AHCA’s submission included comments in the following areas:
The Forecast Error Correction
In the FY 2008 SNF PPS proposed rule, CMS noted that there was a forecast error of 0.3 percent for FY 2006. Under its current rules, CMS should provide a positive forecast error correction of 0.3 percent since that is above the 0.25 percent threshold. However, CMS is proposing to raise the threshold to 0.5 percent and considering a threshold of as high as 1.0 percent. Under the higher thresholds, there would not be a 0.3 percent forecast error correction to the market basket update for FY 2008, as there would be under current policy.
CMS invited comments on increasing the forecast error adjustment threshold and its effective date. CMS proffered three reasons as a basis for its proposal to change the threshold: (1) that adjustments should be reserved only for exceptional errors; (2) that according to MedPAC analysis, freestanding SNFs have received Medicare payments that exceeded costs by 10.8 percent or more since 2001, and Medicare margins are projected to be 11 percent in 2007; and (3) that a change in policy would be more consistent with the Medicare inpatient capital PPS forecast error correction policies.
AHCA responded that the proposed change in the forecast error correction threshold would be a very big step in the wrong direction and should not be adopted. None of the reasons proffered by CMS sufficiently support the proposed change in the forecast error threshold. Indeed, in its analysis of the proposed rule, AHCA reached the conclusion that even a 0.25 percent threshold is tolerable only if a correction is made when the forecast error cumulatively reaches 0.25 percent.
Based on its own analysis, AHCA recommended that CMS implement neither a 0.5 percent nor a 1.0 percent forecast error correction threshold for FY 2008 or any future year. AHCA recommended that instead CMS:
- Provide a forecast correction of 0.702 percent for FY 2008, representing the cumulative loss for the industry which has now exceeded 0.25 percent;
- At a minimum, provide a forecast correction of 0.3 percent for FY 2008 – although that is not as full and accurate an adjustment as a 0.702 percent change;
- Retain the forecast error correction threshold at 0.25 percent annually; and
- Apply a cumulative correction when the 0.25 percent threshold is reached on a cumulative basis.
The SNF Market Basket
As part of the FY 2008 SNF PPS proposed rule, CMS has proposed to revise and rebase the market basket for calculating the SNF annual update factor. AHCA commended CMS for addressing in a systematic manner many of the market basket related issues that AHCA raised over the past few years. After many years of encouragement, AHCA expressed approval at CMS’ development and inclusion of a professional liability insurance component in the market basket.
In the proposed rule, CMS described the proposed market basket update methodology, which uses Medicare SNF cost reports as the primary data source. However, AHCA found the CMS methodology for computing the labor and pharmacy components, that would use total allowable costs to calculate the weights, very problematic. For example, the labor component methodology uses a less appropriate mix of SNF and total facility costs, while the pharmacy component methodology incorrectly assumes that the Medicare cost reports reflect total facility pharmacy costs rather than costs for Medicare patients only, and thereby consistently and significantly underestimates the weight related to SNF pharmacy spending. AHCA proposed a more accurate alternative methodology for computing the labor and pharmacy components of the SNF market basket that would more appropriately use Medicare-specific reimbursable costs.
CMS also proposed a number of changes to the price proxies used to monitor the rate of change in wage and price proxies for the 23 expenditure categories that make up the proposed market basket. While most of the price proxies are the same as those used in the 1997-based SNF market basket, CMS proposed new proxies for wages and salaries, employee benefits, professional liability insurance, chemicals, postage, and capital. AHCA found that certain of the proxies were improvements from the current methodology, they still did not accurately reflect changes in the prices of items and services purchased by SNFs.
The SNF Area Wage Index
In the FY 2008 SNF PPS proposed rule, CMS again continued to use inpatient hospital wage data to create the SNF area wage index. AHCA has commented in the past that a SNF-specific area wage index is needed to improve the accuracy of SNF payments to providers to better reflect differences in local labor market conditions. With the Tax Relief and Health Care Act of 2006 (TRHCA), Congress mandated that the Secretary revise the wage index for the inpatient hospital PPS in FY 2009. The TRHCA also mandated a Medicare Payment Advisory Commission (MedPAC) report, and required CMS to consider specific issues of concern to Congress. MedPAC provided an alternative index approach. AHCA urged CMS to carefully examine the alternative wage index approach and thoroughly research and ensure that the proposed alternative would achieve actual improvements, in particular in the SNF setting, before implementation.
In the proposed rule for FY 2008, CMS invited public comments that identify codes in any of the four service categories representing recent medical advances that might meet CMS criteria for exclusion from SNF consolidated billing. CMS has taken the position that it does not have the statutory authority to exclude certain recommended services. AHCA continues to believe that CMS does have the authority to address some of AHCA’s concerns and in the comments asked that CMS reconsider its position on the scope of its authority and recommended exclusions related site of service issues, cancer treatment drugs and ambulance services. AHCA is cognizant of CMS’ interpretation of the limits of its authority regarding consolidated billing. To that end, as CMS is aware, AHCA worked with lawmakers in the 109th Congress to introduce legislation, The Long Term Care Quality And Modernization Act, in part to broaden CMS’ authority in this area. The legislation did not get enacted, but we expect it will be introduced again in this Congress.