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RUGS IV Rates Released — Significant Implications for SNFs


The long anticipated Notice of Skilled Nursing Facility (SNF) Prospective Payment System updates for FY 2011 was issued on July 22, 2010, affecting payment rates beginning October 1, 2010. As most of you are aware, RUG-IV was originally scheduled to be implemented on October 1, 2010, commensurate with the implementation of the updated Minimum Data Set (MDS) 3.0. Legislation was passed that has delayed implementation until October 1, 2011, causing significant concern in the industry due to the incompatibility of the MDS 3.0 with the existing RUG-III system.

The House has passed the Veterans', Seniors' and Children's Health Technical Corrections Act of 2010, H.R. 5712, which contains a repeal of the delay, and it is believed the Senate will also pass the bill and full implementation will occur on October 1, 2010. Repealing the legislation is critical to the industry as most facilities will experience significant reductions in Medicare revenue if RUG-IV is delayed. In the event the repeal does not occur, the Notice includes provisions for paying facilities using a hybrid methodology.

The MDS 3.0 and RUG-IV incorporate momentous changes to the SNF Prospective Payment System that will significantly alter how facilities are paid for rendering care. Providers that are not well versed in the new regulations will be at risk for significant reductions in revenue. Some examples are as follows:

  • A shift to 66 payment categories from 53 payment categories
  • Changes related to assessment reference dates and qualifiers that will significantly reduce utilization of rehabilitation and extensive service categories
  • Modification to therapy services related to estimating treatments and utilization of concurrent therapy that will likely result in RUG classifications at much lower levels of therapy than previous results
  • Adjustments related to assistance with activities of daily living (ADLs) and an increased emphasis on ADL scores in the nursing case mix indices and related RUG payment rates (will result in greater payment rates for select categories)

The RUG-IV SNF Payment rates effective October 1, 2010, can be found at the right. As a result of all of the changes, providers will have significant differences in their RUGs utilization effective October 1, 2010. Some providers could possibly see a reduction in their average daily Medicare rate of up to $40 per day, while others may see much less change. However, it is unlikely to see many situations where payments would increase on average for a single facility.

In most cases, it will not be appropriate to apply the RUG-IV rates to historical RUG utilization to determine the net financial impact of the transition. To assist our clients through the transition, Plante & Moran has developed extensive tools on the new requirements including a template to project the financial impact of the transition (RUG-IV Estimator) and onsite training programs for facility staff related to MDS 3.0 and RUG-IV.

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