May 1998

Health Care E-lert - Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities, 5/18/98

3 min

HCFA has finally published interim final rules, effective July 1, 1998, on the new prospective payment system ("PPS") and consolidated billing for skilled nursing facilities ("SNFs") that implement changes mandated by the Balanced Budget Act of 1997.

Prospective Payment System

For cost reporting periods beginning on or after July 1, 1998, SNFs will be paid for Medicare admissions through per diem prospective case-mix adjusted rates. PPS rates will apply to all costs (routine, ancillary and capital-related) of covered SNF services. These services include posthospital SNF services for which benefits are provided under Part A and all items and services for which, prior to July 1, 1998, payment may be made under Part B and which are furnished to SNF residents during a Part A covered stay. These rates will largely determine reimbursement for hospital-based sub-acute units.

A 3 year transition period will be initiated covering the 3 cost reporting periods beginning on or after July 1, 1998. Payment during this time will be made as follows: 1st year = 75% facility-specific rate + 25% Federal rate; 2nd year = 50% facility-specific rate + 50% Federal rate; 3rd year = 25% facility-specific rate + 75% Federal rate. The Federal rate is the mean SNF costs in FY95, updated for inflation. Federal rate data and geographic data are included in the regulations. The facility-specific rate is the total allowable Part A Medicare Cost (routine, ancillary and capital-related) incurred during a facility's cost reporting period beginning FY95. SNFs that received their first Medicare payment on or after October 1, 1995 receive payment according to the Federal rate only.

Consolidated Billing

For services rendered on or after July 1, 1998, the SNF must bill Medicare for almost all services provided to residents. A SNF must furnish services either directly or "under arrangement" with an outside supplier in which the SNF itself (rather than the supplier) bills Medicare. Compliance with SNF consolidated billing is required under the terms of an SNF's Medicare provider agreement, and applies regardless of who is paying for the inpatient stay. Submit claims to the Part A Intermediary on Form HCFA-1450. (See Program Memorandum AB-98-18 and 63 Fed. Reg. 26251.)

Requirements: services must be directly furnished or arranged for by the SNF; SNF, not outside supplier, must bill Medicare; physicians must include SNF's Medicare provider number on bills for physician services furnished to SNF residents that are separately billed to Part B carrier; fee schedules and uniform coding must be used for SNF Part B bills.

Consolidated billing requirements apply to: covered SNF services provided to a SNF resident; physical, occupational and speech-language therapy; laboratory services; sub-categories of physician services even though physician may be excluded; nonphysician services that would otherwise be billed to a Part B carrier in conjunction with related physician services and paid under a single, global fee; services furnished to SNF by someone other than practitioner (as incident to practitioner's professional service); and, ambulance transport only during an SNF stay.

Subject Facilities: Medicare-participating SNFs, including a distinct part of an SNF. If any portion of a nursing home has a Medicare-certified SNF, then consolidated billing applies to the entire nursing home. If a surrounding institution that houses a Medicare distinct part of an SNF includes an entity other than a nursing home (i.e. hospital, domiciliary care home), the consolidating billing does not apply to that entity, but only to the nursing home itself.