August 2007

 

On August 1, 2007, CMS issued its final rule associated with the SNF Prospective Payment System (PPS).   The rule updates PPS payment rates for FY08.  Among other things, the rule revised and rebased the SNF market basket, and modified the threshold for the adjustment to account for market basket forecast errors. 

The purpose of this memorandum is to provide information on how the rule impacts payments to Connecticut nursing facilities.  This memorandum also discusses the differences between the final rule and the proposed rule that CMS issued earlier this year. 

With regard to the market basket rate, the rule sets the FY08 amount at 3.3 percent.  The final rule also reflects a rebasing of the market basket from FY97 to FY04.  The rebasing changed the distribution of the labor and non-labor portions of the federal rates.

As for the forecast error adjustment, the rule raised the threshold for triggering an adjustment from 0.25 percentage points to 0.50 percentage points, effective with FY08.

While the market basket percentage will cause aggregate nursing facility payments under PPS to increase by 3.3 percent, as in prior years, actual rates to individual facilities will be influenced by the change in the wage indexes for each geographic area.  The following table shows the wage indexes for each region in Connecticut for FY07, FY08 as proposed, and FY08 as finalized.

 

 

 

 

 

 

 

 

 

 

 

The changes were primarily caused by the use of the full (non-weighted) CBSA-based index.  In the prior period the index was a blend of the MSA-based index and the CBSA-based index.   With regard to the proposed and the final wage indexes for FY08, the differences are associated with a change in the budget neutrality factor used by CMS.

As a result of the change in the wage index and the rebasing of the market basket, Connecticut facilities will not realize payment increases at the market basket rate of 3.3 percent.  For some, rates will increase albeit less than 3.3 percent, and for others rates will decrease. 

The table that follows outlines the percentage changes from FY07 to FY08 in PPS per diem rates for each region in Connecticut, as calculated under the proposed rule and the final rule.

 

 

The table indicates that, according to the final rule published by CMS, SNFs in New London and Windham counties will realize rate decreases of less than 1%, while SNFs in other Connecticut locations will see rate increases ranging from 1.7% to 3.0%. 

Providers should feel free to contact Vincent Ruocco, LLC, CPA with questions.  Mr. Ruocco can be reached at (203) 932-2931.