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Date: Tuesday, May 12, 1998 FOR IMMEDIATE RELEASE Contact: HCFA Press Office (202) 690-6145
HHS Secretary Donna E. Shalala today announced a new Medicare payment system for skilled nursing facilities designed to control the growth of spending for post-acute care and make the delivery of such care more efficient.
The skilled nursing facility (SNF) benefit is one of the fastest growing components of Medicare spending. In 1989, Medicare spending for SNF services totaled $2.8 billion or 4.7 percent of total Medicare spending. In 1996, SNF care accounted for $10.6 billion or 9 percent of total program spending.
"We can make Medicare dollars go further by being a more prudent purchaser of skilled nursing facility services," said Shalala. "This new system will save money and will in some cases provide increased access for patients who require more care in skilled nursing facility services."
The new payment system proposed today was called for in the Balanced Budget Act enacted last year. It would replace Medicare's current cost-based methodology with a prospective payment system adjusted for the clinical condition of patients. Under this system, each SNF will receive a base payment amount adjusted for local wages and the clinical characteristics of the patient. Such payments will cover the routine costs (room, board, nursing services, minor medical supplies), ancillary costs (therapies, drugs, and lab services), and capital costs (land, building, and equipment).
The new payment system will be effective for cost reporting periods beginning July 1. For the first three years, the payment rate will be a blend of a facility specific rate and a federal rate. For the first cost-reporting period, the facility percentage will be 75 percent of the daily rate and the federal percentage will be 25 percent. For the second reporting period, the split will be 50-50; and the third reporting period will be 25 percent the facility rate and 75 percent the federal rate. In the fourth reporting period, all nursing facilities will be paid at the federal rate.
A facility specific daily rate is based on Part A allowable costs for skilled nursing facility services for cost reporting periods beginning in fiscal year 1995. This rate also includes an estimate of the amounts payable under Medicare Part B, excluding payment for physician and certain other practitioner services, for residents covered under Part A for skilled nursing facility services.
The federal per diem rates are calculated using Medicare allowable costs from hospital-based and free-standing nursing facilities for cost reporting periods beginning in FY 1995. The federal daily rates are computed separately for urban and rural facilities and adjusted for the mix of residents' clinical conditions and geographic variation in wages.