Important Developments in Medicare and Medicaid Reimbursement

Medicare

The Centers for Medicare & Medicaid Services (CMS) published the, “Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities – Notice” in the Federal Register dated July 31, 2006. The changes noted in the notice are anticipated to increase payments to SNF’s by approximately $560 million. Results for individual facilities will be dependent on RUG utilization and wage index changes.

Under the notice, facilities will experience the following rate adjustments beginning October 1, 2006:

• A full market basket increase of 3.1% (NO adjustment is required to correct previous forecast errors)
• Adjustment of the labor related portion from 75.922 to 75.839
• Continuation of the temporary 128% increase in the per diem adjusted payment rates for SNF residents with AIDS
• Full transition to the CBSA based wage index values (as opposed to the blended MSA/CBSA rates used in FY 06)

The following counties will experience significant decreases in their wage indices as a result of the full transition to the CBSA wage index:

The following counties will experience increases in their wage indices are a result of the full transition to the CBSA wage index:

In addition to the proposed rate changes, CMS has addressed the following items in this notice:

• A notation was made indicating that Congress has not enacted any further legislation affecting the consolidating billing provision. The last transmittal issued, as noted by CMS, was Program Transmittal #390 issued December 10, 2004.
• CMS is exploring refinements to the existing provider-oriented “silos” to create a more seamless system for payment and delivery of post-acute care under Medicare. This model could feature more consistent payments for the same type of care across different sites of service, Value Based Purchasing incentives and collection of uniform clinical assessment information to support quality and discharge planning functions. The notice further discusses pathways for demonstration models.
• A new Nursing Home Quality Campaign to begin this fall, which will be conducted over the next two years. The ultimate objective of the campaign is to make a real difference in the quality of life and efficiency of care delivery in nursing homes, by accelerating progress in identifying and treating pain and pressure ulcers, eliminating the use of physical restraints and attracting and retaining nursing and other staff.
• CMS has opted to waive notice and comment procedures related to this federal register issuance for the following reasons: the statue requires annual updates to SNF PPS rates; the methodologies used to update the rates have been previously subject to public comment; and this notice initiates no policy changes with regard to SNF PPS but simply reflects the application of previously established methodologies.

The Federal Register is posted and available on the CMS website at http://www.cms.hhs.gov/SNFPPS. Click on “List of SNF federal regulations” on the left side of the screen then search for regulation CMS-1530-N.

National Provider Identifiers

National Provider Identifiers (NPI) are 10 digit codes that will replace Medicare and Medicaid provider numbers, physician identification numbers, and provider identification numbers. NPI implementation is right around the corner. Beginning May 23, 2007 only NPI numbers will be accepted when billing Medicare. There is an application process, if you have not already done so, we encourage you to begin the process now.

One-Time Hold on Medicare Payments

This is a reminder to all hospitals, skilled nursing facilities, home health agencies and physicians who bill Medicare contractors (fiscal intermediaries) for their services. Section 5203 of the Deficit Reduction Act of 2006 (DRA) requires the Centers for Medicare and Medicaid Services (CMS) to implement a one-time hold on Medicare payments for the period of September 22, 2006 through September 30, 2006.

No interest will accrue or be paid, and no late penalty will be paid to any provider for any delay in a payment by reason of this one-time hold on payments. Claims held due to this one-time policy during this period will be paid on Monday October 2, 2006.

We encourage you to plan now for this 9-day interruption in Medicare payments. Since the fiscal intermediaries will continue to apply the 14-day electronic payment hold, providers should continue with their normal billing procedures to insure no disruption in payments, once the one-time 9-day hold expires.

Medicaid

Although the final details for fiscal 2007 are not yet available, we anticipate the following:

• Continuation of the provider tax program in its existing format, with inclusion of the governmentally owned facilities. The current tax is $16.30 per non-Medicare actual day of care, with payment to providers calculated at 21.8% of the variable cost component.
• Increase in the variable cost limit for both Class I and Class III facilities ranging from 1-3%.

The current asset value limitation for Class I facilities has been increased over 8% to $50,000 per skilled nursing facility bed effective October 1, 2006. The current asset value of a facility is a significant determinant in the calculation of capital reimbursement. Thus, the increase may allow providers to obtain additional reimbursement for future capital projects. If you would like assistance in determining the potential for additional reimbursement for a capital project, please contact Betsy Rust at 248 223-3437 or your local Plante & Moran advisor.