We agree with the commenters that the discharge to 
community measure should only capture discharges to home and community 
based settings. We believe that the comment referring to the ``home and 
community based settings rule'' refers to Medicaid regulations 
applicable to services authorized under sections 1915(c), 1915(i) and 
1915(k) of the Act, which are provided through waivers or state plans 
amendments approved by CMS. We would like to clarify that this measure 
only captures discharges to home and community based settings, not to 
institutional settings, and is consistent with both Medicaid 
regulations requiring home and community based settings to support 
integration, and also with the Americans with Disabilities Act (ADA), 
based on Patient Discharge Status Codes 01, 06, 81, and 86 on the 
Medicare FFS PAC claim.\83\ Discharges to jail or law enforcement are 
not included under Code 01 of the Patient Discharge Status Code; rather 
these are included under Code 21 (Discharged/transferred to Court/Law 
Enforcement).
---------------------------------------------------------------------------

    \83\ Ibid.
---------------------------------------------------------------------------

    We also note that Title II of the ADA regulations requires public 
entities to administer services, programs, and activities in the most 
integrated setting appropriate to the needs of qualified individuals 
with disabilities (28 CFR 35.130(d)). The preamble discussion of the 
``integration regulation'' explains that ``the most integrated 
setting'' is one that enables individuals with disabilities to interact 
with nondisabled persons to the fullest extent possible. Integrated 
settings are those that provide individuals with disabilities 
opportunities to live, work, and receive services in the greater 
community, like individuals without disabilities (28 CFR part 35, app. 
A (2010) (addressing Sec.  35.130)).
    Comment: Several commenters stated that PAC patients/residents 
discharged to a nursing facility as long-term care residents should not 
be considered discharges to community, particularly if they were 
discharged to the nursing facility from the Medicare-certified skilled 
nursing part of the same nursing home, and even if they resided in a 
long-term nursing facility at baseline. Commenters emphasized that a 
nursing home does not represent an individual's own home in their own 
community. These commenters interpreted the proposed measure 
specifications as allowing these discharges to a nursing facility to be 
coded as ``group home'', ``foster care'', or ``other residential care 
arrangement'' under discharge status code 01. Commenters expressed 
concern that coding discharges from the SNF to residential/long-term 
care facility within the same nursing home as discharges to community 
would unfairly advantage SNFs and artificially inflate their discharge 
to community rates, would disadvantage other PAC providers, would 
negate the value of the measure, and would miscommunicate facility's 
actual discharge to community performance to the average Medicare 
beneficiary. Commenters also noted that including nursing facility 
discharges as community discharges could incentivize SNFs to not do the 
hard work that actual, meaningful discharge planning to the community 
requires.
    Response: We agree with the commenters that discharges to long-term 
care nursing facilities, or any other institutional settings, should 
not be coded as discharges to community. We also recognize the 
differences in required discharge planning processes and resources for 
discharging a patient/resident to the community compared with 
discharging to a long-term nursing facility. The discharge to community 
measure only captures discharges to home and community based settings 
as discharges to community, based on Patient Discharge Status Codes 01, 
06, 81, and 86 on the Medicare FFS PAC claim.\84\ These codes do not 
include discharges to long-term care nursing facilities or any other 
institutional setting that may violate the integration mandate of title 
II of the ADA. Instead, depending on the nature of the facility to 
which patients/residents are discharged, such discharges may be coded 
on the Medicare FFS claim as 04, 64, 84, 92, or another appropriate 
code for an institutional discharge.
---------------------------------------------------------------------------

    \84\ Ibid.
---------------------------------------------------------------------------

    In response to the commenters' concerns that SNFs may be unfairly 
advantaged by this measure as compared with other PAC providers, we 
would like to note that, in our measure development samples, the 
national discharge to community rate for SNFs was 47.26 percent, while 
this rate for IRFs was considerably higher (69.51 percent). Further, 
using an MDS-claims linked longitudinal file, we found that, of SNF 
stays that had a pre-hospitalization non-PPS MDS assessment suggesting 
prior nursing facility residence, two-thirds had a discharge status 
code of 30 (still patient), and approximately 18 percent had a 
discharge status code of 02 (acute hospital); less than 5 percent of 
these patients had a discharge status code of 01 (discharge to home or 
self care).
    Comment: Several commenters recommended that the discharge to 
community measure should entirely exclude baseline long-stay nursing 
facility residents, as they could not be reasonably expected to 
discharge to the community after their PAC stay. One commenter noted 
that the measure fails to consider when a patient's ``home'' is a 
custodial nursing facility and the patient's post-acute episode 
involves a discharge back to his or her ``home.'' Another commenter 
noted that baseline nursing facility residents have a very different 
discharge process back to the nursing facility compared with patients 
discharged to the community. This commenter recommended that different 
measures be developed for the baseline nursing facility resident 
population, such as return to prior level of function, improvement in 
function, prevention of further functional decline, development of 
pressure ulcers, or accidental falls. This commenter also recognized 
our current efforts in monitoring transitions of care and quality 
requirements in long-term care facilities. One commenter suggested that 
we use the Minimum Data Set to identify and exclude baseline nursing 
facility residents.
    Response: We appreciate the commenters' concerns and their 
recommendation to exclude baseline nursing facility residents from the 
discharge to community measure, and to distinguish baseline custodial 
nursing facility residents who are discharged back to the nursing 
facility after their SNF stay. We recognize that patients/residents who 
permanently lived in a nursing facility at baseline may not be expected 
to discharge back to a home and community based setting after their PAC 
stay. We also recognize that, for baseline nursing facility residents, 
a discharge back to their nursing facility represents a discharge to 
their baseline residence. We agree with the commenter about the 
differences in discharge planning processes when discharging a patient/
resident to the community

[[Page 52026]]

compared with discharging to a long-term nursing facility. However, 
using Medicare FFS claims alone, we are unable to accurately identify 
baseline nursing facility residents. Potential future modifications of 
the measure could include the assessment of the feasibility and impact 
of excluding baseline nursing facility residents from the measure 
through the addition of patient assessment-based data. However, we note 
that, currently, the IRF-PAI is the only PAC assessment that contains 
an item related to pre-hospital baseline living setting.
    Comment: One commenter raised concerns that the measure does not 
exclude individuals admitted to a SNF for Part A services, but who have 
an expressed goal to remain in the facility for long-term care and 
never be discharged back to community. The commenter specifically noted 
that there appears to be a relationship between SNF turnover rate and 
discharge to community rates. They noted that SNFs with low turnover, 
which they offered as a marker for being a primarily long-term care 
facility, had low discharge to community rates compared with SNFs with 
high turnover.
    Response: This measure risk adjusts for several case-mix variables 
that may be related to preferences for facility-based long-term care 
such as age, diagnoses from the prior acute stay, comorbidities in the 
year preceding PAC admission, length of prior acute stay, number of 
prior hospitalizations in the past year, and ventilator use. Further, 
by excluding patients on hospice and those whose prior acute stay was 
for medical treatment of cancer, we are excluding SNF residents who may 
be more likely to transfer to a nursing facility at the end of their 
SNF stay. There are no claims data we could currently use to identify 
residents with an expressed goal to remain in the nursing home for 
long-term care. As we agree this is an important aspect of this measure 
work, we will consider assessing the ability to identify residents with 
an expressed goal to remain in the nursing home for long-term care, and 
the impact of such an exclusion on the measure performance.
    Comment: MedPAC recommended that we confirm discharge to a 
community setting with the absence of a subsequent claim to a hospital, 
IRF, SNF, or LTCH, to ensure that discharge to community rates reflect 
actual facility performance. Other commenters also recommended that we 
assess the reliability and validity of the Patient Discharge Status 
code on PAC claims, expressing concerns about the accuracy of these 
data without further definition and validation. Commenters cited MedPAC 
and other studies, noting that Patient Discharge Status Codes often 
have low reliability, and this could impact accurate portrayal of 
measure performance.
    Response: We are committed to developing measures based on reliable 
and valid data. This measure does confirm the absence of hospital or 
LTCH claims following discharge to a community setting. Unplanned 
hospital and LTCH readmissions following the discharge to community, 
including those on the day of SNF discharge, are considered an 
unfavorable outcome. We will consider verifying the absence of IRF and 
SNF claims following discharge to a community setting, as we continue 
to refine this measure. Nonetheless, we would like to note that an ASPE 
report on post-acute care relationships found that, following discharge 
to community settings from IRFs, LTCHs, or SNFs in a 5 percent Medicare 
sample, IRFs or SNFs were very infrequently reported as the next site 
of post-acute care.\85\
---------------------------------------------------------------------------

    \85\ Gage B, Morley M, Spain P, Ingber M. Examining Post Acute 
Care Relationships in an Integrated Hospital System Final Report. 
RTI International; 2009.
---------------------------------------------------------------------------

    Because the discharge to community measure is a measure of 
discharge destination from the PAC setting, we have chosen to use the 
PAC-reported discharge destination (from the Medicare FFS claims) to 
determine whether a patient/resident was discharged to the community 
(based on discharge status codes 01, 06, 81, 86). We assessed the 
reliability of the claims discharge status code by examining agreement 
between discharge status on claims and assessment instruments for the 
same stay in all four PAC settings. We found between 94 and 99 percent 
agreement in coding of community discharges on matched claims and 
assessments in each of the PAC settings. We also assessed how 
frequently discharges to acute care, as indicated on the PAC claim, 
were confirmed by follow-up acute care claims, and found that 88 
percent to 91 percent of IRF, LTCH, and SNF claims indicating acute 
care discharge were followed by an acute care claim on the day of, or 
day after, PAC discharge. We believe that these data support the use of 
the ``Patient Discharge Status Code'' from the PAC claim for 
determining discharge to a community setting for this measure.
    The use of the claims discharge status code to identify discharges 
to the community was discussed at length with the TEP convened by our 
measure development contractor. TEP members did not express significant 
concerns regarding the accuracy of the claims discharge status code in 
coding community discharges, nor about our use of the discharge status 
code for defining this quality measure. A summary of the TEP 
proceedings is available on the PAC Quality Initiatives Downloads and 
Videos Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Comment: One commenter recommended that, in all PAC settings, 
patients who are discharged home and then admitted to a SNF or nursing 
facility during the 31-day post-discharge window not be counted as 
successful discharges to the community. The commenter suggested that 
MDS data could be used to identify individuals admitted to nursing 
homes.
    Response: We agree that it is important to track whether patients 
remain in the community in the post-discharge observation window in 
order to ensure that facilities are appropriately discharging patients 
to the community. In the measure, we examine post-discharge unplanned 
acute care or LTCH readmissions, thereby accounting for more serious, 
acute readmissions in the post-discharge window. In future versions of 
the measure, we will consider looking for IRF, SNF, and nursing 
facility admissions and readmissions in the 31-day post-discharge 
window when examining discharge to community outcomes.
    Comment: A few commenters requested clarification on the 
calculation of the discharge to community measure rates. One commenter 
questioned why estimates were used rather than observed rates.
    Response: A successful discharge to community outcome includes 
patients discharged to the community who remain alive for 31 days post-
discharge with no unplanned readmission. The method used requires the 
use of estimates because the observed rates are statistically adjusted 
to account for patient mix in each facility. The statistical model also 
estimates facility-level effects. In brief, we first calculate the sum 
of the probabilities of discharge to community of all patients/
residents in the facility, including both the impact of patient/
resident characteristics and the impact of the facility; this equals 
the ``predicted number'' of discharges to community after adjusting for 
the facility's case mix. We then calculate the ``expected number'' of 
discharges to community for the same

[[Page 52027]]

patients/residents at the average facility. The ratio of the predicted-
to-expected number of discharges to community is a measure of the 
degree to which discharges to community are higher or lower than what 
would otherwise be expected at the average facility. This ratio is 
multiplied by the mean discharge to community rate for all facility 
stays for the measure, yielding the risk-standardized discharge to 
community rate for each facility.
    Details on the risk adjustment methodology and measure calculation 
algorithm for the discharge to community measure are available in the 
Measure Specifications for Measures Adopted in the FY 2017 SNF QRP 
Final Rule, posted on the CMS SNF QRP Web page at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html. Specifically, we refer readers to Sections 2.1.8--
Statistical Risk Model and Risk Adjustment Covariates, and 2.1.9--
Measure Calculation Algorithm.
    Comment: One commenter had concerns that there was overlap between 
the potentially preventable readmission measure and the discharge to 
community measure under the SNF QRP. The commenter noted that using two 
separate measures may be confusing to consumers and providers, making 
it challenging for SNFs to track and improve performance on these 
metrics.
    Response: There are distinct differences between the discharge to 
community and potentially preventable readmission measures under the 
SNF QRP. Although there may be some overlap in the outcomes captured 
across the two measures (for example, residents who have a potentially 
preventable readmission also have an unsuccessful discharge to 
community) each measure has a distinct purpose, outcome definition, and 
measure population. For example, the discharge to community measure 
assesses the rate of successful discharges to the community, defined as 
discharge to a community setting without post-discharge unplanned 
readmissions or death, while the potentially preventable readmission 
measure assesses the rate of readmissions that may be potentially 
prevented for patients/residents discharged to lower levels of care 
from the SNF.
    Our goal is to develop measures that are meaningful to patients and 
consumers, and assist them in making informed choices when selecting 
post-acute providers. Since the goal of PAC for most patients and 
family members is to be discharged to the community and remain in the 
community, from a patient/consumer perspective, it is important to 
assess whether a patient remained in the community after discharge and 
to separately report discharge to community rates. In addition to 
assessing the success of community discharges, the inclusion of post-
discharge readmission and death outcomes is intended to avoid the 
potential unintended consequence of inappropriate discharges to the 
community.
    Analysis on our measure development sample has shown that, of SNF 
patients discharged to the community, approximately 15 percent had an 
unplanned readmission in the post-discharge observation window. The 
mean number of days from SNF discharge to readmission was 12.2 with a 
standard deviation of 9.7; 25 percent of readmissions occurred within 3 
days of SNF discharge, and 50 percent within 10 days. Ignoring these 
post-discharge readmissions occurring soon after discharge to community 
would fail to reflect our intent with this measure.
    Comment: One commenter suggested that the discharge to community 
measure examine emergency room visits in the post-discharge observation 
window, in addition to unplanned readmissions. The commenter noted that 
this addition would impose no additional data collection burden on SNFs 
or hospitals, since these data are already collected by us.
    Response: The discharge to community measure captures patients that 
are discharged to the community and remain in the community post-
discharge. An emergency room visit that does not result in 
hospitalization would not be considered a failure to remain in the 
community. Nevertheless, we will assess emergency room visit rates in 
the post-discharge observation window to monitor for increasing rates, 
and potential indication of poor quality of care or inappropriate 
community discharges.
    Comment: Some commenters had questions regarding death in the post-
discharge window. One commenter requested clarification as to why an 
unexpected death, such as an accidental death, in the post-discharge 
observation window would count against a SNF's measure rate on the 
discharge to community measure. Another commenter recommended that the 
measure exclude patients who have been discharged to the community and 
expire within the post-discharge observation window. The commenter 
stated that the types of patients treated in SNFs varied greatly, and 
including post-discharge death in the measure could lead to an 
inaccurate reflection of the quality of care furnished by the SNF.
    Response: Including 31-day post-discharge mortality outcomes is 
intended to identify successful discharges to community, and to avoid 
the potential unintended consequence of inappropriate community 
discharges. We have found, through our analyses on our measure 
development sample, that death in the 31 days following discharge to 
community is an infrequent event, with only 2.0 percent of SNF Medicare 
FFS beneficiaries discharged to community dying during that period. In 
addition, accidental or unrelated deaths in the post-discharge window 
are expected to be rare and randomly distributed. We do not expect such 
deaths to disproportionately affect measure rates for specific 
facilities. Finally, we do not expect facilities to achieve a 0 percent 
death rate in the measure's post-discharge observation window; however, 
one focus of the measure is to identify facilities with unexpectedly 
high rates of death for quality monitoring purposes.
    Comment: A few commenters requested clarification on whether 
patients who are discharged to home under hospice care qualify as a 
discharge to community for the purposes of the measure. One commenter 
also requested clarification on how a patient who elects hospice care 
after SNF discharge but within the post-discharge observation window 
would be counted in the measure. Two commenters suggested that patients 
who die on hospice within the post-discharge observation window not be 
excluded from the discharge to community measures, but instead be 
considered successful discharges to the community. One commenter noted 
that dying at home is the preference of the majority of Americans, and 
nursing homes should not be penalized for helping a person choose where 
they want their life to end. The other commenter believed that 
excluding patients on hospice could create an incentive to keep dying 
individuals in a SNF or discharge them to the hospital.
    Response: The discharge to community measure excludes patients 
discharged to home- or facility-based hospice care. Thus, discharges to 
hospice are not considered discharges to community, but rather are 
excluded from the measure calculation. We are are adding an exclusion 
of patients/residents with a hospice benefit in the post-discharge 
observation window to the proposed Discharge to Community--PAC SNF QRP 
measure, in response to

[[Page 52028]]

public comments received on this measure proposal, comments received 
during measure development, and our ongoing analysis and testing.
    In response to commenters' concerns about the exclusion of hospice 
patients/residents, we would like to note that we that we reached the 
decision to exclude patients/residents discharged to hospice after 
discussion with our TEP members and hospice clinical experts, 
comparison of post-discharge death rates for hospice and non-hospice 
patients/residents, and comparison of discharge planning and goals of 
care for hospice and non-hospice patients/residents. We concluded that 
it would be conceptually confusing to include in the discharge to 
community outcome both patients/residents who are successfully 
rehabilitated to live in the community for whom death is an undesirable 
outcome, and patients/residents who are terminally ill, and wish to die 
in the comfort of their home. The rationale for the added exclusion of 
patients/residents with a post-discharge hospice benefit aligns with 
the rationale for exclusion of discharges to hospice.
    Comment: One commenter suggested that the measure does not 
appropriately account for patients who seek other end-of-life care in 
the community, beyond hospice.
    Response: There are no current data sources available that would 
enable us to identify patients seeking end-of-life care that is 
separate from hospice services.
    Comment: One commenter suggested that we revise the measure name to 
reflect that it only applies to the Medicare FFS population. The 
commenter was concerned that, in many states, a large proportion of 
Medicare beneficiaries served by SNFs are not enrolled in Medicare FFS; 
thus, the measure may not reflect a SNF's overall discharge to 
community rate, but rather the discharge to community rate among FFS 
beneficiaries only.
    Response: We will take the commenter's suggestion into 
consideration.
    Comment: Several commenters had concerns that the risk adjustment 
methodology does not include adjustment for sociodemographic or 
socioeconomic status. Commenters noted the importance of home and 
community supports such as caregiver availability, willingness, and 
ability to support the person in the community, and availability of an 
established home in determining a beneficiary's ability to be 
discharged to community and remain in their home or community setting. 
Commenters believed that sociodemographic and socioeconomic factors 
were strong predictors of return to the community, and since they were 
outside a provider's control, they should be accounted for in risk 
adjustment. One commenter expressed concern that the measure does not 
adjust for regional differences in community-based needs and supports 
that result from factors such as geographic variance in availability of 
affordable housing. Another commenter suggested that the measure 
account for rurality, since limited alternative services may be 
available in rural areas, making discharge to community less feasible.
    Response: We understand the importance of home and community 
supports and availability of housing for ensuring a successful 
discharge to community outcome. The discharge to community measure is a 
claims-based measure and, currently, there are no standardized data on 
variables such as living status, family and caregiver supports, or 
housing availability across across the four PAC settings. We appreciate 
and will consider the commenter's suggestion to account for potential 
challenges of discharging patients to the community in rural areas. As 
we refine the measure in the future, we will consider testing and 
adding additional relevant data sources and standardized items for risk 
adjustment of this measure. With regard to the suggestions regarding 
risk adjustment pertaining to sociodemographic and socioeconomic 
factors, we refer the readers to section III.D.2.f. for a more detailed 
discussion of the role of SES/SDS factors in risk adjustment of our 
measures.
    Comment: One commenter raised concerns that the measure does not 
adjust for factors that are unique to certain specific provider types, 
such as providers offering dedicated services to specialty residents, 
for example, those with HIV/AIDS. The commenter noted that providers 
caring for these populations may encounter greater challenges in 
discharging patients to the community due to special needs such as 
affordable and safe housing, mental health and substance abuse 
counseling, and medication management and supports.
    Response: We appreciate the commenters' suggestion that the 
discharge to community measure should adjust for providers primarily 
caring for specialty populations that may encounter greater challenges 
with discharge to community settings. Our risk adjustment model 
accounts for a comprehensive list of diagnoses and comorbidities, 
including HIV/AIDS. We will consider testing for an association between 
providers primarily caring for specialty populations and discharge to 
community outcomes as we refine this measure.
    Comment: One commenter emphasized the relationship between 
functional gains made by patients during their SNF stay and their 
ability to discharge to the community. The commenter stated that return 
to one's previous home represents part of the goal of care; 
additionally, it is also important that the patient is able to function 
to the greatest possible extent in the home and community setting, and 
achieve the highest quality of life possible. The commenter recommended 
that we delay adopting this measure until it incorporates metrics that 
assess whether patients achieved their functional and independence 
goals based on their plan of care and their specific condition.
    Many other commenters suggested that we include functional status 
in the risk adjustment for the discharge to community measure. 
Commenters noted that the literature demonstrates evidence that higher 
functional and cognitive status are strong predictors of individuals' 
ability to live independently, whereas lower functional status was a 
strong predictor of requiring long-term nursing home placement. Another 
commenter noted that functional status is associated with increased 
risk of 30-day all-cause hospital readmissions, and since readmissions 
and discharge to community are closely related, functional status risk 
adjustment is also important for this measure. One commenter suggested 
that the SNF and LTCH measures include risk adjustment that is similar 
to the risk adjustment for Case-Mix Groups (CMGs) in the IRF setting 
and Activities of Daily Living in the HHA setting. One commenter 
interpreted the measure proposal as stating that we will not adjust the 
quality measures, including the discharge to community measure, to 
account for functional status of beneficiaries until such data are 
collected under the IMPACT Act.
    Response: We agree that it is important to assess various aspects 
of patient outcomes that are indicative of successful discharge from 
the SNF setting. We also agree that functional status may be related to 
discharge to community outcomes, and that it is important to test 
functional status risk adjustment when assessing discharge to community 
outcomes. The discharge to community measure does include functional 
status risk adjustment in the IRF setting using CMGs from claims, and 
in the home health setting using Activities of Daily Living from 
claims.

[[Page 52029]]

As mandated by the IMPACT Act, we are moving toward the goal of 
collecting standardized patient assessment data for functional status 
across PAC settings. Currently, the SNF Quality Reporting Program 
includes a process measure related to functional status assessment: 
Application of Percent of Long-Term Care Hospital Patients with an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631). Once standardized functional status 
data become available across settings, it is our intent to use these 
data to assess patients' functional gains during their PAC stay, and to 
examine the relationship between functional status, discharge 
destination, and patients' ability to discharge to community. As we 
examine these relationships between functional outcomes and discharge 
to community outcomes in the future, we will assess the feasibility of 
leveraging these standardized patient assessment data to incorporate 
functional outcomes into the discharge to community measure. 
Standardized cross-setting patient assessment data will also allow us 
to examine interrelationships between the quality and resource use 
measures in each PAC setting, to understand how these measures are 
correlated.
    Comment: One commenter stated that ventilator use is included as a 
risk adjuster in the LTCH setting only, but should be used across all 
settings. This commenter also requested information on the hierarchical 
logistic regression modeling and variables that will be used for risk 
adjustment.
    Response: We would like to clarify that risk adjustment for 
ventilator use is included in both LTCH and SNF settings. We 
investigated the need for risk adjustment for ventilator use in IRFs, 
but found that less than 0.01 percent of the IRF population (19 patient 
stays in 2012, and 9 patient stays in 2013) had ventilator use in the 
IRF. Given the low frequency of ventilator use in IRFs, any associated 
estimates would not be reliable; thus, ventilator use is not included 
as a risk adjuster in the IRF setting measure. However, we will 
continue to assess this risk adjuster for inclusion in the IRF model 
for this measure.
    For details on measure specifications, modeling, and calculations, 
we refer readers to the Measure Specifications for Measures Adopted in 
the FY 2017 SNF QRP Final Rule, posted on the CMS SNF QRP Web page at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    Comment: Two commenters conveyed concerns about unintended 
consequences of the discharge to community measure. One commenter was 
concerned about increased costs to the health care system in instances 
where patients have difficult transitions to community, have subsequent 
difficulty accessing SNF care, and experience costlier inpatient care 
as a consequence. Another commenter had concerns that the discharge to 
community measure may limit access to specialty services, limit access 
to care for low-income populations; create perverse incentives for 
providers; or impact the finances of post-acute care providers based on 
factors beyond their control. One commenter stated that effective risk 
adjustment would be important to avoid unintended consequences of 
decreased access for patients who may need a longer SNF stay.
    Response: We appreciate the commenter's concerns regarding 
potential unintended consequences of the discharge to community 
measure. We expect that, on average, discharges to community settings 
rather than institutional settings will result in lower healthcare 
costs. To avoid potential unintended consequences of inappropriate 
discharges to the community, this measure examines acute care and LTCH 
readmissions and death in the 31-day post-discharge observation window; 
the measure thus incentivizes providers to ensure safe transitions to 
the community without post-discharge unplanned readmissions. In future 
modifications of the measure, we will consider looking for IRF, SNF, 
and nursing facility admissions and readmissions in the 31-day post-
discharge window when examining discharge to community outcomes. With 
regard to the commenter's concern that the measure may result in 
decreased access for patients who may need a longer SNF stay, we would 
like to clarify that the measure does not examine the length of a SNF 
stay and does not incentivize facilities to avoid patients/residents 
who may need a longer stay in the facility. The measure examines 
discharge destination from the SNF, irrespective of their length of 
stay.
    As with all our measures, we will monitor for unintended 
consequences as part of measure monitoring and evaluation to ensure 
that measures do not reduce quality of care or access for patients, 
result in disparities for certain patient sub-groups, or adversely 
affect healthcare spending.
    Comment: One commenter conveyed appreciation that the measure would 
be revised using an ICD-9 to ICD-10 crosswalk.
    Response: We thank the commenter for their appreciation of proposed 
measure updates using the ICD-9 to ICD-10 crosswalk, as stated in the 
Proposed Measure Specifications for Measures Proposed in the FY 2017 
SNF QRP Proposed Rule.
    Comment: One commenter encouraged us to provide PAC settings with 
access to measure performance data as early as possible so providers 
have time to adequately review these data, and implement strategies to 
decrease readmissions where necessary.
    Response: We intend to provide initial confidential feedback to PAC 
providers, prior to public reporting of this measure, based on Medicare 
FFS claims data from discharges in CY 2016.
    Comment: Several commenters expressed concern about the lack of NQF 
endorsement for the measure, and suggested additional measure testing 
and development. One commenter requested that we provide a timeline for 
submission of the proposed measures to NQF. Additionally, commenters 
recommended NQF endorsement prior to implementation or public 
reporting.
    Response: We thank the commenter for their comments regarding NQF 
endorsement. We would like to clarify that the discharge to community 
measure has been fully developed and tested. We plan to submit the 
Discharge to Community--PAC SNF QRP measure to the NQF for 
consideration for endorsement.
    Final Decision: After careful consideration of the public comments, 
we are finalizing our proposal to adopt the measure, Discharge to 
Community--PAC SNF QRP as a Medicare FFS claims-based measure for the 
FY 2018 payment determination and subsequent years, with the added 
exclusion of residents with a hospice benefit in the 31-day post-
discharge observation window. For measure specifications, we refer 
readers to the Measure Specifications for Measures Adopted in the FY 
2017 SNF QRP Final Rule, posted on the CMS SNF QRP Web page at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.

[[Page 52030]]

iii. Measure To Address the IMPACT Act Domain of Resource Use and Other 
Measures: Potentially Preventable 30-Day Post-Discharge Readmission 
Measure for Skilled Nursing Facility Quality Reporting Program
    Sections 1899B(a)(2)(E)(ii) and 1899B(d)(1)(C) of the Act require 
the Secretary to specify measures to address the domain of all-
condition risk-adjusted potentially preventable hospital readmission 
rates by SNFs, LTCHs, and IRFs by October 1, 2016, and HHAs by January 
1, 2017. We proposed the measure Potentially Preventable 30-Day Post-
Discharge Readmission Measure for SNF QRP as a Medicare FFS claims-
based measure to meet this requirement for the FY 2018 payment 
determination and subsequent years.
    The measure assesses the facility-level risk-standardized rate of 
unplanned, potentially preventable hospital readmissions for Medicare 
FFS beneficiaries in the 30 days post-SNF discharge. The SNF admission 
must have occurred within up to 30 days of discharge from a prior 
proximal hospital stay which is defined as an inpatient admission to an 
acute care hospital (including IPPS, CAH, or a psychiatric hospital). 
Hospital readmissions include readmissions to a short-stay acute care 
hospitals or an LTCH, with a diagnosis considered to be unplanned and 
potentially preventable. This measure is claims-based, requiring no 
additional data collection or submission burden for SNFs. Because the 
measure denominator is based on SNF admissions, each Medicare 
beneficiary may be included in the measure multiple times within the 
measurement period. Readmissions counted in this measure are identified 
by examining Medicare FFS claims data for readmissions to either acute 
care hospitals (IPPS or CAH) or LTCHs that occur during a 30-day window 
beginning two days after SNF discharge. This measure is conceptualized 
uniformly across the PAC settings, in terms of the measure definition, 
the approach to risk adjustment, and the measure calculation. Our 
approach for defining potentially preventable hospital readmissions is 
described in more detail below.
    Hospital readmissions among the Medicare population, including 
beneficiaries that utilize PAC, are common, costly, and often 
preventable.86 87 MedPAC and a study by Jencks et al. 
estimated that 17 to 20 percent of Medicare beneficiaries discharged 
from the hospital were readmitted within 30 days. MedPAC found that 
more than 75 percent of 30-day and 15-day readmissions and 84 percent 
of 7-day readmissions were considered ``potentially preventable.'' \88\ 
In addition, MedPAC calculated that annual Medicare spending on 
potentially preventable readmissions would be $12 billion for 30-day, 
$8 billion for 15-day, and $5 billion for 7-day readmissions in 
2005.\89\ For hospital readmissions from SNFs, MedPAC deemed 76 percent 
of readmissions as ``potentially avoidable''--associated with $12 
billion in Medicare expenditures.\90\ Mor et al. analyzed 2006 Medicare 
claims and SNF assessment data (Minimum Data Set), and reported a 23.5 
percent readmission rate from SNFs, associated with $4.3 billion in 
expenditures.\91\ Fewer studies have investigated potentially 
preventable readmission rates from the remaining post-acute care 
settings.
---------------------------------------------------------------------------

    \86\ Friedman, B., and Basu, J.: The rate and cost of hospital 
readmissions for preventable conditions. Med. Care Res. Rev. 
61(2):225-240, 2004. doi:10.1177/1077558704263799.
    \87\ Jencks, S.F., Williams, M.V., and Coleman, E.A.: 
Rehospitalizations among patients in the Medicare Fee-for-Service 
Program. N. Engl. J. Med. 360(14):1418-1428, 2009. doi:10.1016/
j.jvs.2009.05.045.
    \88\ MedPAC: Payment policy for inpatient readmissions, in 
Report to the Congress: Promoting Greater Efficiency in Medicare. 
Washington, DC, pp. 103-120, 2007. Available from http://www.medpac.gov/documents/reports/Jun07_EntireReport.pdf.
    \89\ ibid.
    \90\ ibid.
    \91\ Mor, V., Intrator, O., Feng, Z., et al.: The revolving door 
of rehospitalization from skilled nursing facilities. Health Aff. 
29(1):57-64, 2010. doi:10.1377/hlthaff.2009.0629.
---------------------------------------------------------------------------

    We have addressed the high rates of hospital readmissions in the 
acute care setting, as well as in PAC. For example, we developed the 
following measure: Skilled Nursing Facility 30-Day All-Cause 
Readmission Measure (SNFRM) (NQF #2510), as well as similar measures 
for other PAC providers (NQF #2502 for IRFs and NQF #2512 for 
LTCHs).\92\ These measures are endorsed by the NQF, and the NQF 
endorsed SNF measure (NQF #2510) was adopted into the SNF VBP Program 
in the FY 2016 SNF final rule (80 FR 46411 through 46419). Note that 
these NQF endorsed measures assess all-cause unplanned readmissions.
---------------------------------------------------------------------------

    \92\ National Quality Forum: All-Cause Admissions and 
Readmissions Measures. pp. 1-319, April 2015. Available from http://www.qualityforum.org/Publications/2015/04/All-Cause_Admissions_and_Readmissions_Measures_-_Final_Report.aspx.
---------------------------------------------------------------------------

    Several general methods and algorithms have been developed to 
assess potentially avoidable or preventable hospitalizations and 
readmissions for the Medicare population. These include the Agency for 
Healthcare Research and Quality's (AHRQ's) Prevention Quality 
Indicators, approaches developed by MedPAC, and proprietary approaches, 
such as the 3M \TM\ algorithm for Potentially Preventable 
Readmissions.93 94 95 Recent work led by Kramer et al. for 
MedPAC identified 13 conditions for which readmissions were deemed as 
potentially preventable among SNF and IRF populations.96 97 
Although much of the existing literature addresses hospital 
readmissions more broadly and potentially avoidable hospitalizations 
for specific settings like long-term care, these findings are relevant 
to the development of potentially preventable readmission measures for 
PAC.98 99 100
---------------------------------------------------------------------------

    \93\ Goldfield, N.I., McCullough, E.C., Hughes, J.S., et al.: 
Identifying potentially preventable readmissions. Health Care Finan. 
Rev. 30(1):75-91, 2008. Available from http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4195042/.
    \94\ Agency for Healthcare Quality and Research: Prevention 
Quality Indicators Overview. 2008.
    \95\ MedPAC: Online Appendix C: Medicare Ambulatory Care 
Indicators for the Elderly. pp. 1-12, prepared for Chapter 4, 2011. 
Available from http://www.medpac.gov/documents/reports/Mar11_Ch04_APPENDIX.pdf?sfvrsn=0.
    \96\ Kramer, A., Lin, M., Fish, R., et al.: Development of 
Inpatient Rehabilitation Facility Quality Measures: Potentially 
Avoidable Readmissions, Community Discharge, and Functional 
Improvement. pp. 1-42, 2015. Available from http://www.medpac.gov/documents/contractor-reports/development-of-inpatient-rehabilitation-facility-quality-measures-potentially-avoidable-readmissions-community-discharge-and-functional-improvement.pdf?sfvrsn=0.
    \97\ Kramer, A., Lin, M., Fish, R., et al.: Development of 
Potentially Avoidable Readmission and Functional Outcome SNF Quality 
Measures. pp. 1-75, 2014. Available from http://www.medpac.gov/documents/contractor-reports/mar14_snfqualitymeasures_contractor.pdf?sfvrsn=0.
    \98\ Allaudeen, N., Vidyarthi, A., Maselli, J., et al.: 
Redefining readmission risk factors for general medicine patients. 
J. Hosp. Med. 6(2):54-60, 2011. doi:10.1002/jhm.805.
    \99\ Gao, J., Moran, E., Li, Y.-F., et al.: Predicting 
potentially avoidable hospitalizations. Med. Care 52(2):164-171, 
2014. doi:10.1097/MLR.0000000000000041.
    \100\ Walsh, E.G., Wiener, J.M., Haber, S., et al.: Potentially 
avoidable hospitalizations of dually eligible Medicare and Medicaid 
beneficiaries from nursing facility and home[hyphen]and 
community[hyphen]based services waiver programs. J. Am. Geriatr. 
Soc. 60(5):821-829, 2012. doi:10.1111/j.1532-5415.2012.03920.x.
---------------------------------------------------------------------------

    Potentially Preventable Readmission Measure Definition: We 
conducted a comprehensive environmental scan, analyzed claims data, and 
obtained input from a TEP to develop a definition and list of 
conditions for which hospital readmissions are potentially preventable. 
The Ambulatory Care Sensitive Conditions and Prevention Quality 
Indicators, developed by AHRQ, served as the starting point in this 
work. For patients in the 30-day post-PAC

[[Page 52031]]

discharge period, a potentially preventable readmission (PRR) refers to 
a readmission for which the probability of occurrence could be 
minimized with adequately planned, explained, and implemented post 
discharge instructions, including the establishment of appropriate 
follow-up ambulatory care. Our list of PPR conditions is categorized by 
3 clinical rationale groupings:
     Inadequate management of chronic conditions;
     Inadequate management of infections; and
     Inadequate management of other unplanned events.
    Additional details regarding the definition for potentially 
preventable readmissions are available in the document titled, Proposed 
Measure Specifications for Measures Proposed in the FY 2017 SNF QRP 
Proposed Rule, available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    This measure focuses on readmissions that are potentially 
preventable and also unplanned. Similar to the SNF 30-Day All-Cause 
Readmission Measure (NQF #2510), this measure uses the current version 
of the CMS Planned Readmission Algorithm as the main component for 
identifying planned readmissions. A complete description of the CMS 
Planned Readmission Algorithm, which includes lists of planned 
diagnoses and procedures, can be found on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. In addition 
to the CMS Planned Readmission Algorithm, this measure incorporates 
procedures that are considered planned in post-acute care settings, as 
identified in consultation with TEPs. Full details on the planned 
readmissions criteria used, including the CMS Planned Readmission 
Algorithm and additional procedures considered planned for post-acute 
care, can be found in the document titled, Proposed Measure 
Specifications for Measures Proposed in the FY 2017 SNF QRP Proposed 
Rule at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    This measure, Potentially Preventable 30-Day Post-Discharge 
Readmission Measure for Skilled Nursing Facility Quality Reporting 
Program, assesses potentially preventable readmission rates while 
accounting for patient demographics, principal diagnosis in the prior 
hospital stay, comorbidities, and other patient factors. While 
estimating the predictive power of patient characteristics, the model 
also estimates a facility-specific effect, common to patients treated 
in each facility. This measure is calculated for each SNF based on the 
ratio of the predicted number of risk-adjusted, unplanned, potentially 
preventable hospital readmissions that occur within 30 days after a SNF 
discharge, including the estimated facility effect, to the estimated 
predicted number of risk-adjusted, unplanned inpatient hospital 
readmissions for the same patients treated at the average SNF. A ratio 
above 1.0 indicates a higher than expected readmission rate (worse) 
while a ratio below 1.0 indicates a lower than expected readmission 
rate (better). This ratio is referred to as the standardized risk ratio 
(SRR). The SRR is then multiplied by the overall national raw rate of 
potentially preventable readmissions for all SNF stays. The resulting 
rate is the risk-standardized readmission rate (RSRR) of potentially 
preventable readmissions.
    An eligible SNF stay is followed until: (1) The 30-day post-
discharge period ends; or (2) the patient is readmitted to an acute 
care hospital (IPPS or CAH) or LTCH. If the readmission is unplanned 
and potentially preventable, it is counted as a readmission in the 
measure calculation. If the readmission is planned, the readmission is 
not counted in the measure rate.
    This measure is risk adjusted. The risk adjustment modeling 
estimates the effects of patient characteristics, comorbidities, and 
select health care variables on the probability of readmission. More 
specifically, the risk-adjustment model for SNFs accounts for 
demographic characteristics (age, sex, original reason for Medicare 
entitlement), principal diagnosis during the prior proximal hospital 
stay, body system specific surgical indicators, comorbidities, length 
of stay during the patient's prior proximal hospital stay, intensive 
care unit (ICU) utilization, end-stage renal disease status, and number 
of acute care hospitalizations in the preceding 365 days.
    This measure is calculated using 1 calendar year of FFS claims 
data, to ensure the statistical reliability of this measure for 
facilities. In addition, we proposed a minimum of 25 eligible stays for 
public reporting of the measure.
    A TEP convened by our measure development contractor provided 
recommendations on the technical specifications of this measure, 
including the development of an approach to define potentially 
preventable hospital readmission for PAC. Details from the TEP 
meetings, including TEP members' ratings of conditions proposed as 
being potentially preventable, are available in the TEP Summary Report 
available on the CMS Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html. We 
also solicited stakeholder feedback on the development of this measure 
through a public comment period held from November 2 through December 
1, 2015. Comments on the measure varied, with some commenters 
supportive of the measure, while others either were not in favor of the 
measure, or suggested potential modifications to the measure 
specifications, such as including standardized function data. A summary 
of the public comments is also available on the CMS Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    The MAP encouraged continued development of the measure. 
Specifically, the MAP stressed the need to promote shared 
accountability and ensure effective care transitions. More information 
about the MAP's recommendations for this measure is available at http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx. At the time, the risk-adjustment model was still under 
development. Following completion of that development work, we were 
able to test for measure validity and reliability as identified in the 
measure specifications document provided above. Testing results are 
within range for similar outcome measures finalized in public reporting 
and value-based purchasing programs, including the SNFRM (NQF #2510) 
adopted into the SNF VBP Program in the FY 2016 SNF final rule (80 FR 
46411 through 46419).
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF endorsed measures focused on potentially 
preventable

[[Page 52032]]

hospital readmissions. We are unaware of any other measures for this 
IMPACT Act domain that have been endorsed or adopted by other consensus 
organizations. Therefore, we proposed the Potentially Preventable 30-
Day Post-Discharge Readmission Measure for SNF QRP, under the 
Secretary's authority to specify non-NQF-endorsed measures under 
section 1899B(e)(2)(B) of the Act, for the SNF QRP for the FY 2018 
payment determination and subsequent years given the evidence 
previously discussed above.
    We plan to submit the measure to the NQF for consideration of 
endorsement. We stated in the proposed rule that we intended to provide 
initial confidential feedback to SNFs, prior to public reporting of 
this measure, based on 1 calendar year of claims data from discharges 
in CY 2016. We also stated that we intended to publicly report this 
measure using claims data from CY 2017.
    We invited public comment on our proposal to adopt the measure, 
Potentially Preventable 30-Day Post-Discharge Readmission Measure for 
SNF QRP. We received several comments, which are summarized with our 
responses below.
    Comment: MedPAC and several other commenters expressed general 
support for the proposed Potentially Preventable 30-Day Post-Discharge 
Readmission Measure for SNF QRP. One commenter noted that the PPR 
measure would supplement the all-cause readmission measure by creating 
an incentive for SNFs to focus attention on managing SNF residents that 
are chronically ill as well as to manage or avoid infections. Some 
commenters specifically supported the post-PAC discharge readmission 
window, noting that SNFs should be accountable for safe transitions to 
the community or next care setting.
    Response: We thank commenters for their support of this measure.
    Comment: One commenter specifically supported the inclusion of 
infectious conditions in the ``inadequate management of infections'' 
and ``inadequate management of other unplanned events'' categories in 
the measure's definition of potentially preventable hospital 
readmissions. Another commenter expressed support for the inclusion of 
chronic conditions and infections as conditions for which readmissions 
would be considered potentially preventable. Another commenter 
expressed appreciation for the focus on preventable readmissions, but 
urged us to continue evaluating and testing the measure to ensure that 
the codes used for the PPR definition are clinically relevant. One 
commenter expressed concern over being ``penalized'' for readmissions 
that are clinically unrelated to a patient's original reason for SNF 
admission.
    Response: We thank commenters for their support of this measure 
domain and the list of PPR conditions developed for this measure. 
Though readmissions may be considered potentially preventable even if 
they may not appear to be clinically related to the patient's original 
reason for SNF admission, there is substantial evidence that the 
conditions included in the definition may be preventable with 
adequately planned, explained, and implemented post-discharge 
instructions, including the establishment of appropriate follow-up 
ambulatory care. Furthermore, this measure is based on Medicare FFS 
claims data, and it may not always be feasible to determine whether a 
subsequent readmission is or is not clinically related to the reason 
why the patient was receiving SNF care. We intend to conduct ongoing 
evaluation and monitoring of this measure.
    Comment: Several commenters expressed concern over the cross-
setting alignment of the proposed PPR measures. One commenter 
encouraged us to assess readmission measures across the agency's 
programs to ensure that they promote collaboration and support 
readmission reduction efforts. MedPAC commented that the measure 
definition and risk adjustment should be identical across PAC settings 
so that potentially preventable readmission rates can be compared 
across settings. Another commenter expressed concern specifically over 
the ``nonalignment'' between the IRF and SNF versions of the measure, 
adding that this may lead to confusion.
    Response: The PPR definition (that is, list of conditions for which 
readmissions would be considered potentially preventable) is aligned 
for measures with the same readmission window, regardless of PAC 
setting. Specifically, the post-PAC discharge PPR measures that were 
developed for each of the PAC settings contain the same list of PPR 
conditions. Although there are some minor differences in the 
specifications across the measures (for example, years of data used to 
calculate the measures to ensure reliability and some of the measure 
exclusions necessary to attribute responsibility to the individual 
settings), the IMPACT Act PPR measures are standardized. As described 
for all IMPACT Act measures in section III.D.2.f., the statistical 
approach for risk adjustment is also aligned across the measures; 
however, there is variation in the exact risk adjusters. The risk-
adjustment models are empirically driven and differ between measures as 
a consequence of case mix differences, which is necessary to ensure 
that the estimates are valid.
    Comment: One commenter expressed concern that the post-discharge 
readmission window provides an opportunity for patient health to 
decline following discharge due to factors beyond providers' control, 
including patient behavior, noting these factors vary considerably 
among patients. The commenter suggested the measure reflect the shared 
responsibility of all parties involved in a patient's care, such as 
caregivers and the patients themselves. The commenter also suggested we 
clarify how patients that expire within the readmission window are 
handled in the measure.
    Response: The focus of the PPR measure is to identify excess PPR 
rates for the purposes of quality improvement. There is substantial 
evidence that certain readmissions can be prevented with adequately 
planned, explained, and implemented post-discharge instructions, 
including the establishment of appropriate follow-up ambulatory care. 
We are aware that there are certain patient characteristics that may 
increase the risk of readmission, and a number of these conditions are 
accounted for in the risk-adjustment model. We would also like to 
clarify that patients who expire during the SNF stay are excluded 
because there is no post-SNF discharge window to observe the outcome. 
However, we do include patients that expire during the post-SNF 
discharge readmission window to assess the outcome as it is relevant 
for all patients discharged from SNFs. This is also consistent with 
other NQF-endorsed readmission measures.
    Comment: Several commenters raised concerns over the risk-
adjustment approach for the PPR measures, urging us to incorporate 
factors such as cognitive and functional status, supply variables, and 
SES/SDS factors into the measure's risk adjustment. One commenter noted 
that assessment instruments, such as the MDS, provide data sources for 
various patient clinical characteristics. Furthermore, the commenter 
expressed that because the IMPACT Act mandates the standardization of 
assessment instruments, the IMPACT Act measures should incorporate 
standardized items as risk adjusters.
    Another commenter supported the proposed risk-adjustment 
methodology commenting that it will provide a valid assessment of 
quality of care in

[[Page 52033]]

preventing unplanned, preventable hospital readmissions.
    Response: The risk-adjustment model takes into account medical 
complexity, as patients with multiple risk factors will rate as having 
higher risk of readmission. For those cross-setting post-acute measures 
such as those intended to satisfy the IMPACT Act domains that use the 
patient assessment-based data elements for risk adjustment, we have 
either made such items standardized, or intend to do so as feasible. We 
wish to note that we intend to evaluate the feasibility of including 
functional and cognitive status when standardized assessment data 
become available. With regard to the suggestions pertaining to risk 
adjustment methodologies pertaining to sociodemographic factors we 
refer the readers to section section III.D.2.f. where we also discuss 
these topics.
    Comment: Some commenters cautioned against potential unintended 
consequences of the measure, in particular, noting that the measure 
could incentivize SNFs to delay necessary readmission to the hospital 
or prolong the SNF stay. One commenter noted that the measure could 
cause SNFs to be selective about the patients they admit (that is, 
``cherry pick'' their patients), and suggested that an appropriate risk 
adjustment could prevent this.
    Response: We intend to conduct ongoing monitoring to assess for 
potential unintended consequences associated with the implementation of 
this measure, and we will take these suggestions into account. A major 
goal of risk adjustment is to ensure that patient case mix is taken 
into account in order to allow for fair comparisons of facilities. The 
risk of readmission for patients in poor health is taken into account 
by the risk-adjustment model used in the calculation of this measure. 
Given this is a post-SNF discharge measure, SNFs would have no 
incentive to delay hospital readmissions.
    Comment: One commenter suggested that the PPR measure incorporate 
both inpatient and emergency room (ER) visits because a measure that 
captures both would be more understandable to consumers. Another 
expressed concern regarding overlap between the proposed PPR measure 
and the discharge to community measure, and the implications for 
quality improvement.
    Response: We appreciate the comment suggesting that the measure 
include inpatient as well as ER visits. However, we wish to clarify 
that the PPR measure was developed to fulfill the IMPACT Act's 
statutory requirement for a measure to address the domain of 
potentially preventable hospital readmissions. We agree that ER or 
emergency department visits are also an important outcome, but they are 
not hospital readmissions.
    We discuss above the similarities and differences between the PPR 
and discharge to community measure. Although there are conceptual 
similarities between the measures, we believe that each measure 
provides important information for quality improvement purposes and 
will enable SNFs to target different aspects of care provided.
    Comment: One commenter provided comments on the statistical 
approach used to calculate the measure, recommending that we use the 
actual readmission rate (that is, observed) as the numerator of the SRR 
rather than the predicted number of readmissions, or provide evidence 
to justify this more complicated methodology. The commenter 
acknowledged the aims of the risk-adjustment model but suggested using 
the actual instead of the predicted number of readmissions so that the 
numerator of the SRR is clearer and more actionable for facilities, and 
is not likely to result in substantial changes to the relative ranking 
of facilities. The same commenter also indicated support for the 
current minimum denominator size--25 patients--for public reporting but 
suggested that a minimum size of 30 would improve the reliability of 
the measurement.
    Response: The statistical approach for this measure, including the 
use of the predicted to expected readmission rate, is used in several 
other readmission measures, including the SNFRM (NQF #2510) and other 
NQF-endorsed readmission measures. Not using this approach would render 
providers with small numbers of eligible patient stays excessively 
vulnerable to reported rates driven by the influence of random 
variation in performance, limiting the value of the public reporting 
their measure performance. We would also like to note that facilities 
will be given their observed rates in their reports.
    We acknowledge that increasing the minimum denominator size for 
public reporting of this measure may increase the reliability of the 
measure, but doing so would prevent a substantial number of facilities 
from reporting this measure.
    Comment: One commenter commented that we should not finalize this 
measure because the measure was still under development and the MAP did 
not vote to support it, but instead encouraged continued development. 
In addition, this commenter said we should submit the measure for NQF 
endorsement and only propose NQF endorsed measures. Another commenter 
encouraged additional testing and evaluation of the measure prior to 
implementation.
    Response: We intend to submit this measure to NQF for consideration 
of endorsement. Although the measure is not currently endorsed, we did 
conduct additional testing subsequent to the MAP meeting. Based on that 
testing, we were able to complete the risk adjustment model and 
evaluate facilities' PPR rates, and we made the results of our analyses 
available at the time of the proposed rule. We found that testing 
results were similar to the SNFRM (NQF #2510) and allowed us to 
conclude that the measure is sufficiently developed, valid and reliable 
for adoption in the SNF QRP.
    Comment: One commenter expressed concern that we used language that 
suggested all readmissions are preventable and recommends the use of 
the term ``may be avoidable'' in place of ``should be avoidable'' in 
describing readmissions. The commenter was concerned that the language 
used would imply that the goal of the measure is for providers to reach 
zero percent PPR.
    Another commenter expressed concern about the accuracy of claims-
based data, but supported the effort to limit the data collection 
burden placed on providers.
    Response: We agree with the commenter that this is a measure of 
potentially preventable readmissions and that not all readmissions are 
preventable. We wish to clarify that the PPR rate is not expected to be 
0. The goal of the measure is to identify excess PPR rates for the 
purposes of quality improvement.
    With respect to the use of claims data to calculate this measure, 
multiple studies have been conducted to examine the validity of using 
Medicare hospital claims to calculate several NQF endorsed quality 
measures for public reporting.101 102 103 These studies 
supported the use of claims data as a valid means for risk adjustment 
and assessing similar outcomes. Additionally, although assessment and 
other data sources may be valuable for

[[Page 52034]]

risk adjustment, we are not aware of another data source aside from 
Medicare claims data that could be used to reliably assess the outcome 
of potentially preventable hospital readmissions post-SNF discharge.
---------------------------------------------------------------------------

    \101\ Bratzler DW, Normand SL, Wang Y, et al. An administrative 
claims model for profiling hospital 30-day mortality rates for 
pneumonia patients. PLoS One 2011;6(4):e17401.
    \102\ Keenan PS, Normand SL, Lin Z, et al. An administrative 
claims measure suitable for profiling hospital performance on the 
basis of 30-day all-cause readmission rates among patients with 
heart failure. Circulation 2008;1(1):29-37.
    \103\ Krumholz HM, Wang Y, Mattera JA, et al. An administrative 
claims model suitable for profiling hospital performance based on 
30-day mortality rates among patients with heart failure. 
Circulation 2006;113:1693-1701.
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    Final Decision: After careful consideration of the public comments, 
we are finalizing our proposal to adopt the measure, Potentially 
Preventable 30-Day Post-Discharge Readmission Measure for SNF QRP 
beginning with the FY 2018 payment determination. Measure 
Specifications for Measures Adopted in the FY 2017 SNF QRP Final Rule 
are available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
g. SNF QRP Quality Measure Finalized for the FY 2020 Payment 
Determination and Subsequent Years
    We proposed to adopt one new quality measure to meet the 
requirements of the IMPACT Act for the FY 2020 payment determination 
and subsequent years. The measure, Drug Regimen Review Conducted with 
Follow-Up for Identified Issues--PAC SNF QRP, addresses the IMPACT Act 
quality domain of Medication Reconciliation.
1. Quality Measure Addressing the IMPACT Act Domain of Medication 
Reconciliation: Drug Regimen Review Conducted With Follow-Up for 
Identified Issues--Post Acute Care (PAC) Skilled Nursing Facility 
Quality Reporting Program
    Sections 1899B (a)(2)(E)(i)(III) and 1899B(c)(1)(C) of the Act 
require the Secretary to specify a quality measure to address the 
domain of medication reconciliation by October 1, 2018 for IRFs, LTCHs 
and SNFs; and by January 1, 2017 for HHAs. We proposed to adopt the 
quality measure, Drug Regimen Review Conducted with Follow-Up for 
Identified Issues--PPAC SNF QRP, for the SNF QRP as a resident-
assessment based, cross-setting quality measure to meet the IMPACT Act 
requirements with data collection beginning October 1, 2018 for the FY 
2020 payment determinations and subsequent years.
    This measure assesses whether PAC providers were responsive to 
potential or actual clinically significant medication issue(s) when 
such issues were identified. Specifically, the proposed quality measure 
reports the percentage of resident stays in which a drug regimen review 
was conducted at the time of admission and timely follow-up with a 
physician occurred each time potential clinically significant 
medication issues were identified throughout that stay. For this 
proposed quality measure, a drug regimen review is defined as the 
review of all medications or drugs the patient is taking to identify 
any potential clinically significant medication issues. This proposed 
quality measure utilizes both the processes of medication 
reconciliation and a drug regimen review, in the event an actual or 
potential medication issue occurred. The measure informs whether the 
PAC facility identified and addressed each clinically significant 
medication issue and if the facility responded or addressed the 
medication issue in a timely manner. Of note, drug regimen review in 
PAC settings is generally considered to include medication 
reconciliation and review of the patient's drug regimen to identify 
potential clinically significant medication issues.\104\ (Please note: 
In the proposed rule, footnote 94 was inadvertently labeled ibid, which 
attributed the reference to the American Geriatric Society. In this 
final rule, we have corrected the reference and replaced it with the 
intended one, Institute of Medicine. Preventing Medication Errors. 
Washington, DC: National Academies Press; 2006.) This measure is 
applied uniformly across the PAC settings.
---------------------------------------------------------------------------

    \104\ Institute of Medicine. Preventing Medication Errors. 
Washington, DC: National Academies Press; 2006.
---------------------------------------------------------------------------

    Medication reconciliation is a process of reviewing an individual's 
complete and current medication list. Medication reconciliation is a 
recognized process for reducing the occurrence of medication 
discrepancies that may lead to Adverse Drug Events (ADEs).\105\ 
Medication discrepancies occur when there is conflicting information 
documented in the medical records. The World Health Organization 
regards medication reconciliation as a standard operating protocol 
necessary to reduce the potential for ADEs that cause harm to patients. 
Medication reconciliation is an important patient safety process that 
addresses medication accuracy during transitions in resident care and 
in identifying preventable ADEs.\106\ The Joint Commission added 
medication reconciliation to its list of National Patient Safety Goals 
(2005), suggesting that medication reconciliation is an integral 
component of medication safety.\107\ The Society of Hospital Medicine 
published a statement in agreement of the Joint Commission's emphasis 
and value of medication reconciliation as a patient safety goal.\108\ 
There is universal agreement that medication reconciliation directly 
addresses resident safety issues that can result from medication 
miscommunication and unavailable or incorrect information.\109\ \110\ 
\111\
---------------------------------------------------------------------------

    \105\ Ibid.
    \106\ Leotsakos A., et al. Standardization in patient safety: 
The WHO High 5s project. Int J Qual Health Care. 2014:26(2):109-116.
    \107\ The Joint Commission. 2016 Long Term Care: National 
Patient Safety Goals Medicare/Medicaid Certification-based Option. 
(NPSG.03.06.01).
    \108\ Greenwald, J.L., Halasyamani, L., Greene, J., LaCivita, 
C., et al. (2010). Making inpatient medication reconciliation 
patient centered, clinically relevant and implementable: A consensus 
statement on key principles and necessary first steps. Journal of 
Hospital Medicine, 5(8), 477-485.
    \109\ Leotsakos A., et al. Standardization in patient safety: 
The WHO High 5s project. Int J Qual Health Care. 2014:26(2):109-116.
    \110\ The Joint Commission. 2016 Long Term Care: National 
Patient Safety Goals Medicare/Medicaid Certification-based Option. 
(NPSG.03.06.01).
    \111\ IHI. Medication Reconciliation to Prevent Adverse Drug 
Events [Internet]. Cambridge, MA: Institute for Healthcare 
Improvement; [cited 2016 Jan 11]. Available from: http://www.ihi.org/topics/adesmedicationreconciliation/Pages/default.aspx.
---------------------------------------------------------------------------

    The performance of timely medication reconciliation is valuable to 
the process of drug regimen review. Preventing and responding to ADEs 
is of critical importance as ADEs account for significant increases in 
health services utilization and costs \112\ \113\ \114\ including 
subsequent emergency room visits and re-hospitalizations.\115\ Annual 
health care costs from ADEs in the United States are estimated at $3.5 
billion, resulting in 7,000 deaths annually.\116\
---------------------------------------------------------------------------

    \112\ Institute of Medicine. Preventing Medication Errors. 
Washington, DC: National Academies Press; 2006.
    \113\ Jha AK, Kuperman GJ, Rittenberg E, et al. Identifying 
hospital admissions due to adverse drug events using a computer-
based monitor. Pharmacoepidemiol Drug Saf. 2001;10(2):113-119.
    \114\ Hohl CM, Nosyk B, Kuramoto L, et al. Outcomes of emergency 
department patients presenting with adverse drug events. Ann Emerg 
Med. 2011;58:270-279.
    \115\ Kohn LT, Corrigan JM, Donaldson MS. To Err Is Human: 
Building a Safer Health System Washington, DC: National Academies 
Press; 1999.
    \116\ Greenwald, J.L., Halasyamani, L., Greene, J., LaCivita, 
C., et al. (2010). Making inpatient medication reconciliation 
patient centered, clinically relevant and implementable: A consensus 
statement on key principles and necessary first steps. Journal of 
Hospital Medicine, 5(8), 477-485.
---------------------------------------------------------------------------

    Medication errors include the duplication of medications, delivery 
of an incorrect drug, inappropriate drug omissions, or errors in the 
dosage, route, frequency, and duration of medications. Medication 
errors are one of the most common types of medical errors and can occur 
at any point in the process of ordering and delivering a medication. 
Medication errors have the potential to

[[Page 52035]]

result in an ADE.\117\ \118\ \119\ \120\ \121\ \122\ Inappropriately 
prescribed medications are also considered a major healthcare concern 
in the United States for the elderly population, with costs of roughly 
$7.2 billion annually.\123\
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    \117\ Institute of Medicine. To err is human: Building a safer 
health system. Washington, DC: National Academies Press; 2000.
    \118\ Lesar TS, Briceland L, Stein DS. Factors related to errors 
in medication prescribing. JAMA. 1997:277(4): 312-317.
    \119\ Bond CA, Raehl CL, & Franke T. Clinical pharmacy services, 
hospital pharmacy staffing, and medication errors in United States 
hospitals. Pharmacotherapy. 2002:22(2): 134-147.
    \120\ Bates DW, Cullen DJ, Laird N, Petersen LA, Small SD, et 
al. Incidence of adverse drug events and potential adverse drug 
events. Implications for prevention. JAMA. 1995:274(1): 29-34.
    \121\ Barker KN, Flynn EA, Pepper GA, Bates DW, & Mikeal RL. 
Medication errors observed in 36 health care facilities. JAMA. 2002: 
162(16):1897-1903.
    \122\ Bates DW, Boyle DL, Vander Vliet MB, Schneider J, & Leape 
L. Relationship between medication errors and adverse drug events. J 
Gen Intern Med. 1995:10(4): 199-205.
    \123\ Fu, Alex Z., et al. ``Potentially inappropriate medication 
use and healthcare expenditures in the US community-dwelling 
elderly.'' Medical care 45.5 (2007): 472-476.
---------------------------------------------------------------------------

    There is strong evidence that medication discrepancies occur during 
transfers from acute care facilities to post-acute care facilities. 
Discrepancies occur when there is conflicting information documented in 
the medical records. Almost one-third of medication discrepancies have 
the potential to cause patient harm.\124\ Medication discrepancies upon 
admission to SNFs have been reported as occurring at a rate of more 
than 21 percent. It has been found that at least one medication 
discrepancy occurred in more than 71 percent of all the SNF 
admissions.\125\ An estimated fifty percent of patients experienced a 
clinically important medication error after hospital discharge in an 
analysis of two tertiary care academic hospitals.\126\
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    \124\ Wong, Jacqueline D., et al. ``Medication reconciliation at 
hospital discharge: Evaluating discrepancies.'' Annals of 
Pharmacotherapy 42.10 (2008): 1373-1379.
    \125\ Tjia, J., Bonner, A., Briesacher, B.A., McGee, S., 
Terrill, E., & Miller, K. (2009). Medication discrepancies upon 
hospital to skilled nursing facility transitions. Journal of general 
internal medicine, 24(5), 630-635.
    \126\ Kripalani S, Roumie CL, Dalal AK, et al. Effect of a 
pharmacist intervention on clinically important medication errors 
after hospital discharge: A randomized controlled trial. Ann Intern 
Med. 2012:157(1):1-10.
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    Medication reconciliation has been identified as an area for 
improvement during transfer from the acute care facility to the 
receiving post-acute care facility. Post-acute care facilities report 
gaps in medication information between the acute care hospital and the 
receiving post-acute care setting when performing medication 
reconciliation.127 128 Hospital discharge has been 
identified as a particularly high risk point in time, with evidence 
that medication reconciliation identifies high levels of 
discrepancy.\129\ \130\ \131\ \132\ \133\ \134\ Also, there is evidence 
that medication reconciliation discrepancies occur throughout the 
patient stay.\135\ \136\ For older patients who may have multiple 
comorbid conditions and thus multiple medications, transitions between 
acute and post-acute care settings can be further complicated,\137\ and 
medication reconciliation and patient knowledge (medication literacy) 
can be inadequate post-discharge.\138\ The proposed quality measure, 
Drug Regimen Review Conducted with Follow-Up for Identified Issues--PAC 
SNF QRP, provides an important component of care coordination for PAC 
settings and would affect a large proportion of the Medicare population 
who transfer from hospitals into PAC services each year. For example, 
in 2013, 1.7 million Medicare FFS beneficiaries had SNF stays, 338,000 
beneficiaries had IRF stays, and 122,000 beneficiaries had LTCH 
stays.\139\
---------------------------------------------------------------------------

    \127\ Gandara, Esteban, et al. ``Communication and information 
deficits in patients discharged to rehabilitation facilities: An 
evaluation of five acute care hospitals.'' Journal of Hospital 
Medicine 4.8 (2009): E28-E33.
    \128\ Gandara, Esteban, et al. ``Deficits in discharge 
documentation in patients transferred to rehabilitation facilities 
on anticoagulation: Results of a system wide evaluation.'' Joint 
Commission Journal on Quality and Patient Safety 34.8 (2008): 460-
463.
    \129\ Coleman EA, Smith JD, Raha D, Min SJ. Post hospital 
medication discrepancies: Prevalence and contributing factors. Arch 
Intern Med. 2005 165(16):1842-1847.
    \130\ Wong JD, Bajcar JM, Wong GG, et al. Medication 
reconciliation at hospital discharge: Evaluating discrepancies. Ann 
Pharmacother. 2008 42(10):1373-1379.
    \131\ Hawes EM, Maxwell WD, White SF, Mangun J, Lin FC. Impact 
of an outpatient pharmacist intervention on medication discrepancies 
and health care resource utilization in post hospitalization care 
transitions. Journal of Primary Care & Community Health. 2014; 
5(1):14-18.
    \132\ Foust JB, Naylor MD, Bixby MB, Ratcliffe SJ. Medication 
problems occurring at hospital discharge among older adults with 
heart failure. Research in Gerontological Nursing. 2012, 5(1): 25-
33.
    \133\ Pherson EC, Shermock KM, Efird LE, et al. Development and 
implementation of a post discharge home-based medication management 
service. Am J Health Syst Pharm. 2014; 71(18): 1576-1583.
    \134\ Pronovosta P, Weasta B, Scwarza M, et al. Medication 
reconciliation: A practical tool to reduce the risk of medication 
errors. J Crit Care. 2003; 18(4): 201-205.
    \135\ Bates DW, Cullen DJ, Laird N, Petersen LA, Small SD, et 
al. Incidence of adverse drug events and potential adverse drug 
events. Implications for prevention. JAMA. 1995:274(1): 29-34.
    \136\ Himmel, W., M. Tabache, and M. M. Kochen. ``What happens 
to long-term medication when general practice patients are referred 
to hospital?.''European journal of clinical pharmacology 50.4 
(1996): 253-257.
    \137\ Chhabra, P.T., et al. (2012). ``Medication reconciliation 
during the transition to and from LTC settings: A systematic 
review.'' Res Social Adm Pharm 8(1): 60-75.
    \138\ Kripalani S, Roumie CL, Dalal AK, et al. Effect of a 
pharmacist intervention on clinically important medication errors 
after hospital discharge: A randomized controlled trial. Ann Intern 
Med. 2012:157(1):1-10.
    \139\ March 2015 Report to the Congress: Medicare Payment 
Policy. Medicare Payment Advisory Commission; 2015.
---------------------------------------------------------------------------

    A TEP convened by our measure development contractor provided input 
on the technical specifications of this proposed quality measure, Drug 
Regimen Review Conducted with Follow-Up for Identified Issues--PAC SNF 
QRP, including components of reliability, validity and the feasibility 
of implementing the measure across PAC settings. The TEP supported the 
measure's implementation across PAC settings and was supportive of our 
plans to standardize this measure for cross-setting development. A 
summary of the TEP proceedings is available on the PAC Quality 
Initiatives Downloads and Video Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    We solicited stakeholder feedback on the development of this 
measure by means of a public comment period held from September 18 
through October 6, 2015. Through public comments submitted by several 
stakeholders and organizations, we received support for implementation 
of this measure. The public comment summary report for the measure is 
available on the CMS Public Comment Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    The NQF-convened MAP met on December 14 and 15, 2015 and provided 
input on the use of this proposed quality measure, Drug Regimen Review 
Conducted with Follow-Up for Identified Issues--PAC SNF QRP. The MAP 
encouraged continued development of the proposed quality measure to 
meet the mandate added by the IMPACT Act. The MAP agreed with the 
measure gaps identified by us including medication reconciliation, and 
stressed that medication reconciliation be present as an ongoing 
process. More information about the MAPs recommendations for this 
measure is available at http://www.qualityforum.org/Publications/2016/
02/

[[Page 52036]]

MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-
_PAC-LTC.aspx.
    Since the MAP's review and recommendation of continued development, 
we have continued to refine this measure consistent with the MAP's 
recommendations. The measure is consistent with the information 
submitted to the MAP and support its scientific acceptability for use 
in quality reporting programs. Therefore, we proposed this measure for 
implementation in the SNF QRP as required by the IMPACT Act.
    We reviewed the NQF's endorsed measures and identified one NQF-
endorsed cross-setting quality measure related to medication 
reconciliation, which applies to the SNF, LTCH, IRF, and HHA settings 
of care: Care for Older Adults (COA) (NQF #0553). The quality measure, 
Care for Older Adults (COA) (NQF #0553) assesses the percentage of 
adults 66 years and older who had a medication review. The Care for 
Older Adults (COA) (NQF #0553) measure requires at least one medication 
review conducted by a prescribing practitioner or clinical pharmacist 
during the measurement year and the presence of a medication list in 
the medical record. This is in contrast to the proposed quality 
measure, Drug Regimen Review Conducted with Follow-Up for Identified 
Issues--PAC SNF QRP, which reports the percentage of resident stays in 
which a drug regimen review was conducted at the time of admission and 
that timely follow-up with a physician occurred each time one or more 
potential clinically significant medication issues were identified 
throughout that stay.
    After careful review of both quality measures, we decided to 
propose the quality measure, Drug Regimen Review Conducted with Follow-
Up for Identified Issues--PAC SNF QRP for the following reasons:
     The IMPACT Act requires the implementation of quality 
measures using patient assessment data that are standardized and 
interoperable across PAC settings. The quality measure, Drug Regimen 
Review Conducted with Follow-Up for Identified Issues--PAC SNF QRP, 
employs three standardized resident-assessment data elements for each 
of the four PAC settings so that data are standardized, interoperable, 
and comparable; whereas, the Care for Older Adults (COA), (NQF #0553) 
quality measure does not contain data elements that are standardized 
across all four PAC settings.
     The quality measure, Drug Regimen Review Conducted with 
Follow-Up for Identified Issues--PAC SNF QRP, requires the 
identification of potential clinically significant medication issues at 
the beginning, during and at the end of the resident's stay to capture 
data on each resident's complete PAC stay; whereas, the Care for Older 
Adults (COA), (NQF #0553) quality measure only requires annual 
documentation in the form of a medication list in the medical record of 
the target population.
     The quality measure, Drug Regimen Review Conducted with 
Follow-Up for Identified Issues--PAC SNF QRP, includes identification 
of the potential clinically significant medication issues and 
communication with the physician (or physician designee), as well as 
resolution of the issue(s) within a rapid timeframe (by midnight of the 
next calendar day); whereas, the Care for Older Adults (COA), (NQF 
#0553) quality measure does not include any follow-up or timeframe in 
which the follow-up would need to occur.
     The quality measure, Drug Regimen Review Conducted with 
Follow-Up for Identified Issues--PAC SNF QRP, does not have age 
exclusions; whereas, the Care for Older Adults (COA), (NQF #0553) 
quality measure limits the measure's population to patients aged 66 and 
older.
     The quality measure, Drug Regimen Review Conducted with 
Follow-Up for Identified Issues--PAC SNF QRP, will be reported to SNFs 
quarterly to facilitate internal quality monitoring and quality 
improvement in areas such as resident safety, care coordination and 
resident satisfaction; whereas, the Care for Older Adults (COA), (NQF 
#0553) quality measure would not enable quarterly quality updates, and 
thus data comparisons within and across PAC providers would be 
difficult due to the limited data and scope of the data collected.
    Therefore, based on the evidence discussed above, we proposed to 
adopt the quality measure entitled, Drug Regimen Review Conducted with 
Follow-Up for Identified Issues--PAC SNF QRP, for the SNF QRP for FY 
2020 payment determination and subsequent years. We plan to submit the 
quality measure to the NQF for consideration for endorsement.
    The calculation of the proposed quality measure would be based on 
the data collection of three standardized items to be included in the 
MDS. The collection of data by means of the standardized items would be 
obtained at admission and discharge. For more information about the 
data submission required for this measure, please see section V.B.9. of 
the FY 2017 SNF PPS proposed rule (81 FR 24270 through 24273).
    The standardized items used to calculate this proposed quality 
measure do not duplicate existing items currently used for data 
collection within the MDS. The measure denominator is the number of 
resident stays with a discharge or expired assessment during the 
reporting period. The measure numerator is the number of stays in the 
denominator where the medical record contains documentation of a drug 
regimen review conducted at: (1) Admission; and (2) discharge with a 
look back through the entire resident stay, with all potential 
clinically significant medication issues identified during the course 
of care and followed-up with a physician or physician designee by 
midnight of the next calendar day. This measure is not risk adjusted. 
For technical information about this measure including information 
about the measure calculation and discussion pertaining to the 
standardized items used to calculate this measure, refer to the 
document titled, Proposed Measure Specifications for Measures Proposed 
in the FY 2017 SNF QRP Proposed Rule available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    Data for the proposed quality measure, Drug Regimen Review 
Conducted with Follow-Up for Identified Issues--PAC SNF QRP, would be 
collected using the MDS with submission through the Quality Improvement 
Evaluation System (QIES) Assessment Submission and Processing (ASAP) 
system.
    We invited public comment on our proposal to adopt the quality 
measure, Drug Regimen Review Conducted with Follow-Up for Identified 
Issues--PAC SNF QRP, for the SNF QRP. The comments we received on this 
topic, with their responses, appear below.
    Comment: Several commenters, including MedPAC, expressed support 
for the quality measure. Further, several commenters expressed 
appreciation to us for proposing a quality measure to address the 
IMPACT Act domain, Medication Reconciliation, acknowledging the 
importance of medication reconciliation for addressing resident safety 
issues. Several commenters emphasized the importance of preventing and 
responding to Adverse Drug Events (ADEs) to reduce health services 
utilization and associated healthcare costs and emphasized that 
medication

[[Page 52037]]

reconciliation is fundamental to resident safety during care 
transitions.
    Response: We appreciate the commenters' support for the quality 
measure and the recognition of the importance of medication 
reconciliation as addressed in the measure. We agree that medication 
reconciliation is an important patient safety process for addressing 
medication accuracy during transitions in patient care and identifying 
preventable Adverse Drug Events (ADEs), which may lead to reduced 
health services utilization and associated costs.
    Comment: We received several comments regarding concerns about 
whether the measure has continued to be refined since the NQF-convened 
MAP meeting in December 2015. Many commenters noted that the MAP 
recommended ``continued development'' for the measure and requested 
evidence of robust testing of the measure to support measure validity. 
Several commenters requested that we test this measure prior to 
implementing it as part of the quality reporting system. One commenter 
further expressed that testing would enable us to more fully understand 
the benefits and limitations of the measure and its implication for 
providers and patients. Several commenters expressed concern that the 
measure was not NQF endorsed.
    Response: Since the time of the NQF-convened MAP, with our measure 
contractor, we tested this measure in a pilot test involving twelve 
post-acute care facilities (IRF, SNF, LTCH), representing variation 
across geographic location, size, profit status, and clinical records 
system. Two clinicians in each facility collected data on a sample of 
10 to 20 patients for a total of 298 records (147 qualifying pairs). 
Analysis of agreement between coders within each participating facility 
indicated a 71 percent agreement for item DRR-01 \140\ Drug Regimen 
Review (admission); 69 percent agreement for item DRR-02 \141\ 
Medication Follow-up (admission); and 61 percent agreement for DRR-03 
\142\ Medication Intervention (During Stay and Discharge). Overall, 
pilot testing enabled us to verify feasibility of the measure. 
Furthermore, measure development included convening a technical expert 
panel (TEP) to provide input on the technical specifications of this 
proposed quality measure, including components of reliability, validity 
and the feasibility of implementing the measure across PAC settings. 
The TEP included SNF stakeholders and supported the measure's 
implementation across PAC settings and was supportive of our plans to 
standardize this measure for cross-setting development. A summary of 
the TEP proceedings is available on the PAC Quality Initiatives 
Downloads and Videos Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
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    \140\ DRR pilot items DRR-01, DRR-02 and DRR-03 are equivalent 
to the proposed rule DRR PAC instrument items N. 2001, N. 2003 and 
N. 2005.
    \141\ DRR pilot items DRR-01, DRR-02 and DRR-03 are equivalent 
to the proposed rule DRR PAC instrument items N. 2001, N. 2003 and 
N. 2005.
    \142\ DRR pilot items DRR-01, DRR-02 and DRR-03 are equivalent 
to the proposed rule DRR PAC instrument items N. 2001, N. 2003 and 
N. 2005.
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    As noted above, we plan to conduct further testing on this measure 
once we have started collecting data from the PAC settings. Analysis of 
this data will allow us to evaluate whether the measure satisfies NQF 
endorsement criteria (for example, measure performance). Once we have 
completed this additional measure performance testing, we plan to 
submit the measure to NQF for endorsement.
    Comment: We received several comments about the lack of a specific 
definition of clinically significant medication issues for the measure. 
Several commenters were concerned that the phrase could be interpreted 
differently by the many providers involved in a resident's treatment, 
and that this could result in a challenge to collect reliable and 
accurate data for this quality measure. Several commenters requested 
that we provide additional guidance regarding this definition. One 
commenter suggested that it was premature for us to provide clarifying 
language because a related proposed rule regarding Discharge Planning 
(Reform of Requirements for Long-Term Care Facilities, 80 FR 42168) has 
not been finalized. One commenter further conveyed that, without 
further guidance on the definition of clinically significant, there are 
likely to be variations in measure performance that are not based on 
differences in care, but rather on differences in data collection.
    Response: For this measure, potential clinically significant 
medication issues are defined as those issues that, in the clinician's 
professional judgment, warrant interventions, such as alerting the 
physician and/or others, and the timely completion of any recommended 
actions (by midnight of the next calendar day) so as to avoid and 
mitigate any untoward or adverse outcomes. The definition of 
``clinically significant'' in this measure was conceptualized during 
the measure development process. For purposes of the measure, the 
decision regarding whether or not a medication issue is ``clinically 
significant'' will need to be made on a case-by-case basis, but we also 
intend to provide additional guidance and training on this issue.
    Comment: We received several comments related to the State 
Operations Manual (SOM) Sec.  483.60(c). One commenter requested that 
we provide further guidance on how the measure relates to the 
``medication regimen review'' within the SOM. Many commenters 
recommended that the definitions of potentially clinically significant 
medication issues and drug regimen review align with similar 
definitions in the SOM. One commenter further requested that we allow 
the existing SNF SOM required reviews to fulfill the requirements of 
the measure. One commenter further noted that the definitions contained 
in the measure are not as clinically detailed (as the SOM), are not PAC 
setting inclusive, and do not acknowledge the need for a multiple 
disciplinary team. The commenter also noted that the SOM uses the term 
``medication'' rather than ``drug'' and offers that ``medication'' is a 
more appropriate title to the measure. One commenter conveyed a need 
for clarification in how the measure will interface with the current 
SNF requirements for drug regimen review. One commenter expressed 
concern that the requirements of the measure potentially conflict with 
the requirements CMS SNF State Operations Manual.
    Response: We acknowledge the commenters' request to align other 
regulatory requirements involving medication regimen review with the 
measure such as the State Operations Manual Sec.  483.60(c). We would 
like to note that during the development of this measure, the 
definitions as detailed in the SOM were taken into consideration. We do 
not believe that the measure's use of terminology of ``clinically 
significant'' overrides the guidance as outlined in the SOM. Further, 
we wish to clarify that the specification of the measure does not 
preclude the activities of drug regimen reviews that are consistent 
with the SOM. We would like to reiterate that this measure was 
developed to assess whether PAC providers were responsive to potential 
or actual clinically significant medication issue(s) when such issues 
were identified and was not developed for regulatory purposes for 
Skilled Nursing Facilities to be in compliance with the requirements of 
the 42 CFR part 483. In particular, the SOM

[[Page 52038]]

Appendix PP--Guidance to Surveyors for Long Term Care Facilities, under 
Sec.  483.60(c) Drug Regimen Review, references pharmacy services 
requirements where: (1) The drug regimen of each resident must be 
reviewed at least once a month by a licensed pharmacist; and (2) The 
pharmacist must report any irregularities to the attending physician, 
and the director of nursing, and these reports must be acted upon. The 
measure, Drug Regimen Review Conducted with Follow-Up for Identified 
Issues--PAC SNF QRP reports the percentage of resident stays in which a 
drug regimen review was conducted at the time of admission, and timely 
follow-up with a physician occurred each time potential clinically 
significant medication issues were identified throughout that stay.
    Comment: Several commenters were concerned that the measure does 
not meet the medication reconciliation domain of the IMPACT Act. In 
particular, these commenters believe that the proposed quality measure 
goes beyond the statutory mandate by incorporating drug regimen 
(medication) review into the measure. Commenters supported measure 
development related to the concepts of drug regimen review and 
medication reconciliation in reducing unnecessary rehospitalizations, 
preventable adverse events, and improving health care outcomes, but 
maintained that the services provided as part of drug regimen review 
are distinctly different from the services provided as part of 
medication reconciliation, and that they are completed by different 
members of the care team. One commenter conveyed that the measure has 
not been proven to be relevant to medication reconciliation.
    Response: We disagree with the commenters' suggestion that the 
measure does not meet the requirements of the IMPACT Act. Medication 
reconciliation and drug regimen review are interrelated activities; 
while medication reconciliation is a process that identifies the most 
accurate and current list of medications, particularly during 
transitions of care, it also includes the evaluation of the name, 
dosage, frequency, and route. Drug regimen review is a process that 
necessitates and includes the review of all medications for additional 
purposes such as the identification of potential adverse effects. The 
process of drug regimen review includes medication reconciliation at 
the time of resident transitions and throughout the resident's stay. 
Therefore, we believe that medication reconciliation and drug regimen 
review are processes that are appropriate to combine in a single 
measure for purposes of the SNF QRP.
    Comment: We received several comments regarding the time frame for 
the measure and resulting burden. Several commenters noted that 
requiring SNFs to notify the physician within one day was unreasonable. 
One commenter was concerned that the requirement that a physician be 
contacted within a day was too prescriptive, given that it may take 
more than a day for a physician to return a call, and suggested that we 
adopt a more reasonable standard. Further, another commenter suggested 
that this timeline created a mandate that many SNFs simply won't be 
able to meet. One commenter acknowledged that medication issues need to 
be resolved with urgency, but conveyed that the timeframe requirements 
of the measure are not feasible, citing limitations with the 
prescriber's and the hospitalist's availability to respond to issues 
and limited access to information technology that supports the prompt 
resolution of issues. Another commenter also noted that while 
clinically significant medical issues are required to be reported in a 
timely process, the word timely has not been adequately defined. One 
commenter suggested that we abandon the measure and instead verify that 
medication reconciliation is provided upon admission. Another commenter 
suggested that we clarify whether physician follow up is only required 
for clinically significant issues, rather than each time the drug 
regimen review is conducted.
    Several commenters conveyed concern that the time frame of the 
measure (for example, following up by midnight of the next calendar 
day) will create challenges for rural SNFs without an in-house pharmacy 
or physicians, and that the measure will increase operational and 
financial challenges for long-term care providers. A few commenters 
asked us to consider reforms to mitigate the burden for providers 
located in rural areas. Another commenter conveyed that additional 
questions on the MDS would result in additional staff cost and effort. 
One commenter noted that many SNFs have not implemented electronic 
medical records, which will increase the burden associated with 
collecting this information. One commenter recommended that we work 
with stakeholders to develop a policy that aligns with the resident's 
best interest and accounts for the complex post-acute care setting.
    Response: We appreciate the challenges that SNFs face when they 
have to coordinate resident care with a treatment team that may include 
physicians, non-physician practitioners, pharmacists and others, and 
also appreciate that some of these treatment team members might not 
work full-time at the SNF. However, we chose to set the intervention 
timeline as midnight of the next calendar day because we believe this 
timeline is consistent with current standard clinical practice where a 
clinically significant medication issue arises. We believe that high 
quality care should be provided wherever resident services are 
administered, including small and rural facilities, and that these 
activities, in addition to any regulatory requirements, ensure such 
high quality care is provided and patient harm avoided.
    Comment: We received several comments related to the role of 
pharmacists in drug regimen review. One commenter expressed concern 
that the measure would require frequent consultant pharmacist visits to 
the SNF without providing more funding to cover additional expenses. 
Many commenters suggested that we redefine the measure to allow the SNF 
to determine which licensed professional provides the medication 
reconciliation. These commenters recommended that we recognize the 
essential role that pharmacists play in providing services to 
beneficiaries. One commenter submitted a study that noted the monetary 
savings that drug regimen review by pharmacists have provided to post-
acute care residential facilities. Several commenters expressed that 
pharmacists should receive compensation for service they provide around 
this measure. One commenter encouraged us to consider ways in which to 
provide incentives to LTC pharmacies for the savings and improved care.
    Response: We recognize the essential role that pharmacists, as well 
as other members of the SNF treatment team, play in furnishing services 
to Medicare beneficiaries. This measure does not supersede or conflict 
with current CMS guidance or regulations related to drug regimen 
review. The measure also does not specify what clinical professional is 
required to perform these activities.
    Comment: We received several comments pertaining to the scope of 
the measure. One commenter conveyed that the CMS definition of 
Medication Reconciliation in a measure for hospitals differs from the 
definition for purposes of the proposed SNF QRP measure. One commenter 
conveyed opposition to the measure, expressing that the measure 
calculation proposes to capture a number of action steps within this 
single measure. Many commenters

[[Page 52039]]

expressed concerns that the measure may not accurately capture SNF 
performance, given all the work that the SNF and pharmacy undertake to 
ensure that medication-related issues are addressed prior to dispensing 
medication.
    Response: The Drug Regimen Review Conducted with Follow-Up for 
Identified Issues--PAC SNF QRP measure evaluates medication 
reconciliation in conjunction with drug regimen review in the post 
acute care setting, which distinguishes it from solely medication 
reconciliation that is conducted in the hospital which we believe the 
commenter is referring to. We believe it is appropriate that the 
measure captures multiple action steps in a single measure as drug 
regimen review is a multifaceted process that should take place 
throughout the resident's stay.
    Comment: We received a comment suggesting that we inaccurately 
represented that an article by American Geriatric Society suggests (and 
therefore aides our position) that drug regimen review includes a 
medication reconciliation and review of the patient's drug regimen to 
identify potential issues.
    Response: The commenter is correct regarding an inaccurate 
reference. We inadvertently attributed reference to the American 
Geriatric Society in our discussion. Therefore, we have corrected the 
reference and replaced it with the intended one (Institute of Medicine. 
Preventing Medication Errors. Washington, DC: National Academies Press; 
2006).
    Comment: One commenter supported the need for medication 
reconciliation, but had concerns about factors outside the facility's 
control. The commenter conveyed the challenge of medication 
reconciliation across the continuum, conveying the importance of a 
discharge summary from the prior care setting that includes a thorough 
medication list, by indication, in avoiding therapeutic duplication. 
The commenter suggested that we consider the need for increased 
collaboration with hospitals to address this issue. Other commenters, 
including MedPAC, suggested that we develop a measure that evaluates 
whether PAC providers are sending medication lists home or to the next 
level of care. These commenters suggested that requiring providers to 
transfer medication lists may improve monitoring of the patient's 
condition, which may help prevent readmissions and unintended medical 
harm. Another commenter recommended that we add a medication management 
measure to fully address patients' medication management routine needs 
in order to prepare patients for discharge to PAC settings or the 
community.
    Response: We appreciate the comments about the importance of 
collaboration across the continuum of care, as well as the value of a 
detailed discharge summary from the prior level of care. We believe 
that all providers should strive to ensure accurate, sufficient, and 
efficient patient-centered care during their care transitions across 
the continuum, including medication oversight. Thus while we may 
implement quality measures that address gaps in quality, such as 
information exchange during care transitions, ultimately providers must 
act to ensure that such coordination is taking place.
    We appreciate the commenter's comment and interest in future 
quality measure development, including measures related to sending a 
medication list at discharge and adding a medication management 
measure. As a requirement of this measure and as with common clinical 
practice, PAC facilities are expected to document information 
pertaining to the process of drug regimen review, which includes 
medication reconciliation, in the resident's discharge medical record. 
However, we will take the commenters recommendations into consideration 
as we continue to develop additional quality measures under the domain 
of Medication Reconciliation.
    Comment: One commenter encouraged us to make the reporting of the 
measure, Drug Regimen Review Conducted with Follow-Up for Identified 
Issues--PAC SNF QRP, available to SNFs in real time through the CASPER 
Quality Measures report in QIES ASAP system.
    Response: We thank the commenter for their suggestion. We 
anticipate making this measure information available to SNFs in the 
CASPER Quality Measures reports beginning approximately in October, 
2020. Confidential SNF feedback on this measure will be made available 
to SNFs in October, 2019.
    Comment: We received a comment about the role of registered nurses 
in the medication reconciliation process. The commenter recognized the 
critical importance of medication reconciliation and cited research 
demonstrating that registered nurses (RNs) are more likely to identify 
medication discrepancies in nursing facilities than licensed practical 
nurses (LPNs); the commenter encouraged us, in the Conditions of 
Participation for Skilled Nursing Facilities (SNFs) and Nursing 
Facilities (NFs), to require that facilities employ RNs 24 hours per 
day.
    Response: We thank the commenter for recognizing the importance of 
medication reconciliation and the role of registered nurses in the 
medication reconciliation process.
    Comment: We received a comment about materials that were posted on 
the CMS Public Comment Web site for a public comment period held from 
September 18 through October 6, 2015. The comment specifically included 
specific questions regarding the language used in the ``Importance'' 
section of the Measure Justification Form, which requests the measure 
developer quote verbatim currently published clinical practice 
guidelines. The commenter noted the absence of an ``Outcome 1,'' which 
is defined as functional status, in the quoted material. Additionally, 
the commenter expressed concern about specific targets within the goal 
of reducing polypharmacy and about guidelines for calculating 
creatinine clearance levels and about the Cockcroft Gault Score. 
Finally, the commenter noted that it is clinically unrealistic to have 
an expected outcome of ``No adverse drug reactions, no drugs ordered to 
treat side effects or adverse reaction.''
    Response: We thank the commenter for their comments but wish to 
clarify that the document they reference, the Measure Justification 
Form, was posted for a prior public comment period that was not part of 
the proposed rule. We also wish to clarify that language that was 
commented on was derived directly from published clinical practice 
guidelines and not by CMS.
    Final Decision: After consideration of the public comments, we are 
finalizing our proposal to adopt the measure, Drug Regimen Review 
Conducted with Follow-Up for Identified Issues--PAC SNF QRP measure for 
the SNF QRP for the FY 2020 payment determination and subsequent years, 
as described in the Measure Specifications for Measures Adopted in the 
FY 2017 SNF QRP final rule, available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
h. SNF QRP Quality Measures and Measure Concepts Under Consideration 
for Future Years
    We invited comment on the importance, relevance, appropriateness, 
and applicability for each of the quality measures in Table 13 for 
future years in

[[Page 52040]]

the SNF QRP. We are developing a measure related to the IMPACT Act 
domain, accurately communicating the existence of and providing for the 
transfer of health information and care preferences of an individual to 
the individual, family caregiver of the individual, and providers of 
services furnishing items and services to the individual, when the 
individual transitions. We are considering the possibility of adding 
quality measures that rely on the patient's perspective; that is, 
measures that include patient-reported experience of care and health 
status data. For this purpose, we are considering a measure focused on 
pain and four measures focused on function that rely on the collection 
of patient-reported data. Finally, we are considering a measure related 
to health and well-being, Percent of Residents or Patients Who Were 
Assessed and Appropriately Given the Seasonal Influenza Vaccine, and a 
measure related to patient safety, Percent of SNF Residents Who Newly 
Received an Antipsychotic Medication.

 Table 13--SNF QRP Quality Measures Under Consideration for Future Years
------------------------------------------------------------------------
 
------------------------------------------------------------------------
IMPACT Act Domain.................  Accurately communicating the
                                     existence of and providing for the
                                     transfer of health information and
                                     care preferences of an individual
                                     to the individual, family caregiver
                                     of the individual, and providers of
                                     services furnishing items and
                                     services to the individual, when
                                     the individual transitions.
IMPACT Act Measure................   Transfer of health
                                     information and care preferences
                                     when an individual transitions.
NQS Priority......................  Patient- and Caregiver-Centered
                                     Care.
Measures..........................   Percent of Residents Who
                                     Self-Report Moderate to Severe Pain
                                     Application of the Change
                                     in Self-Care Score for Medical
                                     Rehabilitation Patients (NQF #2633)
                                     Application of the Change
                                     in Mobility Score for Medical
                                     Rehabilitation Patients (NQF #2634)
                                     Application of the
                                     Discharge Self-Care Score for
                                     Medical Rehabilitation Patients
                                     (NQF #2635)
                                     Application of the
                                     Discharge Mobility Score for
                                     Medical Rehabilitation Patients
                                     (NQF #2636).
NQS Priority......................  Health and Well-Being.
Measure...........................   Percent of Residents or
                                     Patients Who Were Assessed and
                                     Appropriately Given the Seasonal
                                     Influenza Vaccine.
NQS Priority......................  Patient Safety.
Measure...........................   Percent of SNF Residents
                                     Who Newly Received an Antipsychotic
                                     Medication.
------------------------------------------------------------------------
The comments we received on this topic, with their responses, appear
  below.

    Comment: We received several comments supporting the inclusion of 
measures regarding the transfer of health information and care 
preferences. One commenter encouraged the inclusion of measures that 
capture the role of family caregivers in supporting care transitions, 
quality outcomes, and individual care preferences. Another commenter 
recommended pilot testing measures regarding transfer of health 
information and preferences; while another suggested a measure that 
would incentivize the adoption of health IT around the domain 
requirement to support the electronic transmission of health 
information and care preferences.
    Response: We thank the commenters for their comments and agree that 
the transfer of health information across PAC settings is important to 
capture. As we move through the development of this measure concept, we 
will consider the inclusion of the role of family caregivers in 
supporting care transitions, quality outcomes, and individual care 
preferences. In addition, we will take into consideration the 
commenters' recommendations pertaining to the pilot testing for these 
measure concepts.
    Comment: We received comments that were broadly supportive of 
patient- and caregiver-reported measures and agreed that they are 
meaningful to patients and their families.
    Response: We thank the commenters for their support of patient-
reported measures under consideration for future implementation in the 
SNF QRP and agree with the importance of patient- and caregiver-
centered measures such as these.
    Comment: Several commenters supported the potential future use of 
the four self-reported function measures. One commenter supported risk 
adjustment of these measures and the focus on patient-centered 
outcomes. Another supported the use of the four self-reported function 
measures applied from the IRF setting and emphasized the importance of 
alignment across PAC settings and encouraged measure testing in the SNF 
setting prior to implementation. Another commenter recommended that SNF 
residents should be excluded from measures related to change in 
function if there is no expectation of functional improvement.
    Several commenters suggested the development of function measures 
addressing cognition. One commenter remarked on the limited number of 
items in the MDS related to communication, cognition, and swallowing 
and noted that these three domains stand as major obstacles to validly 
determine the status, needs, and outcomes of individuals with 
neurological disorders. The commenter encouraged us to adopt a specific 
screening tool, the Montreal Cognitive Assessment (MoCA), or similar 
screening tools and assessment tools (that is, CARE-C) to best meet the 
needs of Medicare beneficiaries and the intent of the IMPACT Act.
    Another commenter recommended that we consider community-based 
measures of function, examining patient outcomes after they are 
discharged from a PAC setting. One commenter encouraged the development 
of an outcome measure to meet the IMPACT Act domain of functional 
status, suggesting the NH Compare measure, Percent of Residents Whose 
Need for Help with Activities of Daily Living has Increased (Long 
Stay).
    Response: We thank the commenters for their support of the four 
self-reported function measures under consideration for future 
implementation in the SNF QRP. We also appreciate commenters' 
suggestions regarding the development and specification of these 
measures as well as additional measure concepts or areas related to 
function that we should consider. We agree that the implementation of 
outcome measures of function in the SNF QRP is a priority. We also 
agree that future measure development should include other areas of 
function, such as communication, cognition, and swallowing. We will 
continue to engage stakeholders in future measure development. We will 
take these suggested quality measure concepts and recommendations 
regarding measure specifications into consideration in our ongoing 
measure development and testing efforts.

[[Page 52041]]

    Comment: We received several comments regarding pain management and 
prevention. One commenter suggested that we consider HCAHPS measures 
related to pain control, while another commenter suggested such a 
measure should reflect a patient-centered approach to pain management 
instead of level and frequency of pain symptoms. We also received a 
comment encouraging the use of the CAHPS NH survey to examine resident 
and family members' experience of care.
    Response: We will take these suggested quality measure concepts and 
recommendations regarding measure specifications into consideration in 
our ongoing measure development and testing efforts.
    Comment: We received several comments supporting a future seasonal 
influenza vaccination measure. Several commenters encouraged us to 
consider other immunization measures for the SNF QRP, including a 
pneumococcal vaccine measure. One commenter encouraged consideration of 
the cost of delivering these services as they may have financial 
implications for SNFs.
    Response: We thank the commenters for their support of a future 
seasonal influenza vaccination measure. Cost burden for providers is 
always a consideration as we develop and implement new measures. We 
appreciate the commenters' feedback on potential measure development 
areas related to immunization. We will take their recommendations into 
consideration in our measure development and testing efforts, as well 
as in our ongoing efforts to identify and propose appropriate measures 
for the SNF QRP in the future.
    Comment: We received several comments supporting the inclusion of 
the antipsychotic quality measure (listed on the Nursing Home Compare 
Web site) in the SNF QRP. One commenter supported the measure but 
cautioned against adapting the pre-existing, non-NQF-endorsed 
antipsychotic measures currently used in nursing homes, indicating that 
these process measures do not provide a linkage to clinical outcomes or 
intermediate outcomes. Commenters also emphasized the need for the 
measures to account for situations where continued or newly prescribed 
antipsychotics would be clinically appropriate.
    Response: We appreciate commenters' feedback on this potential 
measure development area. We will take their recommendations into 
consideration in our measure development and testing efforts, as well 
as in our ongoing efforts to identify and propose appropriate measures 
for the SNF QRP in the future.
    Comment: Commenters suggested additional measures and measure 
concepts for us to consider for future implementation in the SNF QRP, 
including workforce-related measures and measures assessing resident 
experience of care, engagement, and shared decision-making. Several 
commenters recommended that CMS consider incorporating various Nursing 
Home Compare measures into the SNF QRP.
    Response: We thank commenters for their suggestions regarding areas 
for potential future measure development. We will take their 
recommendations into consideration in our measure development and 
testing efforts, as well as in our ongoing efforts to identify and 
propose appropriate measures for the SNF QRP in the future.
i. Form, Manner, and Timing of Quality Data Submission
i. Participation/Timing for New SNFs
    In the FY 2016 SNF PPS final rule (80 FR 46455), we established the 
requirements associated with the timing of data submission, beginning 
with the submission of data required for the FY 2018 payment 
determination, for new SNFs. We finalized that a new SNF would be 
required to begin reporting data on any quality measures finalized for 
that program year by no later than the first day of the calendar 
quarter subsequent to 30 days after the date on its CMS Certification 
Number (CCN) notification letter. For example, for the FY 2018 payment 
determinations, if a SNF received its CCN on August 28, 2016, and 30 
days are added (August 28 + 30 days = September 27), the SNF would be 
required to submit data for residents who are admitted beginning on 
October 1, 2016. We did not propose any new policies related to the 
participation and timing for new SNFs.
ii. Finalized Data Collection Timelines and Requirements for the FY 
2018 Payment Determination and Subsequent Years
    In the FY 2016 SNF PPS final rule (80 FR 46457), for the FY 2018 
payment determination, we finalized that SNFs submit data on the three 
finalized quality measures for residents who are admitted to the SNF on 
and after October 1, 2016, and discharged from the SNF up to and 
including December 31, 2016, using the data submission method and 
schedule that we proposed in this section. We also finalized that we 
would collect that single quarter of data for FY 2018 to remain 
consistent with the usual October release schedule for the MDS, to give 
SNFs a sufficient amount of time to update their systems so that they 
can comply with the new data reporting requirements, and to give CMS a 
sufficient amount of time to determine compliance for the FY 2018 
program. The proposed use of one quarter of data for the initial year 
of quality reporting is consistent with the approach we used to 
implement a number of other QRPs, including the LTCH, IRF, and Hospice 
QRPs.
    We also finalized that, following the close of the reporting 
quarter, October 1, 2016, through December 31, 2016, for the FY 2018 
payment determination, SNFs would have an additional 5.5 months to 
correct and/or submit their quality data and we finalized that the 
final deadline for submitting data for the FY 2018 payment 
determination would be May 15, 2017 (80 FR 46457). The statement that 
SNFs would have an additional 5.5 months was incorrect in that the time 
between the close of the quarter on December 31, 2016 and May 15, 2017 
is 4.5 months, not 5.5 months. Therefore, we proposed that SNFs will 
have 4.5 months, from January 1, 2017 through May 15, 2017, following 
the data submission period of October 1, 2016 through December 31, 
2016, in which to complete their data submissions and make corrections 
to their data where necessary.

   Table 14--Finalized Measures, Data Collection Source, Data Collection Period and Data Submission Deadlines
                                   Affecting the FY 2018 Payment Determination
----------------------------------------------------------------------------------------------------------------
                                                                                             Data submission
           Quality measure                Data  collection      Data collection period    deadline for  FY 2018
                                               source                                     payment  determination
----------------------------------------------------------------------------------------------------------------
NQF # 0678: Percent of Patients or     MDS                     10/01/16-12/31/16.......  May 15, 2017.
 Residents with Pressure Ulcers that
 are New or Worsened.
NQF # 0674: Application of Percent of  MDS                     10/01/16-12/31/16.......  May 15, 2017.
 Residents Experiencing One or More
 Falls with Major Injury (Long Stay).

[[Page 52042]]

 
NQF # 2631: Application of Percent of  MDS                     10/01/16-12/31/16.......  May 15, 2017.
 Long-Term Care Hospital Patients
 with an Admission and Discharge
 Functional Assessment and a Care
 Plan that Addresses Function.
----------------------------------------------------------------------------------------------------------------

    We invited public comments on our proposal to correct the time 
frame for SNFs to correct and/or submit their quality data used for the 
FY 2018 payment determination to consist of 4.5 months rather than the 
5.5 months stated in the FY 2016 SNF PPS final rule (80 FR 46457). We 
received no comments on this proposed correction.
    Final decision: We are finalizing as proposed that for the FY 2018 
payment determination, SNFs will have 4.5 months following the end of 
the reporting quarter to complete their data submissions and make 
corrections to their data where necessary.
iii. Data Collection Timelines and Requirements for the FY 2019 Payment 
Determinations and Subsequent Years
    In the FY 2016 SNF PPS final rule (80 FR 46457), we finalized that, 
for the FY 2019 payment determination, we would collect data from the 
2nd through 4th quarters of FY 2017 (that is, data for residents who 
are admitted from January 1st and discharged up to and including 
September 30th) to determine whether a SNF has met its quality 
reporting requirements for that FY. In the FY 2016 SNF PPS final rule 
we also finalized that beginning with the FY 2020 payment 
determination, we would move to a full year of fiscal year (FY) data 
collection. We intend to propose the FY 2019 payment determination 
quality reporting data submission deadlines in future rulemaking.
    In the FY 2016 SNF PPS final rule (80 FR 46457), we also finalized 
that we would collect FY 2018 data in a manner that would remain 
consistent with the usual October release schedule for the MDS. 
However, to align with the data reporting cycles in other quality 
reporting programs, in contrast to fiscal year data collection that we 
finalized last year, we are now proposing to move to calendar year (CY) 
reporting following the initial reporting of data from October 1, 2016, 
through December 31, 2016, as finalized in the FY 2016 SNF PPS final 
rule (80 FR 46457), for the FY 2018 payment determination.
    More specifically, we proposed to follow a CY schedule for measure 
and data submission requirements that includes quarterly deadlines 
following each quarter of data submission, beginning with data 
reporting for the FY 2019 payment determinations. Each quarterly 
deadline will occur approximately 4.5 months after the end of a given 
calendar quarter as outlined below in Table 15. This timeframe will 
give SNFs enough time to submit corrections to the assessment data, as 
discussed below. Thus, if finalized, the FY 2019 payment determination 
would be based on 12 calendar months of data reporting beginning on 
January 1, 2017, and ending on December 31, 2017 (that is, data from 
January 1, 2017, up to and including December 31, 2017.) This approach 
would enable CMS to move to a full 12 months of data reporting 
immediately following the first 3 months of reporting (October 1, 2016 
through December 31, 2016 for the FY 2018 payment determination) rather 
than an interim year which uses only 9 months of data, and a subsequent 
12 months of FY data reporting following the initial reporting for the 
FY 2018 payment determination.
    Our proposal to implement, for the FY 2019 payment determination 
and all subsequent years for assessment-based data submitted via the 
MDS, calendar year, quarterly data collection periods followed by data 
submission deadlines is consistent with the approach taken by the LTCH 
QRP and the IRF QRP, which are based on CY data and for which each data 
collection quarterly period is followed by a 4.5 month time frame that 
allows for the continued submission and correction of data until a 
deadline has been reached for that quarter of data. At that point, the 
data submitted becomes a frozen ``snapshot'' of data for both public 
reporting purposes and for the purposes of determining compliance in 
meeting the data reporting thresholds.

      Table 15--Proposed Data Collection Period and Data Submission Deadlines Affecting the FY 2019 Payment
                                       Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
                                                                                           Quarterly review and
                                                                                          correction periods and
                                          Data  collection         Data collection/          data submission
           Quality measure                     source            submission quarterly    quarterly deadlines for
                                                                  reporting period *         FY 2019 payment
                                                                                             determination **
----------------------------------------------------------------------------------------------------------------
NQF # 0678: Percent of Patients or     MDS                     CY 2017 Q1--1/1/2017-3/   CY 2017 Q1 Deadline:
 Residents with Pressure Ulcers that                            31/2017.                  August 15, 2017.
 are New or Worsened.
NQF # 0674: Application of Percent of                          CY 2017 Q2--4/1/2017-6/   CY 2017 Q2 Deadline:
 Residents Experiencing One or More                             30/17.                    November 15, 2017.
 Falls with Major Injury (Long Stay)
NQF #2631: Application of Percent of                           CY 2017 Q3--7/1/2017-9/   CY 2017 Q3 Deadline:
 Long-Term Care Hospital Patients                               30/2017.                  February 15, 2018.
 with an Admission and Discharge                               CY 2017 Q4--10/1/2017-12/ CY 2017 Q4 Deadline:
 Functional Assessment and a Care                               31/2017.                  May 15, 2018.
 Plan that Addresses Function
----------------------------------------------------------------------------------------------------------------
* Data collection/submission will follow a similar quarterly reporting period schedule for subsequent CYs.
** Data review and correction periods and data submission deadlines will follow a similar quarterly schedule for
  subsequent CYs.

    We invited public comments on our proposal to adopt calendar year 
data collection time frames, following the initial 3-month reporting 
period from October 1, 2016, to December 31, 2016, for all measures 
finalized for adoption

[[Page 52043]]

into the SNF QRP. The comments we received on this topic, with their 
responses, appear below.
    Comment: We received several comments supporting our proposal to 
move to a CY reporting schedule to align with the LTCH and IRF QRPs.
    Response: We appreciate the commenters' support of our proposal to 
move to a calendar year reporting schedule, which is consistent with 
the approach we also use for the LTCH and IRF QRPs. We seek to align 
requirements across QRPs whenever possible.
    Comment: We received one comment supporting the continuation of the 
October release schedule for updates to the MDS and the alignment of 
data collection with that October release schedule.
    Response: We appreciate the commenters' support of our alignment of 
the beginning of the initial data collection period for new measures 
with the October release schedule for the MDS and moving to CY 
reporting following the initial data collection period.
    Further, we proposed that beginning with FY 2019 payment 
determination, assessment-based measures finalized for adoption into 
the SNF QRP will follow a CY schedule of data reporting, quarterly 
review and correction periods, and data submission deadlines as 
provided in Tables 15 and 16 for all subsequent payment determination 
years unless otherwise specified:

 Table 16--Proposed Data Collection Period and Data Submission Deadlines
    Affecting the FY 2019 Payment Determination and Subsequent Years
------------------------------------------------------------------------
                                                    Quarterly review and
                                                     correction periods
                                Data collection/     and data submission
 CY data collection quarter   submission quarterly      deadlines for
                                reporting period           payment
                                                        determination
------------------------------------------------------------------------
Quarter 1...................  January 1-March 31..  April 1-August 15.
Quarter 2...................  April 1-June 30.....  July 1-November 15.
Quarter 3...................  July 1-September 30.  October 1-February
                                                     15.
Quarter 4...................  October 1-December    January 1-May 15.
                               31.
------------------------------------------------------------------------

    We invited public comments on the proposed data collection period 
and data submission deadlines for all assessment-based measures 
finalized for adoption into the SNF QRP beginning with the FY 2019 
payment determination, specifically, on our use of CY reporting with 
data submission deadlines following a period of approximately 4.5 
months after each quarterly data collection period to enable the 
correction of such data, as outlined in Table 16. We received no 
additional comments on this proposed general schedule.
    Final decision: We are finalizing our proposed data collection 
period and data submission deadlines for all assessment-based measures 
finalized for adoption into the SNF QRP beginning with FY 2019 payment 
determination, as outlined in Tables 15 and 16.
iv. Timeline and Data Submission Mechanisms for Claims-Based Measures 
for the FY 2018 Payment Determination and Subsequent Years
    The Medicare Spending per Beneficiary--PAC SNF QRP, Discharge to 
Community--PAC SNF QRP, and Potentially Preventable Potentially 
Preventable 30-Day Post-Discharge Readmission Measure for SNF QRP 
measures are Medicare FFS claims-based measures. Because claims-based 
measures can be calculated based on data that are already reported to 
the Medicare program for payment purposes, no additional information 
collection will be required from SNFs. As discussed in section V.B.6. 
of the FY 2017 SNF PPS proposed rule (81 FR 24257 through 24267), for 
the Medicare Spending per Beneficiary--PAC SNF QRP Measure, the 
Discharge to Community--PAC SNF QRP measure and the Potentially 
Preventable 30-Day Post-Discharge Readmission Measure for SNF QRP, we 
proposed to use 1 year of claims data beginning with CY 2016 claims 
data to inform confidential feedback reports for SNFs, and CY 2017 
claims data for public reporting.
    We invited public comments on this proposal. We did not receive any 
comments specifically related to this proposal.
    Final Decision: We are finalizing the timeline and data submission 
mechanisms for claims-based measures proposed for the FY 2018 payment 
determination and subsequent years as proposed in Tables 15 and 16.
v. Timeline and Data Submission Mechanisms for the FY 2020 Payment 
Determination and Subsequent Years for New SNF QRP Assessment-Based 
Quality Measure
    We proposed that SNFs would submit data on the Drug Regimen Review 
measure by completing data elements to be included in the MDS and then 
submitting the MDS to CMS through the Quality Improvement and 
Evaluation System (QIES), Assessment Submission and Processing System 
(ASAP) system beginning October 1, 2018. For more information on SNF 
QRP reporting through the QIES ASAP system, refer to the ``Related 
Links'' section at the bottom of https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/index.html?redirect=/NursingHomeQualityInits/30_NHQIMDS30TechnicalInformation.asp#TopOfPage.
    We invited public comments on our proposed SNF QRP data collection 
requirements for the Drug Regimen Review measure for the FY 2020 
payment determination and subsequent years. We did not receive any 
comments related to this topic.
    For the FY 2020 payment determination, we proposed that SNFs submit 
data on the proposed assessment-based quality measure for residents who 
are admitted to the SNF on and after October 1, 2018, and discharged 
from SNF Part A covered stays (that is, both residents discharged from 
Part A covered stays and physically discharged) up to and including 
December 31, 2018, using the data submission schedule that we proposed 
in this section.
    We proposed to collect a single quarter of data for the FY 2020 
payment determination to remain consistent with the usual October 
release schedule for the MDS, to give SNFs a sufficient amount of time 
to update their systems so that they can comply with the new data 
reporting requirements, and to give CMS a sufficient amount of time to 
determine compliance for the FY 2020 program. The proposed use of one 
quarter of data for the initial year of assessment data reporting in 
the SNF QRP is consistent with the approach we used previously for the 
SNF QRP and in other QRPs, including the LTCH, IRF, and Hospice QRPs in 
which we have finalized the use of fewer than 12 months of data.

[[Page 52044]]

    We also proposed that following the close of the reporting quarter, 
October 1, 2018, through December 31, 2018, for the FY 2020 payment 
determination, SNFs would have an additional 4.5 months to correct and/
or submit their quality data and that the final deadline for submitting 
data for the FY 2020 payment determination would be May 15, 2019. We 
further proposed that for the FY 2021 payment determination and 
subsequent years, we will collect data using the CY reporting cycle as 
previously proposed in section V.B.9.c. of the FY 2017 SNF PPS proposed 
rule (81 FR 24271 through 24272).

   Table 17--Proposed New SNF QRP Assessment-Based Quality Measures Data Collection Period and Data Submission
                              Deadlines Affecting the FY 2020 Payment Determination
----------------------------------------------------------------------------------------------------------------
                                                                   Data collection/          Data submission
           Quality measure                Data  collection       submission  reporting    deadline for  FY 2020
                                               source                   period            payment  determination
----------------------------------------------------------------------------------------------------------------
Drug Regimen Review Conducted with     MDS                     10/01/18-12/31/18.......  May 15, 2019.
 Follow-Up for Identified Issues--PAC
 SNF QRP.
----------------------------------------------------------------------------------------------------------------

    We invited public comment on the proposed new SNF QRP assessment-
based quality measure data collection period and data submission 
deadline affecting the FY 2020 payment determination. We did not 
receive comments related to this topic.
    Final Decision: We are finalizing as proposed the timeline and data 
submission mechanism for the FY 2020 payment determination for the new 
assessment-based quality as provided in Table 17.
    For this measure, we also proposed to follow a CY schedule for 
measure and data submission requirements that includes quarterly 
deadlines following each quarter of data submission, beginning with 
data reporting for the FY 2021 payment determinations. As previously 
discussed, each quarterly deadline will occur approximately 4.5 months 
after the end of a given calendar quarter as outlined in Table 18. 
Thus, if finalized, the FY 2021 payment determination would be based on 
12 calendar months of data reporting beginning January 1, 2019, and 
ending December 31, 2019. Table 18 provides the data submission and 
collection method, data collection period and data submission timelines 
for the assessment-based quality measure affecting the FY 2021 payment 
determination and subsequent years.

   Table 18--Proposed New SNF QRP Assessment-Based Quality Measure Data Collection Period and Data Submission
                      Deadline Affecting FY 2021 Payment Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
                                                                                             Data submission
                                          Data  collection         Data collection/        quarterly  deadlines
           Quality  measure                    source            submission  quarterly    for  FY 2021  payment
                                                                  reporting  period *        determination **
----------------------------------------------------------------------------------------------------------------
Drug Regimen Review Conducted with     MDS                     CY 19 Q1, 1/1/2019-3/31/  CY 2019 Q1 Deadline:
 Follow-Up for Identified Issues--PAC                           2019.                     August 15, 2019.
 SNF QRP.
                                                               CY 19 Q2, 4/1/2019-6/30/  CY 2019 Q2 Deadline:
                                                                19.                       November 15, 2019.
                                                               CY 19 Q3, 7/1/2019-9/30/  CY 2019 Q3 Deadline:
                                                                2019.                     February 15, 2020.
                                                               CY 19 Q4, 10/1/2019-12/   CY 2019 Q4 Deadline:
                                                                31/2019.                  May 15, 2020.
----------------------------------------------------------------------------------------------------------------
* Data collection/submission will follow a similar quarterly reporting period schedule for subsequent CYs.
** Data review and correction periods and data submission deadlines will follow a similar quarterly schedule for
  subsequent CYs.

    We invited public comment on the SNF QRP assessment-based quality 
measure data collection period and data submission deadline affecting 
the FY 2021 payment determination and subsequent years for the new 
assessment-based measure. We did not receive comments related to this 
topic.
    Final Decision: We are finalizing as proposed the timeline and data 
submission mechanism for the FY 2021 payment determination and 
subsequent years for the new SNF QRP assessment-based quality measure 
as outlined in Table 18.
j. SNF QRP Data Completion Thresholds for the FY 2018 Payment 
Determination and Subsequent Years
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46458) 
for our finalized policies regarding data completion thresholds for the 
FY 2018 payment determination and subsequent years. We finalized that, 
beginning with the FY 2018 payment determination, SNFs must report all 
of the data necessary to calculate the proposed quality measures on at 
least 80 percent of the MDS assessments that they submit. We also 
finalized that, for the FY 2018 SNF QRP, any SNF that does not meet the 
proposed requirement that 80 percent of all MDS assessments submitted 
contain 100 percent of all data items necessary to calculate the SNF 
QRP measures would be subject to a reduction of 2 percentage points to 
its FY 2018 market basket percentage. We finalized that a SNF has 
reported all of the data necessary to calculate the measures if the 
data actually can be used for purposes of calculating the quality 
measures, as opposed to, for example, the use of a dash [-], to 
indicate that the SNF was unable to perform a pressure ulcer 
assessment. We wish to clarify that the provision we

[[Page 52045]]

finalized will affect FY 2018 payment determinations and subsequent 
years and is dependent upon the successful achievement of the 
completion threshold of the data used to calculate the measures we 
finalize. We did not propose any changes to these policies. While we 
did not solicit comments specifically regarding the data completion 
threshold for the SNF QRP, we did receive one comment related to this 
topic.
    Comment: One commenter suggested that the 80 percent data 
completion threshold finalized the SNF PPS FY 2016 final rule is set 
too low and requested that, for the FY 2018 payment determination, the 
data completion threshold be increased to at least ninety percent.
    Response: We intend to reevaluate this threshold over time and will 
propose to modify it, if warranted, based on our analysis.
k. SNF QRP Data Validation Requirements for the FY 2018 Payment 
Determination and Subsequent Years
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46458 
through 46459) for a summary of our approach to the development of data 
validation process for the SNF QRP. At this time, we are continuing to 
explore data validation methodology that will limit the amount of 
burden and cost to SNFs, while allowing us to establish estimations of 
the accuracy of SNF QRP data. We did not propose any further details 
pertaining to the data validation process for the SNF QRP, but we plan 
to do so in future rulemaking cycles. While we did not solicit comments 
specifically regarding data validation requirements for the SNF QRP, we 
received several comments related to this topic.
    Comment: Several commenters agreed that validation of quality 
measure data is important in IMPACT Act implementation. One commenter 
recommended that we utilize pure data checks to identify both 
inconsistencies between QRP measures and MDS items and that data from 
these audits should be provided as part of SNF feedback reports to 
improve data accuracy. This commenter also suggested that we audit 
suspicious data patterns using trained MDS experts and present a list 
of validation checks to providers and MDS vendors to help improve data 
accuracy and expedite the process. Another commenter suggested revising 
and testing revisions to the survey protocol to review resident 
assessments and instituting penalties for violating resident assessment 
requirements.
    Response: We thank the commenters for their input on policies that 
we should consider pertaining to data validation and accuracy analysis. 
We appreciate the commenters' suggestions to ensure data accuracy such 
as a combination of pure data checks to identify inconsistencies. We 
encourage providers to engage in available opportunities to improve the 
accuracy of their data. These suggestions will be taken into 
consideration as we develop the data validation methodologies for the 
SNF QRP.
l. SNF QRP Submission Exception and Extension Requirements for the FY 
2018 Payment Determination and Subsequent Years
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46459 
through 46460) for our finalized policies regarding submission 
exception and extension requirements for the FY 2018 payment 
determination and subsequent years. We did not propose any changes to 
these policies.
m. SNF QRP Reconsideration and Appeals Procedures for the FY 2018 
Payment Determination and Subsequent Years
    We refer the reader to the FY 2016 SNF PPS final rule (80 FR 46460 
through 46461) for a summary of our finalized reconsideration and 
appeals procedures for the SNF QRP for FY 2018 payment determination 
and subsequent years. We did not propose any changes to these 
procedures.
n. Public Display of Quality Measure Data for the SNF QRP & Procedures 
for the Opportunity To Review and Correct Data and Information
    Section 1899B(g) of the Act requires the Secretary to establish 
procedures for public reporting of SNFs' performance, including the 
performance of individual SNFs, on quality measures specified under 
paragraph (c)(1) and resource use and other measures specified under 
paragraph (d)(1) of the Act (collectively, IMPACT Act measures) 
beginning not later than 2 years after the applicable specified 
application date under section 1899B(a)(2)(E) of the Act. Under section 
1899B(g)(2) of the Act, the procedures must ensure, including through a 
process consistent with the process applied under section 
1886(b)(3)(B)(viii)(VII) of the Act, which refers to public display and 
review requirements in the Hospital Inpatient Quality Reporting Program 
(HIQR), that each SNF has the opportunity to review and submit 
corrections to its data and information that are to be made public 
prior to the information being made public. In future rulemaking, we 
intend to propose a policy to publicly display performance information 
for individual SNFs on IMPACT Act measures, as required under the Act.
    We proposed in the FY 2017 SNF PPS proposed rule to implement 
procedures that would allow individual SNFs to review and correct their 
data and information on IMPACT Act measures that are to be made public 
before those measure data are made public.
    For assessment-based measures, we proposed a process by which we 
would provide each SNF with a confidential feedback report that would 
allow the SNF to review its performance on such measures and, during a 
review and correction period, to review and correct the data the SNF 
submitted to CMS via the CMS Quality Improvement and Evaluation System 
(QIES) Assessment Submission and Processing (ASAP) system for each such 
measure. In addition, during the review and correction period, the SNF 
would be able to request correction of any errors in the assessment-
based measure rate calculations.
    We proposed that these confidential feedback reports would be 
available to each SNF using the Certification and Survey Provider 
Enhanced Reporting (CASPER) System. We refer to these reports as the 
SNF Quality Measure (QM) Reports. We proposed to provide monthly 
updates to the data contained in these reports that pertain to 
assessment-based data, as the data become available. We proposed to 
provide the reports so that providers would be able to view their data 
and information at both the facility- and resident-level for quality 
measures. The CASPER facility-level QM Reports may contain information 
such as the numerator, denominator, facility rate, and national rate. 
The CASPER patient-level QM Reports may contain individual patient 
information which will provide information related to which patients 
were included in the quality measures to identify any potential errors. 
In addition, we would make other reports available in the CASPER 
System, such as MDS data submission reports and provider validation 
reports, which would disclose SNFs' data submission status, providing 
details on all items submitted for a selected assessment and the status 
of records submitted. Additional information regarding the content and 
availability of these confidential feedback reports would be provided 
on an ongoing basis at https://www.cms.gov/Medicare/Quality-
Initiatives-Patient-Assessment-

[[Page 52046]]

Instruments/NursingHomeQualityInits/SNF-Quality-Reporting.html.
    As proposed in section III.D.2.i.ii. of the FY 2017 SNF PPS 
Proposed Rule (81 FR 24270), SNFs would have approximately 4.5 months 
after the reporting quarter to correct any errors that appear on the 
CASPER-generated QM reports pertaining to their assessment-based data 
used to calculate the assessment-based measures. During the time of 
data submission for a given quarterly reporting period and up until the 
quarterly submission deadline, SNFs could review and perform 
corrections to errors in the assessment data used to calculate the 
measures and could request correction of measure calculations. However, 
once the quarterly submission deadline occurs, the data is ``frozen'' 
and calculated for public reporting; providers can no longer submit any 
corrections. We would encourage SNFs to submit timely assessment data 
during a given quarterly reporting period and review their data and 
information early during the review and correction period so that they 
can identify errors and resubmit data before the data submission 
deadline.
    As noted in this section, the data would be populated into the 
confidential feedback reports, and we intend to update the reports 
monthly with all data that have been submitted and are available. We 
believe that a proposed data submission and review period, consisting 
of the reporting quarter plus approximately 4.5 months, is sufficient 
time for SNFs to submit, review and, where necessary, correct their 
data and information. These proposed time frames and deadlines for 
review and correction of assessment-based measures and data satisfy the 
statutory requirement that SNFs be provided the opportunity to review 
and correct their data and information that is to be made public and 
are consistent with the informal process hospitals follow in the 
Hospital Inpatient Quality Reporting (IQR) Program.
    We proposed that, in addition to the data collection/submission 
quarterly reporting periods that are followed by data review and 
correction periods and submission deadlines, we would give SNFs a 30-
day preview period prior to public display during which SNFs may 
preview the performance information on their measures that will be made 
public. We proposed to provide a preview report also using the CASPER 
System with which SNFs are familiar. The CASPER preview reports would 
inform providers of their performance on each measure which will be 
publicly reported. The CASPER preview reports for the reporting quarter 
will be available after the 4.5-month review and correction period and 
its data submission deadline, and the reports are refreshed on a 
quarterly basis for those measures publicly reported quarterly and 
annually for those measures publicly reported annually. We proposed to 
give SNFs 30 days to review this information, beginning from the date 
on which they can access the preview report. Corrections to the 
underlying data would not be permitted during this time; however, SNFs 
may contest incorrect measure calculations during the 30-day preview 
period. We proposed that if CMS determines that the measure, as it is 
displayed in the preview report, contains a calculation error, CMS 
could suppress the data on the public reporting Web site, recalculate 
the measure and publish it at the time of the next scheduled public 
display date. This process would be consistent with that followed in 
the Hospital IQR Program. If finalized, we intend to utilize a 
subregulatory mechanism, such as our SNF QRP Web site, to explain the 
process for how and when providers may ask for a correction to their 
measure calculations.
    We invited public comment on these proposals. The comments we 
received on this topic, with their responses, appear below.
    Comment: Several commenters, including MedPAC, supported public 
reporting of the cross-setting quality measures.
    Response: We appreciate the support from MedPAC and several other 
commenters for public reporting of quality measures across post-acute 
care settings. We will continue to move forward with cross-setting 
measure development and public reporting of these measures to meet the 
mandate of the IMPACT Act.
    Comment: One commenter was concerned about measure methodology 
associated with public reporting. The commenter stated that a year or 
more between the report date and penalties would not be meaningful or 
effective in changing behaviors.
    Response: We appreciate the concern raised regarding the measure 
methodology associated with public reporting and the time delay between 
the performance period and public display of the quality measure 
results. We assume commenter's use of the term ``measure methodology'' 
to refer to how the quality measure is calculated. We first want to 
clarify that there are no penalties associated with quality measure 
performance. The quality measures for public display reflect basic 
fundamental processes or outcomes of providing good quality care. SNFs 
should have internal processes established to monitor and improve their 
care. Additionally, through the Certification and Survey Provider 
Enhanced Reports (CASPER) system, providers are able to review their 
data and performance results via reports that are available to them 
well in advance of public display of the quality measures for the 
purposes of ongoing quality improvement. We discuss such reports in 
greater detail below and such reports will enable providers to review 
their data on an ongoing basis so that they can utilize this 
information to improve their quality of care.
    Comment: One commenter was concerned that the review and correction 
process may not provide SNFs enough information to validate measure 
values.
    Response: We appreciate the commenter's concern regarding the 
review and correct process. In addition to the CASPER QM and Review and 
Correct Reports as described earlier in the proposed rule, SNFs have 
opportunities to review their information and validate their data for 
measure calculation using other reports such as data submission reports 
available through CASPER which gives providers information on fatal 
errors and warning messages related to data submission. For example, 
various data submission reports provide details regarding assessment 
items submitted for a selected MDS 3.0 assessment and others summarize 
errors encountered in assessments submitted during a specified period. 
We believe these CASPER reports will provide SNFs with sufficient 
information to validate measure values.
    In addition to assessment-based measures, we have also proposed 
claims-based measures for the SNF QRP. Section 1899B(g)(2) of the Act 
requires prepublication provider review and correction procedures that 
are consistent with those followed in the Hospital IQR Program. For 
claims-based measures used in the Hospital IQR Program, we provide 
hospitals 30 days to preview their claims-based measures and data in a 
preview report containing aggregate hospital-level data. We proposed to 
adopt a similar process for the SNF QRP.
    Prior to the public display of our claims-based measures, in 
alignment with the Hospital IQR, HAC and Hospital VBP Programs, we 
proposed to make available through the CASPER system a confidential 
preview report that will contain information pertaining to claims-based 
measure rate calculations, for example, facility and national rates. 
Such data and

[[Page 52047]]

information would be for feedback purposes only and could not be 
corrected. This information would be accompanied by additional 
confidential information based on the most recent administrative data 
available at the time we extract the claims data for purposes of 
calculating the rates. Because the claims-based measures are calculated 
on an annual basis, these confidential CASPER QM reports for claims-
based measures would be refreshed annually. SNFs would have 30 days 
from the date the preview report is made available in which to review 
this information. The 30-day preview period is the only time when SNFs 
would be able to see claims-based measures before they are publicly 
displayed. SNFs will not be able to make corrections to underlying 
claims data during this preview period, nor will they be able to add 
new claims to the data extract. However, SNFs may request that we 
correct our measure calculation if the SNF believes it is incorrect 
during the 30 day preview period. We proposed that if we agree that the 
measure, as it is displayed in the preview report, contains a 
calculation error, we would suppress the data on the public reporting 
Web site, recalculate the measure, and publish it at the time of the 
next scheduled public display date. This process would be consistent 
with that followed in the Hospital IQR Program. If finalized, we intend 
to utilize a subregulatory mechanism, such as our SNF QRP Web site, to 
explain the process for how and when providers may contest their 
measure calculations.
    The proposed claims-based measures--Medicare Spending per 
Beneficiary--PAC SNF QRP Measure; Discharge to Community--PAC SNF QRP 
and Potentially Preventable 30 Day Post-Discharge Readmission Measure 
for SNF QRP--use Medicare administrative data from hospitalizations for 
Medicare FFS beneficiaries. Public reporting of data will be based on 
one CY of data. We proposed to create data extracts using claims data 
for these claims based measures, at least 90 days after the last 
discharge date in the applicable period (12 calendar months preceding), 
which we will use for the calculations. For example, if the last 
discharge date in the applicable period for a measure is December 31, 
2017, for data collection January 1, 2017, through December 31, 2017, 
we would create the data extract on approximately March 31, 2018, at 
the earliest, and use that data to calculate the claims-based measures 
for that applicable period. Since SNFs would not be able to submit 
corrections to the underlying claims snapshot or add claims (for those 
measures that use SNF claims) to this data set at the conclusion of the 
at least 90-day period following the last date of discharge used in the 
applicable period, at that time we would consider SNF claims data to be 
complete for purposes of calculating the claims-based measures.
    We proposed that beginning with data that will be publicly 
displayed in 2018, claims-based measures will be calculated using 
claims data with at least a 90 day run off period after the last 
discharge date in the applicable period, at which time we would create 
a data extract or snapshot of the available claims data to use for the 
measure calculations. This timeframe allows us to balance the need to 
provide timely program information to SNFs with the need to calculate 
the claims-based measures using as complete a data set as possible. As 
noted, under this proposed procedure, during the 30-day preview period, 
SNFs would not be able to submit corrections to the underlying claims 
data or add new claims to the data extract. This is for two reasons. 
First, for certain measures, the claims data used to calculate the 
measure is derived not from the SNF's claims, but from the claims of 
another provider. For example, the measure Potentially Preventable 30-
Day Post-Discharge Readmission Measure for SNF QRP uses claims data 
submitted by the hospital to which the patient was readmitted. The 
claims are not those of the SNF and, therefore, the SNF could not make 
corrections to them. Second, even where the claims used to calculate 
the measures are those of the SNF, it would not be not possible to 
correct the data after it is extracted for the measures calculation. 
This is because it is necessary to take a static ``snapshot'' of the 
claims to perform the necessary measure calculations.
    We seek to have as complete a data set as possible. We recognize 
that the proposed at least 90-day ``run-out'' period when we would take 
the data extract to calculate the claims-based measures is less than 
the Medicare program's current timely claims filing policy, under which 
providers have up to one year from the date of discharge to submit 
claims. We considered a number of factors in determining that the 
proposed at least 90-day run-out period is appropriate to calculate the 
claims-based measures. After the data extract is created, it takes 
several months to incorporate other data needed for the calculations 
(particularly in the case of risk-adjusted or episode-based measures). 
We then need to generate and check the calculations. Because several 
months lead time is necessary after acquiring the data to generate the 
claims-based calculations, if we were to delay our data extraction 
point to 12 months after the last date of the last discharge in the 
applicable period, we would not be able to deliver the calculations to 
SNFs sooner than 18 to 24 months after the last discharge. We believe 
this would create an unacceptably long delay, both for SNFs and for us 
to deliver timely calculations to SNFs for quality improvement.
    We invited public comment on these proposals. The comments we 
received on this topic, with their responses, appear below.
    Comment: Several commenters recommended we provide real time 
reporting for assessment-based measures and every six months reporting 
for claims-based measures.
    Response: SNFs will have an opportunity to review and utilize their 
data using confidential reports provided through the Certification and 
Survey Provider Enhanced Reports (CASPER) system as close to real time 
as is feasible. We intend to provide SNF Review and Correct reports 
that will allow providers to review information on assessment-based 
measures and anticipate the reports will be updated at least monthly. 
The decision to update claims-based measures on an annual basis was to 
ensure that the amount of data received during the reporting period was 
sufficient to generate reliable measure rates. However, we will look 
into the feasibility of providing SNFs with information more 
frequently.
    Comment: One commenter was concerned with the 90-day run-out period 
for the claims-based measures because claims not filed within this 
period may negatively impact measure rates.
    Response: We wish to clarify that we proposed for the claims-based 
measures to be calculated using claims data with at least a 90 day run 
off period after the last discharge date in the applicable period. We 
established this as the minimum run off period so as to use the most 
recently available data when calculating the claims-based measures. We 
developed this proposal to balance the need to provide timely program 
information to SNFs with the need to calculate the claims-based 
measures using as complete a data set as possible.
    Final Decision: After careful consideration of public comments, we 
are finalizing these proposals as proposed.
o. Mechanism for Providing Feedback Reports to SNFs
    Section 1899B(f) of the Act requires the Secretary to provide 
confidential

[[Page 52048]]

feedback reports to post-acute care providers on their performance for 
the measures specified under paragraphs (c)(1) and (d)(1), beginning 1 
year after the specified application date that applies to such measures 
and PAC providers. As discussed earlier, the reports we proposed to 
provide to SNFs to review their data and information would be 
confidential feedback reports that would enable SNFs to review their 
performance on the measures required under the SNF QRP. We proposed 
that these confidential feedback reports would be available to each SNF 
using the CASPER System. Data contained within these CASPER reports 
would be updated, as previously described, on a monthly basis as the 
data become available except for claims-based measures which can only 
be previewed on an annual basis.
    We intend to provide detailed procedures to SNFs on how to obtain 
their confidential feedback CASPER reports on the SNF QRP Web site at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting.html. We 
proposed to use the CMS Quality Improvement and Evaluation System 
(QIES) Assessment Submission and Processing (ASAP) system to provide 
quality measure reports in a manner consistent with how providers 
obtain such reports to date. The QIES ASAP system is a confidential and 
secure system with access granted to providers, or their designees.
    We sought public comment on this proposal to satisfy the 
requirement to provide confidential feedback reports to SNFs. The 
comments we received on this topic, with their responses, appear below.
    Comment: One commenter supported our plan to make the feedback 
reports available in QIES ASAP through CASPER.
    Response: We appreciate the commenter's support for providing 
feedback reports through CASPER.
    Comment: Several commenters recommended that we conduct a ``dry 
run'' in which providers receive confidential preview reports prior to 
publicly reporting new SNF QRP measures so that providers can become 
familiar with the methodology, understand the measure results, know how 
well they are performing, and have an opportunity to give us feedback 
on potential technical issues with the measures.
    Response: We appreciate that implementation activities such as dry 
runs are valuable prior to measure implementation to ensure the 
usability of a measure and educate providers. We intend to offer SNFs 
information and outreach training related to their measures so that 
they become familiar with the measure's methodology and understand how 
to interpret the confidential preview reports, which they will receive 
prior to the public reporting of new SNF QRP measures. SNFs will also 
receive additional confidential reports such as the SNF facility and 
resident level QM Reports and Review and Correct reports which we are 
developing. The Review and Correct Report will display all of the 
reporting quarters so that SNFs can identify errors in their data prior 
to and up until the submission deadline (freeze date) of a given 
quarter. The Review and Correct Report will provide updates regarding 
our data with a cumulative rate that will reflect publicly reported 
performance. We believe that these various reports will provide an 
indication on how well the SNF is performing as well as opportunities 
to provide us feedback on technical issues with the measures. The SNF 
Review and Correct Reports will be available beginning in the spring of 
2017 and will be issued prior to the public reporting of SNF QRP 
measures. We refer readers to the SNF QRP Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting.html for 
further information, where we will address the process of accessing 
reports. We will continue to engage stakeholders and ask for 
recommendations to take into consideration for future public reporting 
development for the SNF QRP.
    Final Decision: After careful consideration of public comments, we 
are finalizing our policies for providing confidential feedback reports 
to SNFs as proposed.
3. SNF Payment Models Research
    In the FY 2017 SNF PPS proposed rule (81 FR 24275 through 24276), 
we provided an update on the progress we have made in the SNF Payment 
Models Research project. Specifically, we discussed the two prior 
Technical Expert Panels (TEPs) hosted by Acumen, LLC, the contractor 
conducting this research. On June 15, 2016, during the comment period 
associated with the FY 2017 SNF PPS proposed rule, Acumen hosted a 
third TEP which brought together many of the concepts and developments 
from the prior TEPs and analysis. We received a great deal of support 
from TEP panelists, as well as some excellent feedback on ways to 
improve the research going forward. As noted in the FY 2017 SNF PPS 
proposed rule, materials associated with these TEPs are available on 
the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html.
    In the FY 2017 SNF PPS proposed rule, we requested comments on the 
SNF PMR project. The comments we received on this topic, with 
responses, appear below.
    Comment: Many commenters supported the goals of the research 
effort, specifically to develop a replacement for the existing SNF PPS 
that reimburses providers based on resident characteristics and not 
service provision. Some commenters stated that we should consider 
adding certain elements into the new payment system, such as a high 
cost outlier payment, separate payment for non-therapy ancillaries, and 
shifting from a per diem payment to a stay-based or episode-based 
payment schedule. One commenter stated that we should consider 
incorporating an episode-based payment model specifically for speech-
language pathology services. A few commenters stated that the reformed 
payment system should consider a resident's socioeconomic status. 
Finally, some of these commenters asked that we try to align the new 
PPS model with other existing or future post-acute care payment models.
    Response: We appreciate the support for this project, and will 
consider the suggestions made by commenters. However, we would note 
that, in order to develop a revised payment model that is implementable 
without requiring additional statutory authority, we have decided to 
only pursue those options which would be authorized within existing 
statutory constraints. Among other things, we believe this precludes 
the possibility of an outlier policy or non-per diem payment.
    Comment: A few commenters expressed concern regarding the timeline 
for reform of the existing SNF PPS, with one commenter expressing 
frustration that we have not yet implemented a revised SNF PPS. These 
commenters stated that we should implement reform as soon as possible.
    Response: We appreciate these commenters' concerns regarding the 
timing for implementing reform, but would note that reform of a system 
which covers such a wide range of services and such a diverse 
population of beneficiaries requires time to be completed correctly. We 
are moving as expeditiously as possible, ensuring that we allow 
sufficient time for requesting and considering public comments.

[[Page 52049]]

    Comment: A few commenters expressed concerns regarding the data 
being used for the research. One commenter stated that we should not 
use any data from the Staff Time and Resource Intensity Verification, 
or STRIVE, project. A few commenters stated that SNF cost report data 
may not represent a viable source of data upon which to base a revised 
SNF PPS. One commenter expressed concern regarding the potential use of 
ADL information collected on the MDS as a source of nursing resource 
information, as the number of medications a resident is taking would 
not be taken into account. Finally, a few commenters stated that we 
should refrain from implementing a revised SNF PPS until new resident 
data, such as that required by the IMPACT Act, is available for 
analysis.
    Response: We appreciate the concerns raised by these commenters and 
will pass along these concerns to our contractor performing the 
research so that it can take them into account as the research 
continues to evolve.
    Comment: One commenter provided comments on information the 
commenter received participating in a TEP associated with the research 
project. Specifically, the commenter expressed concern regarding the 
possibility of combining physical and occupational therapy together 
under a single rate component. The commenter also made reference to the 
possibility of an additional TEP in Fall 2016.
    Response: We appreciate this commenter's thoughts on the TEP 
materials, as well as their participation on the panel itself. We will 
pass these comments on to our contractor performing the research to 
ensure that this, and other comments made by the commenter during the 
panel, are taken into account. With regard to the possibility of 
another TEP in Fall 2016, we have discussed plans with the contractor 
to host an additional TEP in Fall 2016.
    We appreciate all of the comments received on this topic and look 
forward to providing additional details on the CMS Web site and in 
future rulemaking. We invite the public to provide comments outside of 
the rulemaking process by contacting us at 
[email protected].

IV. Collection of Information Requirements

    Section III.D.2.f. of this preamble sets out three claims-based 
measures that we are adopting for the SNF QRP beginning with the FY 
2018 payment year: (1) Medicare Spending per Beneficiary--PAC SNF QRP; 
(2) Discharge to Community--PAC SNF QRP; and (3) Potentially 
Preventable 30-Day Post-Discharge Readmission Measure for SNF QRP. 
Because they are claims-based, the measures can be calculated using 
data that are already reported to the Medicare program for payment 
purposes. Consequently, we believe there will be no additional burden 
on SNFs in connection with the the reporting of data needed to 
calculate these measures.
    We did not receive any public comments on this topic in response to 
the FY 2017 SNF PPS proposed rule.
    For the FY 2020 payment determination and subsequent years, we are 
adopting for the SNF QRP an assessment-based measure entitled Drug 
Regimen Review Conducted with Follow-Up for Identified Issues--PAC SNF 
QRP. The data for this measure will be collected and reported using the 
MDS (version effective October 1, 2018). While the reporting of data on 
quality measures is an information collection, we believe that the 
burden associated with modifications to the MDS fall under the PRA 
exception (provided in section 1899B(m) of the IMPACT Act of 2014) 
because they are required to achieve the standardization of patient 
assessment data. The requirement and burden will, however, be submitted 
to OMB for review and approval when the modifications to the MDS or 
other applicable PAC assessment instruments have achieved 
standardization and are no longer exempt from the requirements under 
section 1899B(m).
    We estimate the additional elements for the new assessment measure 
will take 7.5 minutes of nursing/clinical staff time to report data on 
admission and 2.5 minutes of nursing/clinical staff time to report data 
on discharge, for a total of 10 minutes. We estimate that the 
additional MDS-RAI items will be completed by Registered Nurses (RN) 
for approximately 75 percent of the time required and Pharmacists for 
approximately 25 percent of the time required. Individual providers 
determine the staffing resources necessary. We estimate 2,101,370 
discharges from 16,484 SNFs annually, with an additional burden of 10 
minutes. This would equate to 350,228 total hours or 21.25 hours per 
SNF. We believe this work will be completed by RNs (75 percent) and 
Pharmacists (25 percent). We obtained mean hourly wages for these staff 
from the U.S. Bureau of Labor Statistics' (BLS) May 2015 National 
Occupational Employment and Wage Estimates (http://www.bls.gov/oes/current/oes_nat.htm), to account for overhead and fringe benefits, we 
have doubled the mean hourly wage. Per the National Occupational 
Employment and Wage Estimates, the mean hourly wage for a RN (BLS 
occupation code: 29-1141) is $34.14/hr. However, to account for 
overhead and fringe benefits, we have double the mean hourly wage, 
making it $68.28/hr for an RN. The mean hourly wage for a pharmacist 
(BLS occupation code: 29-1051) is $57.34/hr. To account for overhead 
and fringe benefits, we have double the mean hourly wage, making it 
$114.68/hr for a pharmacist. Given these wages and time estimates, the 
total cost related to the four measures is estimated at $1,697.17 per 
SNF annually, or $27,976,212.64 [(262,671 hr x $68.28/hr) + (87,557 hr 
x $114.68/hr)] for all SNFs annually. These values have been updated 
from the FY 2017 SNF PPS proposed rule to reflect the more recent 2015 
wage estimates. While we are setting out burden, the requirements and 
associated estimates will not be submitted to OMB for approval under 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) since the 
burden estimates are either claims-based or associated with the 
exemption under section 1899B(m) of the IMPACT Act of 2014. We are 
setting out the burden as a courtesy to advise interested parties of 
the time and costs. These figures are not in the RIA section of this 
rule.
    We received the following comment in response to the FY 2017 SNF 
PPS proposed rule.
    Comment: One commenter agreed that standardization and associated 
collection of this MDS-based measure is PRA exempt. However, the 
commenter suggested that the estimate provided by CMS in the proposed 
rule is insufficient.
    Response: For burden associated with this FY 2017 SNF PPS final 
rule, we considered the comment while planning to implement new items 
on the MDS. The comment was general in that it did not identify the 
estimate of concern nor did it identify what the correct estimate 
should be. While considering the comment, we revised our hourly wage 
estimate to account for more recent BLS wage data. Otherwise, our final 
estimate is unchanged from what was proposed.
    As described in further detail in section III.D.1.b. of this final 
rule, we are adopting the SNFPPR measure for the SNF VBP Program. Like 
the SNFRM (NQF #2510), which was adopted for the SNF VBP Program in the 
FY 2016 SNF PPS final rule (80 FR 46419), the SNFPPR measure is also 
claims-based. Because claims-based measures are calculated based on 
claims that are already submitted to the Medicare program for payment 
purposes, there is no additional burden associated with

[[Page 52050]]

data collection or submission for the SNFPPR measure. Thus there is no 
additional reporting burden associated with the SNFPPR measure.
    We did not receive any public comments on this topic in response to 
the FY 2017 SNF PPS proposed rule.
    Comments on any of the aforementioned collection of information 
claims must be received by the OMB desk officer by August 29, 2016.
    To be assured consideration, comments and recommendations must be 
received via one of the following transmissions: OMB, Office of 
Information and Regulatory Affairs, Attention: CMS Desk Officer, Fax 
Number: (202) 395-5806 OR, Email: [email protected].

V. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA, 
September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA, March 
22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 
4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct 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). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated an economically significant 
rule, under section 3(f)(1) of Executive Order 12866. Accordingly, we 
have prepared a regulatory impact analysis (RIA) as further discussed 
below, and the rule has been reviewed by OMB.
2. Statement of Need
    This final rule updates the SNF prospective payment rates for FY 
2017 as required under section 1888(e)(4)(E) of the Act. It also 
responds to section 1888(e)(4)(H) of the Act, which requires the 
Secretary to provide for publication in the Federal Register before the 
August 1 that precedes the start of each FY, the unadjusted federal per 
diem rates, the case-mix classification system, and the factors to be 
applied in making the area wage adjustment. As these statutory 
provisions prescribe a detailed methodology for calculating and 
disseminating payment rates under the SNF PPS, we do not have the 
discretion to adopt an alternative approach.
3. Overall Impacts
    This final rule sets forth updates of the SNF PPS rates contained 
in the SNF PPS final rule for FY 2016 (80 FR 46390). Based on the 
above, we estimate that the aggregate impact would be an increase of 
$920 million in payments to SNFs, resulting from the SNF market basket 
update to the payment rates, as adjusted by the MFP adjustment. The 
impact analysis of this final rule represents the projected effects of 
the changes in the SNF PPS from FY 2016 to FY 2017. Although the best 
data available are utilized, there is no attempt to predict behavioral 
responses to these changes or to make adjustments for future changes in 
such variables as days or case-mix.
    Certain events may occur to limit the scope or accuracy of our 
impact analysis, as this analysis is future-oriented and, thus, very 
susceptible to forecasting errors due to certain events that may occur 
within the assessed impact time period. Some examples of possible 
events may include newly-legislated general Medicare program funding 
changes by the Congress or changes specifically related to SNFs. In 
addition, changes to the Medicare program may continue to be made as a 
result of previously-enacted legislation or new statutory provisions. 
Although these changes may not be specific to the SNF PPS, the nature 
of the Medicare program is such that the changes may interact and, 
thus, the complexity of the interaction of these changes could make it 
difficult to predict accurately the full scope of the impact upon SNFs.
    In accordance with sections 1888(e)(4)(E) and 1888(e)(5) of the 
Act, we update the FY 2016 payment rates by a factor equal to the 
market basket percentage change adjusted by the MFP adjustment to 
determine the payment rates for FY 2017. As discussed previously, for 
FY 2012 and each subsequent FY, as required by section 1888(e)(5)(B) of 
the Act, as amended by section 3401(b) of the Affordable Care Act, the 
market basket percentage is reduced by the MFP adjustment. The special 
AIDS add-on established by section 511 of the MMA remains in effect 
until such date as the Secretary certifies that there is an appropriate 
adjustment in the case mix. We have not provided a separate impact 
analysis for the MMA provision. Our latest estimates indicate that 
there are fewer than 4,800 beneficiaries who qualify for the add-on 
payment for residents with AIDS. The impact to Medicare is included in 
the total column of Table 19. In updating the SNF PPS rates for FY 
2017, we made a number of standard annual revisions and clarifications 
mentioned elsewhere in this final rule (for example, the update to the 
wage and market basket indexes used for adjusting the federal rates).
    The annual update set forth in this final rule applies to SNF PPS 
payments in FY 2017. Accordingly, the analysis that follows only 
describes the impact of this single year. In accordance with the 
requirements of the Act, we will publish a notice or rule for each 
subsequent FY that will provide for an update to the SNF PPS payment 
rates and include an associated impact analysis.
4. Detailed Economic Analysis
    The FY 2017 SNF PPS payment impacts appear in Table 19. Using the 
most recently available data, in this case FY 2015, we apply the 
current FY 2016 wage index and labor-related share value to the number 
of payment days to simulate FY 2016 payments. Then, using the same FY 
2015 data, we apply the FY 2017 wage index and labor-related share 
value to simulate FY 2017 payments. We tabulate the resulting payments 
according to the classifications in Table 19 (for example, facility 
type, geographic region, facility ownership), and compare the simulated 
FY 2016 payments to the simulated FY 2017 payments to determine the 
overall impact. In Section III.B.2 and III.B.4 of this final rule, we 
discussed an error in calculating the FY 2017 wage index budget 
neutrality factor in the FY 2017 SNF PPS proposed rule and how this 
error affected the impact table in the FY 2017 SNF PPS proposed rule 
(81 FR 24278). Specifically, we stated that in calculating the proposed 
wage index budget neutrality factor, we inadvertently neglected to 
update the wage index data used in the calculation with the most 
recently available FY 2017 data. As we discussed in section III.B.2. 
and III.B.4. of this final rule, this same error (the use of non-
updated wage index data) which resulted in an incorrect calculation of 
the proposed wage index budget neutrality factor also resulted in 
inaccurate wage index impacts in Table 19 of the FY 2017 SNF PPS 
proposed rule. We have corrected this error, and Table 19 of this final 
rule includes corrected impact values based

[[Page 52051]]

on updated FY 2017 wage index data. The breakdown of the various 
categories of data in the table follows:
     The first column shows the breakdown of all SNFs by urban 
or rural status, hospital-based or freestanding status, census region, 
and ownership.
     The first row of figures describes the estimated effects 
of the various changes on all facilities. The next six rows show the 
effects on facilities split by hospital-based, freestanding, urban, and 
rural categories. The next nineteen rows show the effects on facilities 
by urban versus rural status by census region. The last three rows show 
the effects on facilities by ownership (that is, government, profit, 
and non-profit status).
     The second column shows the number of facilities in the 
impact database.
     The third column shows the effect of the annual update to 
the wage index. This represents the effect of using the most recent 
wage data available. The total impact of this change is zero percent; 
however, there are distributional effects of the change.
     The fourth column shows the effect of all of the changes 
on the FY 2017 payments. The update of 2.4 percent (consisting of the 
market basket increase of 2.7 percentage points, reduced by the 0.3 
percentage point MFP adjustment) is constant for all providers and, 
though not shown individually, is included in the total column. It is 
projected that aggregate payments will increase by 2.4 percent, 
assuming facilities do not change their care delivery and billing 
practices in response.
    As illustrated in Table 19, the combined effects of all of the 
changes vary by specific types of providers and by location. For 
example, due to changes finalized in this rule, providers in the urban 
Outlying region would experience a 1.7 percent increase in FY 2017 
total payments.

                              Table 19--Projected Impact to the SNF PPS for FY 2017
----------------------------------------------------------------------------------------------------------------
                                                                     Number of      Update wage
                                                                   facilities FY       data        Total change
                                                                       2017          (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Group:
    Total.......................................................          15,445             0.0             2.4
    Urban.......................................................          10,946             0.0             2.4
    Rural.......................................................           4,499             0.3             2.7
    Hospital based urban........................................             467            -0.2             2.2
    Freestanding urban..........................................          10,479             0.0             2.4
    Hospital based rural........................................             320             0.5             2.9
    Freestanding rural..........................................           4,179             0.3             2.7
Urban by region:
    New England.................................................             797            -0.8             1.6
    Middle Atlantic.............................................           1,481            -0.1             2.3
    South Atlantic..............................................           1,862            -0.2             2.2
    East North Central..........................................           2,095            -0.1             2.3
    East South Central..........................................             547            -0.1             2.3
    West North Central..........................................             907            -0.2             2.2
    West South Central..........................................           1,323             0.3             2.7
    Mountain....................................................             509            -0.1             2.3
    Pacific.....................................................           1,420             0.6             3.0
    Outlying....................................................               5            -0.6             1.7
Rural by region:
    New England.................................................             139             0.1             2.5
    Middle Atlantic.............................................             221             0.4             2.8
    South Atlantic..............................................             507            -0.2             2.2
    East North Central..........................................             933             0.2             2.6
    East South Central..........................................             530             0.4             2.8
    West North Central..........................................           1,087             0.5             2.9
    West South Central..........................................             745             0.6             3.0
    Mountain....................................................             233             0.7             3.2
    Pacific.....................................................             104            -0.4             2.0
Ownership:
    Government..................................................           1,051             0.1             2.5
    Profit......................................................          10,766             0.0             2.4
    Non-profit..................................................           3,628            -0.1             2.3
----------------------------------------------------------------------------------------------------------------
Note: The Total column includes the 2.7 percent market basket increase, reduced by the 0.3 percentage point MFP
  adjustment. Additionally, we found no SNFs in rural outlying areas.

5. Alternatives Considered
    As described in this section, we estimate that the aggregate impact 
for FY 2017 under the SNF PPS would be an increase of $920 million in 
payments to SNFs, resulting from the SNF market basket update to the 
payment rates, as adjusted by the MFP adjustment.
    Section 1888(e) of the Act establishes the SNF PPS for the payment 
of Medicare SNF services for cost reporting periods beginning on or 
after July 1, 1998. This section of the statute prescribes a detailed 
formula for calculating payment rates under the SNF PPS and does not 
provide for the use of any alternative methodology. It specifies that 
the base year cost data to be used for computing the SNF PPS payment 
rates must be from FY 1995 (October 1, 1994, through September 30, 
1995). In accordance with the statute, we also incorporated a number of 
elements into the SNF PPS (for example, case-mix classification 
methodology, a market basket index, a wage index, and the urban and 
rural distinction used in the development or adjustment of the federal 
rates). Further, section 1888(e)(4)(H) of the Act specifically requires 
us to disseminate the payment rates for each new FY through the Federal 
Register and to do so before the

[[Page 52052]]

August 1 that precedes the start of the new FY. Accordingly, we are not 
pursuing alternatives for the payment methodology as discussed 
previously.
6. Accounting Statement
    As required by OMB Circular A-4 (available online at 
www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf), in Table 20, we have prepared an 
accounting statement showing the classification of the expenditures 
associated with the provisions of this final rule. Table 20 provides 
our best estimate of the possible changes in Medicare payments under 
the SNF PPS as a result of the policies in this final rule, based on 
the data for 15,427 SNFs in our database. All expenditures are 
classified as transfers to Medicare providers (that is, SNFs).

       Table 20--Accounting Statement: Classification of Estimated
   Expenditures, From the 2016 SNF PPS Fiscal Year to the 2017 SNF PPS
                               Fiscal Year
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $920 million.*
From Whom To Whom?........................  Federal Government to SNF
                                             Medicare Providers.
------------------------------------------------------------------------
* The net increase of $920 million in transfer payments is a result of
  the MFP-adjusted market basket increase of $920 million.

7. Conclusion
    This final rule sets forth updates of the SNF PPS rates contained 
in the SNF PPS final rule for FY 2016 (80 FR 46390). Based on the 
above, we estimate the overall estimated payments for SNFs in FY 2017 
are projected to increase by $920 million, or 2.4 percent, compared 
with those in FY 2016. We estimate that in FY 2017 under RUG-IV, SNFs 
in urban and rural areas would experience, on average, a 2.4 and 2.7 
percent increase, respectively, in estimated payments compared with FY 
2016. Providers in the rural Mountain region would experience the 
largest estimated increase in payments of approximately 3.2 percent. 
Providers in the urban New England region would experience the smallest 
estimated increase in payments of 1.6 percent.
8. Effects of the Requirements for the SNF VBP and SNF QRP Program
    The requirements set forth for the SNF VBP and SNF QRP Program in 
this final rule would not impact SNFs in FY 2017; therefore, we are not 
including a regulatory impact analysis for the SNF VBP and SNF QRP 
Program in this final rule.

B. Regulatory Flexibility Act Analysis

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, non-profit organizations, and small 
governmental jurisdictions. Most SNFs and most other providers and 
suppliers are small entities, either by reason of their non-profit 
status or by having revenues of $27.5 million or less in any 1 year. We 
utilized the revenues of individual SNF providers (from recent Medicare 
Cost Reports) to classify a small business, and not the revenue of a 
larger firm with which they may be affiliated. As a result, we estimate 
approximately 91 percent of SNFs are considered small businesses 
according to the Small Business Administration's latest size standards 
(NAICS 623110), with total revenues of $27.5 million or less in any 1 
year. (For details, see the Small Business Administration's Web site at 
http://www.sba.gov/category/navigation-structure/contracting/contracting-officials/eligibility-size-standards). In addition, 
approximately 25 percent of SNFs classified as small entities are non-
profit organizations. Finally, individuals and states are not included 
in the definition of a small entity.
    This final rule sets forth updates of the SNF PPS rates contained 
in the SNF PPS final rule for FY 2016 (80 FR 46390). Based on the 
above, we estimate that the aggregate impact would be an increase of 
$920 million in payments to SNFs, resulting from the SNF market basket 
update to the payment rates, as adjusted by the MFP adjustment. While 
it is projected in Table 19 that most providers would experience a net 
increase in payments, we note that some individual providers within the 
same region or group may experience different impacts on payments than 
others due to the distributional impact of the FY 2017 wage indexes and 
the degree of Medicare utilization.
    Guidance issued by the Department of Health and Human Services on 
the proper assessment of the impact on small entities in rulemakings 
utilizes a cost or revenue impact of 3 to 5 percent as a significance 
threshold under the RFA. According to MedPAC, Medicare covers 
approximately 12 percent of total patient days in freestanding 
facilities and 21 percent of facility revenue (Report to the Congress: 
Medicare Payment Policy, March 2016, available at http://medpac.gov/documents/reports/chapter-7-skilled-nursing-facility-services-(march-
2016-report).pdf). As a result, for most facilities, when all payers 
are included in the revenue stream, the overall impact on total 
revenues should be substantially less than those impacts presented in 
Table 19. As indicated in Table 19, the effect on facilities is 
projected to be an aggregate positive impact of 2.4 percent. As the 
overall impact on the industry as a whole, and thus on small entities 
specifically, is less than the 3 to 5 percent threshold discussed 
previously, the Secretary has determined that this final rule would not 
have a significant impact on a substantial number of 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. This 
analysis must conform to the provisions of section 604 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 an MSA and has fewer 
than 100 beds. This final rule would affect small rural hospitals that 
(1) furnish SNF services under a swing-bed agreement or (2) have a 
hospital-based SNF. We anticipate that the impact on small rural 
hospitals would be similar to the impact on SNF providers overall. 
Moreover, as noted in previous SNF PPS final rules (most recently the 
one for FY 2016 (80 FR 46476)), the category of small rural hospitals 
would be included within the analysis of the impact of this final rule 
on small entities in general. As indicated in Table 19, the effect on 
facilities is projected to be an aggregate positive impact of 2.4 
percent. As the overall impact on the industry as a whole is less than 
the 3 to 5 percent threshold discussed above, the Secretary has 
determined that this final rule would not have a significant impact on 
a substantial number of small rural hospitals.

C. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2016, that 
threshold is approximately $146 million. This final rule does not 
include any mandate on state, local, or tribal governments in the 
aggregate, or by the private sector, of $146 million.

[[Page 52053]]

D. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues 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. This final rule would have no substantial direct effect 
on state and local governments, preempt state law, or otherwise have 
federalism implications.

E. Congressional Review Act

    This final rule is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress 
and the Comptroller General for review.
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.

    Dated: July 18, 2016.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: July 25, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2016-18113 Filed 7-29-16; 4:15 pm]
 BILLING CODE 4120-01-P