[August 2005]

In July, 2005, CMS issued the final rule to update the SNF Prospective Payment System (PPS). Based upon the final rule, we have prepared and enclosed the RUGs rates for Connecticut SNFs.  

The rates reflect long-anticipated refinements to the system.  However, CMS will delay the impact of those refinements until January 1, 2006.  As a result, for FY06 CMS will pay SNFs two different sets of rates.  The enclosed schedules show, for each Connecticut geographical area, the current rates, the first change, the first set of new rates effective October 1, 2005, the next change, and lastly the final rates effective January 1, 2006 which reflect the refinements. The enclosed schedules were formatted to make it easier for each provider to identify the changes that would affect them.

The rates will reflect an update using the full amount of the latest market basket index.  For FY06, the factor is 3.1 percent. 

As for the refinements, effective January 1, 2006, the final rule will add nine (9) new groups to the top of the hierarchy to capture beneficiaries who qualify for both the Extensive Services category and the Rehabilitation Therapy category.  Also, as part of the refinement, the temporary add-on payments will be withdrawn, except for the 128 percent adjustment for SNF residents with AIDS. 

With respect to wage indices, CMS will continue the practice of using data supplied by hospitals.  For FY06 RUGs rates, hospital wage index data was taken from cost reporting periods beginning during FY02.   For FY 06, CMS will use transitional indices.

The final rule also employs revised definitions of geographical areas.  The definitions use counties as the building blocks upon which to base new labor market designations.  All counties in a state outside a designated area are designated as rural.  For Connecticut, this change means that Fairfield County and New Haven County will be treated separately. However, adoption of the new designations will be delayed until January 1, 2006.

The final rule contains over 100 pages.  This brief memo was not designed to explain how CMS will reclassify residents or how it will shift the relative weights assigned to each category.  In that regard, we intend to provide information under a separate cover.  Nevertheless, the attached rates will enable providers to estimate the fiscal impact to their operating results. 

Providers should feel free to contact Vincent Ruocco, LLC, CPA at (203) 932-2931 or vruocco@artcpas.com.