[Federal Register Volume 63, Number 154 (Tuesday, August 11, 1998)]
[Proposed Rules]
[Pages 42797-42801]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21423]
[[Page 42797]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Part 413
[HCFA-1883-P]
RIN 0938-AI80
Medicare Program; Revision of the Procedures for Requesting
Exceptions to Cost Limits for Skilled Nursing Facilities and
Elimination of Reclassifications
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would revise the procedures for granting
exceptions to the cost limits for skilled nursing facilities (SNFs) and
retain the current procedures for exceptions to the cost limits for
home health agencies (HHAs). It also would remove the provision
allowing reclassifications for all providers.
DATES: Comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5:00 p.m. on
October 13, 1998.
ADDRESSES: Mail written comments (one original and three copies) to the
following address:
Health Care Financing Administration, Department of Health and Human
Services, Attention: HCFA-1883-P, P.O. Box 31850, Baltimore, MD 21144-
0517.
If you prefer, you may deliver your written comments (one original and
three copies) to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, S.W.,
Washington, DC 20201, or Room C5-09-26, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code HCFA-1883-P. Comments received timely will be available
for public inspection as they are received, generally beginning
approximately 3 weeks after publication of a document, in Room 309-G of
the Department's offices at 200 Independence Avenue, SW., Washington,
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.
(phone: (202) 690-7890).
FOR FURTHER INFORMATION CONTACT: Steve Raitzyk, (410) 786-4599.
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I. Background
Cost Limits
Section 223 of the Social Security Amendments of 1972 (Pub Law 92-
603) amended section 1861(v)(1)(A) of the Social Security Act (the Act)
to authorize the Secretary to establish ``* * * limits on the direct
and indirect overall incurred costs or incurred costs of specific items
or services or groups of items or services * * *'' as a presumptive
estimate of reasonable costs. Under section 1861(v)(1)(A), a provider's
cost in excess of its Medicare cost limit is deemed to be unreasonable
for the efficient delivery of needed health care services under the
Medicare program. The Congress, however, in the House Committee report
``H.R. Rep. No. 92-231, 92nd Congress, 1st Session 5071 (1971),''
stated that ``Providers would, of course, have the right to * * *
obtain relief from the effect of the cost limits on the basis of
evidence of the need for such an exception.''
On June 1, 1979, we published a final rule in the Federal Register
at 44 FR 31802, revising 42 CFR 405.460 to implement more effectively
and equitably section 223 of the Social Security Amendments of 1972.
Section 405.460, which was subsequently redesignated as Sec. 413.30,
describes the general principles and procedures for establishing cost
limits and the process by which providers may appeal the applicability
of these cost limits. Under Sec. 413.30(c), a provider may obtain
relief from the effects of applying cost limits, either by requesting
an exemption from its limit as a new provider of inpatient services, by
requesting a reclassification, or by requesting an exception to the
cost limit.
In the preamble of the June 1, 1979 final rule (44 FR 31806), we
clarified the difference between an exemption and an exception. If a
provider receives an exemption, it is not affected at all by the cost
limits and it is paid under the standard rules for reasonable cost or
customary charges. If a provider receives an exception, it is paid on
the basis of the cost limit, plus an incremental sum for the reasonable
costs warranted by the circumstances that justified the exception.
The cost limit is a presumptive estimate of reasonable costs, which
excludes costs found to be unnecessary for the efficient delivery of
needed health care services. We may establish limits for direct or
indirect costs, for costs of specific services, or for groups of
services. Medicare payable provider costs may not exceed the amounts,
estimated by us, to be necessary for the efficient delivery of needed
health care services furnished by a provider.
We imposed these limits prospectively and they may be calculated on
a per admission, per discharge, per diem, per visit, or other basis.
All SNFs and HHAs that are paid under the cost payment methodology are
subject to these cost limits.
The routine service cost per diem limits are based on the average
cost of furnishing services and are determined by the SNF's or HHA's
geographical location classification (urban or rural) and type of
facility classification (hospital-based or freestanding). We publish in
the Federal Register, the schedule of limits that apply to the cost
reporting periods beginning during the fiscal year indicated in the
notice. This published ``Schedule of Limits'' outlines the methodology
and data we use to determine the average cost of providing the routine
services on which we base the cost limits.
The servicing intermediary notifies each SNF or HHA of its cost
limit at
[[Page 42798]]
least 30 days before the start of a cost reporting period to which the
cost limit applies. If there is a delay, we advise the intermediary of
any alternate process to compute an interim cost limit. Each
intermediary ``cost limit notification'' must contain the following:
The provider's classification and calculation of the
applicable limit.
A statement that, if the provider believes it has been
incorrectly classified, it is the provider's responsibility to furnish
to the intermediary evidence that demonstrates the classification is
incorrect.
A statement that the provider may be entitled to an
exemption from, or an exception to, the cost limits under the
provisions of Sec. 413.30.
This proposed rule focuses on two provisions of Sec. 413.30
established in the June 1, 1979 final rule. First, we propose to change
the approval process for granting exceptions to the cost limits for
SNFs; second, we propose to delete the provision for obtaining a
reclassification for all providers.
II. Skilled Nursing Facility and Home Health Agency Requests
Regarding Applicability of Cost Limits
A. Current Regulations Regarding SNF and HHA Exceptions to Cost Limits
The current regulation at Sec. 413.30(f) allows a provider that is
subject to cost limits to request an exception to the cost limits if
its costs exceed, or are expected to exceed, the limits as a result of
one of the following unusual situations:
Atypical services.
Extraordinary circumstances.
Providers in areas with fluctuating populations.
Medical and paramedical education costs.
Unusual labor costs.
An adjustment is made only to the extent that the costs are
reasonable, attributable to the circumstance specified, separately
identified by the provider, and verified by the intermediary.
The provider must file a request for an exception to the cost
limits no later than 180 days from the date of the intermediary's
notice of program reimbursement. The intermediary reviews the request
with all supporting documentation. The intermediary also makes and
submits to us a recommendation on the provider's request. We make a
final determination and respond to the intermediary within 180 days
from the date of the intermediary's recommendation. If we do not
respond within 180 days, it is considered good cause for the granting
of an extension of the time limit to apply for a Provider Reimbursement
Review Board review.
In the past, Providers and intermediaries had raised many questions
about the documentation needed to properly file SNF exception requests.
In addition, we received many complaints from the SNFs about the length
of time that it took to get a response to their exception requests,
mainly because the regulation did not require a time limit for the
intermediary's recommendation to us.
In order to address this situation and to clarify the exceptions
process, we published, in July, 1994, section 2530 of HCFA Pub. 15-1
(Transmittal No. 378), which gives SNFs detailed instructions for
requesting exceptions to the SNF cost limits. Under transmittal No.
378, intermediaries process SNF exceptions in a more expeditious
manner. Section 2531.1 of Transmittal 378 requires intermediaries to
submit to us their recommendations on a SNF's exception request within
90 days of the receipt of the request from the SNF. Also, under section
2531.1 of Transmittal 378, we notify the intermediary of our final
determination on the exception within 90 days of the date that the
request is received (the current regulation (Sec. 413.30(c)) allows us
180 days to make our final determination).
B. Provisions of this Rule Regarding Exceptions to the Cost Limits for
SNFs and HHAs
After reviewing SNF exception requests submitted by intermediaries
under the rules in Transmittal 378, we identified six intermediaries
that were proficiently adjudicating SNF exceptions within 90 days of
reviewing the SNF's requests. We gave the six intermediaries the
additional responsibility in making the determination on SNF exception
requests subject to our oversight and review. This has resulted in a
substantial decrease in processing time and effort. The resulting
increase in administrative efficiency has benefitted SNFs, fiscal
intermediaries, and the Medicare program.
We propose to revise Sec. 413.30(c) to give all intermediaries the
authority to make final determinations on SNF exception requests. This
would result in an increase in administrative efficiency that would
benefit all SNFs that file SNF exception requests and fiscal
intermediaries that process those exception requests.
In order to assure that all intermediaries will be able to
adjudicate exception requests proficiently, we would work with the Blue
Cross Association to perform additional training for all fiscal
intermediaries. In addition, we would designate a single contact person
to handle all inquiries from fiscal intermediaries regarding exception
requests.
Under proposed Sec. 413.30(c), if the intermediary determines that
the SNF did not provide adequate documentation from which a proper
determination can be made, the intermediary would notify the SNF that
the request is denied. The intermediary would also notify the SNF that
it has 45 days from the date on the intermediary's denial letter to
submit a new exception request with the complete documentation, that we
continue to allow the SNF to request a review by the Provider
Reimbursement Review Board, and that the time we need to review the
request (through the intermediary) is considered good cause for
extending the time limit for the SNF to apply for the review.
Otherwise, the denial is our final determination.
Section 4432 of the Balanced Budget Act of 1997, (Public Law 105-
33) enacted August 5, 1997, mandates that a prospective payment system
for SNFs be implemented effective for cost reporting periods beginning
on or after July 1, 1998. This prospective payment system will replace
the retrospective reasonable cost based system currently used by
Medicare for payment of SNF services. Accordingly, exceptions will no
longer be available to SNFs with cost reporting periods beginning on or
after July 1, 1998. Fiscal intermediaries will continue to process,
beyond July 1, 1998, SNF exception requests for cost reporting periods
beginning before July 1, 1998.
Effective with cost reporting periods beginning on or after July 1,
1998, there will be a 3-year transition period to the prospective
payment system. During the transition period, SNFs will be reimbursed a
blended payment that is based partially on a facility-specific rate and
a prospective payment rate. The base period for the facility-specific
rate will be cost reporting periods beginning during the period October
1, 1994 and September 30, 1995. We recognize that providers might have
questions about the relationship between the exceptions process and the
calculation of the facility-specific rate under section 1888(e) of the
Social Security Act, as added by the BBA. We are currently developing
the regulation to implement the SNF prospective payment system enacted
by the BBA and we will address those issues in that document.
The procedures for HHA exception requests would remain unchanged
but would be set forth at Sec. 413.30(c)(1).
[[Page 42799]]
III. Reclassification of Providers
A. Current Regulations Regarding Reclassifications
Section 413.30(d) states that a provider may obtain a
reclassification if the provider can show that its classification is at
variance with the criteria specified in promulgating the limits.
When cost limits were first developed, we manually arrayed the data
collected from the providers' cost reports and classified them by type
(hospital-based or freestanding) and location (metropolitan area or
nonmetropolitan area). There were instances when providers were
misclassified. Accordingly, we allowed providers to file
reclassification requests under Sec. 413.30(d) if they could show that
the data we used for the classification were incorrect.
B. Provisions of this Rule To Remove the Regulation Allowing
Reclassifications
We propose to remove Sec. 413.30(d) to discontinue the use of
reclassifications. HHAs and SNFs are now filing specific cost reports,
and metropolitan and nonmetropolitan area designations have become
linked, through automation, to the county and State where each provider
is located. As a result, there is no chance that a SNF or HHA can be
misclassified.
Hospitals now file for reclassifications with the Medicare
Geographic Review Board. These reclassifications are specific to
hospitals and are governed under subpart L of part 412. Hospitals no
longer apply for reclassifications under Sec. 413.30.
IV. Technical Changes
A. We would remove paragraph (h), pertaining to hospital cost
report adjustments, as it is obsolete.
B. We would make minor editorial changes to Sec. 413.30.
V. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments that we receive by the date and time specified in the
``DATES'' section of this preamble, and, if we proceed with a
subsequent document, we will respond to the comments, in the preamble
to that document.
VI. Regulatory Impact Statement
Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
through 612), we prepare a regulatory flexibility analysis unless we
certify that a rule would not have a significant economic impact on a
substantial number of small entities. For purposes of the RFA, all SNFs
and HHAs are considered to be small entities. Individuals and States
are not included in the definition of a small entity.
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. Such
an analysis must conform to the provisions of section 603 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 a Metropolitan
Statistical Area and has fewer than 50 beds. The proposed rule to
eliminate reclassifications for HHAs and SNFs would have no effect,
since they no longer need reclassifications. Hospitals can obtain any
needed reclassifications and exceptions under subpart L of part 412.
The proposed rule to change the method of processing requests for
exceptions to cost limits would have no economic impact on either the
providers or the Medicare program.
For these reasons, we are not preparing an analyses for either the
RFA or section 1102(b) of the Act because we have determined, and we
certify, that this rule would not have a significant economic impact on
a substantial number of small entities or a significant impact on the
operations of a substantial number of small rural hospitals.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
VII. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Therefore, we are soliciting public comment on each of these issues
for the information collection requirements discussed below.
Sec. 413.30 Limitations on Payable Costs
(e) Exceptions. Limits established under this section may be
adjusted upward for a SNF or HHA under the circumstances specified in
paragraphs (e)(1) through (e)(5) of this section. An adjustment is made
only to the extent that the costs are reasonable, attributable to the
circumstances specified, separately identified by the SNF or HHA, and
verified by the intermediary.
The current regulation at Sec. 413.30(f) allows a provider that is
subject to cost limits to request an exception to the cost limits if
its costs exceed, or are expected to exceed, the limits as a result of
one of the following unusual situations:
Atypical services.
Extraordinary circumstances.
Providers in areas with fluctuating populations.
Medical and paramedical education costs.
Unusual labor costs.
An adjustment is made only to the extent that the costs are
reasonable, attributable to the circumstance specified, separately
identified by the provider, and verified by the intermediary.
The provider must file a request for an exception to the cost
limits no later than 180 days from the date of the intermediary's
notice of program reimbursement. The intermediary reviews the request
with all supporting documentation. The intermediary also makes and
submits to us a recommendation on the provider's request. We make a
final determination and respond to the intermediary within 180 days
from the date of the intermediary's recommendation. If we do not
respond within 180 days, it is considered good cause for the granting
of an extension of the time limit to apply for a Provider Reimbursement
Review Board review.
We propose to revise Sec. 413.30(c) to give all intermediaries the
authority to make final determinations on SNF exception requests. This
would result in an increase in administrative efficiency that would
benefit all SNFs that file SNF exception requests and fiscal
intermediaries that process those exception requests.
Under proposed Sec. 413.30(c), if the intermediary determines that
the SNF did not provide adequate
[[Page 42800]]
documentation from which a proper determination can be made, the
intermediary would notify the SNF that the request is denied. The
intermediary would also notify the SNF that it has 45 days from the
date on the intermediary's denial letter to submit a new exception
request with the complete documentation, that we continue to allow the
SNF to request a review by the Provider Reimbursement Review Board, and
that the time we need to review the request (through the intermediary)
is considered good cause for extending the time limit for the SNF to
apply for the review. Otherwise, the denial is our final determination.
Section 4432 of the Balanced Budget Act of 1997, (Public Law 105-
33) enacted August 5, 1997, mandates that a prospective payment system
for SNFs be implemented effective for cost reporting periods beginning
on or after July 1, 1998. Accordingly, exceptions will no longer be
available to SNFs with cost reporting periods beginning on or after
July 1, 1998.
As referenced above, a SNF or HHA may request an exception based on
the information provided in its cost report, as submitted to the
appropriate HCFA intermediary. Accordingly, HCFA believes that the
supplemental information submitted by the provider is not subject to
the PRA, as stipulated in 5 CFR 1320.3(h)(6) and 5 CFR 1320.3(h)(9). In
particular, on an individual basis, providers are given an opportunity
to submit additional information designed to clarify the responses
disclosed in a currently approved collection, e.g., HHA/SNF cost
reports (OMB #0938-0022 & 0938-0463), to demonstrate an exception.
We have submitted a copy of this rule to OMB for its review of the
information collection requirements above. If you comment on these
information collection and recordkeeping requirements, please mail
copies directly to the following:
Health Care Financing Administration, Office of Information Services,
Information Technology Investment Management Group, Division of HCFA
Enterprise Standards, Room C2-26-17, 7500 Security Boulevard,
Baltimore, MD 21244-1850. Attn: John Burke HCFA-1883.
And,
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Building, Washington, DC
20503,
List of Subjects in 42 CFR Part 413
Health facilities, Kidney diseases, Medicare, Puerto Rico,
Reporting and recordkeeping requirements.
For the reasons set out in the preamble, 42 CFR Chapter IV,
Subchapter B, part 413, subpart C would be amended as follows:
PART 413--[AMENDED]
1. The authority citation for part 413 is revised to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
2. Section 413.30 is revised to read as follows:
Sec. 413.30 Limitations on payable costs.
(a) Introduction--(1) Scope. This section implements section
1861(v)(1)(A) of the Act, by setting forth the general rules under
which HCFA may establish limits on SNF and HHA costs recognized as
reasonable in determining Medicare program payments. It also sets forth
rules governing exemptions and exceptions to limits established under
this section that HCFA may make as appropriate in consideration of
special needs or situations.
(2) General principle. Payable SNF and HHA costs may not exceed the
costs HCFA estimates to be necessary for the efficient delivery of
needed health services. HCFA may establish estimated cost limits for
direct or indirect overall costs or for costs of specific services or
groups of services. HCFA imposes these limits prospectively and may
calculate them on a per admission, per discharge, per diem, per visit,
or other basis.
(b) Procedure for establishing limits. (1) In establishing limits
under this section, HCFA may classify SNFs and HHAs by factors that
HCFA finds appropriate and practical, including the following:
(i) Type of services furnished.
(ii) Geographical area where services are furnished, allowing for
grouping of noncontiguous areas having similar demographic and economic
characteristics.
(iii) Size of institution.
(iv) Nature and mix of services furnished.
(v) Type and mix of patients treated.
(2) HCFA bases its estimates of the costs necessary for efficient
delivery of health services on cost reports or other data providing
indicators of current costs. HCFA adjusts current and past period data
to arrive at estimated costs for the prospective periods to which
limits are applied.
(3) Before the beginning of a cost period to which revised limits
will be applied, HCFA will publish a notice in the Federal Register,
establishing cost limits and explaining the basis on which they are
calculated.
(4) In establishing limits under paragraph (b)(1) of this section,
HCFA may find it inappropriate to apply particular limits to a class of
SNFs or HHAs due to the characteristics of the SNF or HHA class, the
data on which HCFA bases those limits, or the method by which HCFA
determines the limits. In these cases, HCFA may exclude that class of
SNFs or HHAs from the limits, explaining the basis of the exclusion in
the notice setting forth the limits for the appropriate cost reporting
periods.
(c) Requests regarding applicability of cost limits. A SNF may
request an exception or exemption to the cost limits imposed under this
section. An HHA may request only an exception to the cost limits. The
SNF's or HHA's request must be made to its fiscal intermediary within
180 days of the date on the intermediary's notice of program
reimbursement.
(1) Home health agencies. The intermediary makes a recommendation
on the HHA's request to HCFA, which makes the decision. HCFA responds
to the request within 180 days from the date HCFA receives the request
from the intermediary. The intermediary notifies the HHA of HCFA's
decision. The time required by HCFA to review the request is considered
good cause for the granting of an extension of the time limit for the
HHA to apply for a Provider Reimbursement Review Board review, as
specified in Sec. 405.1841 of this chapter. HCFA's decision is subject
to review under subpart R of part 405 of this chapter.
(2) Skilled nursing facilities. The intermediary makes the final
determination on the SNF's request within 90 days from the date that
the intermediary receives the request from the SNF. If the intermediary
determines that the SNF did not provide adequate documentation from
which a proper determination can be made, the intermediary notifies the
SNF that the request is denied. The intermediary also notifies the SNF
that it has 45 days from the date on the intermediary's denial letter
to submit a new exception request with the complete documentation and
that otherwise, the denial is the final determination. The time
required by the intermediary to review the request is considered good
cause for the granting of an extension of the time limit for the SNF to
apply for a Provider Reimbursement Review Board review, as specified in
Sec. 405.1841 of this
[[Page 42801]]
chapter. The intermediary's determination is subject to review under
subpart R of part 405 of this chapter.
(d) Exemptions. Exemptions from the limits imposed under this
section may be granted to a new SNF. A new SNF is a provider of
inpatient services that has operated as the type of SNF (or the
equivalent) for which it is certified for Medicare, under present and
previous ownership, for less than 3 full years. An exemption granted
under this paragraph, expires at the end of the SNF's first cost
reporting period beginning at least 2 years after the provider accepts
its first inpatient.
(e) Exceptions. Limits established under this section may be
adjusted upward for a SNF or HHA under the circumstances specified in
paragraphs (e)(1) through (e)(5) of this section. An adjustment is made
only to the extent that the costs are reasonable, attributable to the
circumstances specified, separately identified by the SNF or HHA, and
verified by the intermediary.
(1) Atypical services. The SNF or HHA can show that the--
(i) Actual cost of services furnished by a SNF or HHA exceeds the
applicable limit because the services are atypical in nature and scope,
compared to the services generally furnished by SNFs or HHAs similarly
classified; and
(ii) Atypical services are furnished because of the special needs
of the patients treated and are necessary in the efficient delivery of
needed health care.
(2) Extraordinary circumstances. The SNF or HHA can show that it
incurred higher costs due to extraordinary circumstances beyond its
control. These circumstances include, but are not limited to, strikes,
fire, earthquake, flood, or other unusual occurrences with substantial
cost effects.
(3) Areas with fluctuating populations. The SNF or HHA meets the
following conditions:
(i) Is located in an area (for example, a resort area) that has a
population that varies significantly during the year.
(ii) Is furnishing services in an area for which the appropriate
health planning agency has determined does not have a surplus of beds
or services and has certified that the beds or services furnished by
the SNF or HHA are necessary.
(iii) Meets occupancy or capacity standards established by the
Secretary.
(4) Medical and paramedical education. The SNF or HHA can
demonstrate that, if compared to other SNFs or HHAs in its group, it
incurs increased costs for items or services covered by limits under
this section because of its operation of an approved education program
specified in Sec. 413.85.
(5) Unusual labor costs. The SNF or HHA has a percentage of labor
costs that varies more than 10 percent from that included in the
promulgation of the limits.
(f) Operational review. Any SNF or HHA that applies for an
exception to the limits established under paragraph (e) of this section
must agree to an operational review at the discretion of HCFA. The
findings from this review may be the basis for recommendations for
improvements in the efficiency and economy of the SNF's or the HHA's
operations. If recommendations are made, any future exceptions are
contingent on the SNF's or HHA's implementation of these
recommendations.
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: December 8, 1997.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
Dated: April 6, 1998.
Donna E. Shalala,
Secretary.
[FR Doc. 98-21423 Filed 8-10-98; 8:45 am]
BILLING CODE 4120-01-P
