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September 7, 2010

Prospective Payment Skilled Nursing Facilities

Proposed Rule

Report Card

Score: 26 / 60

RULE SUMMARY

This proposed rule would update the payment rates used under the prospective payment system for skilled nursing facilities, for fiscal year 2010. In addition, it would recalibrate the case-mix indexes so that they more accurately reflect parity in expenditures related to the implementation of case-mix refinements in January 2006. It also discusses the results of our ongoing analysis of nursing home staff time measurement data collected in the Staff Time and Resource Intensity Verification project, and proposes a new RUG–IV case-mix classification model that will use the updated Minimum Data Set (MDS) 3.0 resident assessment for case-mix classification. In addition, this proposed rule includes a request for public comment on a possible requirement for the quarterly reporting of nursing home staffing data, and would revise the regulations to incorporate certain technical corrections. Finally, this proposed rule includes a request for public comments on applying the quality monitoring mechanism in place for all other SNF PPS facilities to rural swing-bed hospitals.

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion	Score
Openness
1. How easily were the RIA , the proposed rule, and any supplementary materials found online? 0938-AP46 can be found on regulations.gov using the RIN and a keyword search, as well as on the Department of Health and Human Service's website. It can be found by clicking on regulations, regulations and guidance under medicare, then on quarterly provider updates–regulations. Here, search under QPU April-June 2009. The department offers a list of proposed rules.	4/5
2. How verifiable are the data used in the analysis? Data on nursing home costs come from a survey, with documentary materials available on the HHS website. It is not clear whether actual survey results are publicly available. Analysis of these cost data is used to justify a new model for assigning patients to treatment groups that have different payments attached. A Bureau of Labor Stastistics survey is mentioned as source of wage data, but there is no specific cite or link. Some data used in the calculations are simply sourced to "IHS Global Insight," with no specific publication or links.	2/5
3. How verifiable are the models and assumptions used in the analysis? For details of some calculation methods, the preamble refers the reader to a 1998 rule. MedPAC reports, which support some decisions, are linked. Perhaps three-quarters of the time, discussions of research include citations to specific documents, often with links.	3/5
4. Was the analysis comprehensible to an informed layperson? "Most calculations are explained, but tedious. Some sections are repetitious. There are a large number of ""as explained above"" or ""as explained below"" type phrases, which may indicate poor organization. The reader needs to be at least somewhat familiar with this program to really understand what's going on. The first sentence of background section gives a preview of the style to come: ""Annual updates to the prospective payment system (PPS) rates for skilled nursing facilities (SNFs) are required by section 1888(e) of the Social Security Act (the Act), as added by section 4432 of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105–33, enacted on August 5, 1997), and amended by the Medicare, Medicaid, and State Children’s Health Insurance Program (SCHIP) Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106–113, enacted on November 29, 1999), the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106–554, enacted December 21, 2000), and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108–173, enacted on December 8, 2003)."""	2/5
Analysis
5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?	2/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life? No explicit objective is given other than implementing the law. The text of the preamble occasionally makes passing reference to "appropriate" payments, which presumably means payments that motivate the right quality of care without over-paying. Some changes seem motivated by a desire to more closely match payment with costs.	1/5
Does the analysis identify how these outcomes are to be measured? Costs are measured in dollars, but outcomes are not specified or measured.	2/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes? Payment calculations based on more accurate/up-to-date cost data will lead to more accurate payments. Since the objective is not explicilty defined, the reader has to read between the lines. The theory behind the payment system is explained well in "Methodology Used for the Calculation of the Federal Rates" section.	3/5
Does the analysis present credible empirical support for the theory? Some research is cited to justify why the proposed payment methods are more accurate. The methodology uses lots of input data from past surveys, studies, etc (although it doesn't actually show a lot of the data or make it clear where it can be found, if it is even available to the public).	2/5
Does the analysis adequately assess uncertainty about the outcomes? The analysis acknowledges uncertainty but doesn't do any analysis of uncertainty: "Certain events may occur to limit the scope or accuracy of our impact analysis, as this analysis is future oriented and, thus, very susceptible to forecasting errors due to certain events that may occur within the assessed impact time period."	1/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?	2/5
Does the analysis identify a market failure or other systemic problem? The government is making these payments, so the government needs to determine how they will be set. One recalibration is intended to elimininate $1.05 billion in payments that HHS regards as "excessive." These payments are attributed to use of projected case mix data instead of actual case-mix data to calculate payments in the past.	3/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal? The fact that the recalibration leads to a $1 billion swing in payments suggests that the problem is large.	2/5
Does the analysis present credible empirical support for the theory? Some research is cited to justify why the proposed payment methods are more accurate.	2/5
Does the analysis adequately assess uncertainty about the existence or size of the problem? Some acknowledgment of uncertainty, but no explicit analysis of uncertainty.	1/5
7. How well does the analysis assess the effectiveness of alternative approaches?	2/5
Does the analysis enumerate other alternatives to address the problem? HHS says it did not consider alternatives to the payment system because the payment system is mandated by law. HHS considered alternative time periods for calculating the case mix adjustment.	2/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)? It mentions relatively narrow tweaks in how the federal government will set payment rates.	1/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved? Results of alternatives are not calculated, and HHS dismisses them with a few sentences of reasoning.	1/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future? Costs are calculated relative to a baseline of expenditures that would occur if the rules are not changed. There is not much explicit discussion of the baseline or rationale for it.	2/5
8. How well does the analysis assess costs and benefits?	2/5
Does the analysis identify and quantify incremental costs of all alternatives considered? A table shows the incermental effect of each change the regulation makes, but only for the proposed alternative.	2/5
Does the analysis identify all expenditures likely to arise as a result of the regulation? Only federal expenditures are identified. The analysis estimates a $660 million increase in payments due to adjustment in payment rates and a $1.05 billion reduction due to the case mix adjustment.	3/5
Does the analysis identify how the regulation would likely affect the prices of goods and services? Only in the sense that the calculations establish federal payment rates.	2/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation? "Although the best data available is utilized, there is no attempt to predict behavioral responses to these changes, or to make adjustments for future changes in such variables as days or case-mix." In a few cases, HHS seems aware of incentives created by the regulation: "We are concerned that placing limits on the use of concurrent therapy could result in an inappropriate substitution of therapy aides for therapists and assistants." The preamble also cites a GAO study that found paying facilities based on a patient's estimated therapy needs led facilities to classify more patients as needing more therapy, which they did not necessarily receive. There is a general expression of concern: "[W]e have become concerned that incentives created by the SNF PPS, the public reporting of nursing home quality measures, and the changing beneficiary population using SNF services likely have altered industry practices, and have affected the nursing resources required to treat different types of patients. Changes to technology might also have affected care methods."	2/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis? The analysis acknowledges that the accuracy of the projections may change if other factors, such as legislation affecting Medicare, change. Payments are adjusted for past years' case mix forecast errors if the forecast error exceeds 0.5 percent.	2/5
Does the analysis identify the alternative that maximizes net benefits? Since benefits are not calculated, net benefits cannot be calculated either.	0/5
Does the analysis identify the cost-effectiveness of each alternative considered? Since benefits are not calculated cost-effectiveness cannot be calculated either.	0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs? A table breaks down the effects on various types of facilities, such as rural/urban, location, and private vs. government ownerhship. A new classification system called "RUG-IV" has no effect on total expenditures but is expected to redistribute spending among different types of hospitals; a table shows this. Another table shows differential effects on payments for rehabilitiation therapy vs. nursing services.	4/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits? No relevant discussion.	0/5
Use
9. Does the proposed rule or the RIA present evidence that the agency used the analysis? The calculations determine the rates the federal government will pay for various services. Some decisions about input values or calculation methods seem to be influenced by research.	4/5
10. Did the agency maximize net benefits or explain why it chose another alternative? Net benefits were not calculated, and the preamble does not seem to take any net benefit issues into account.	0/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future? No measures or goals are established. Since benefits are not measured, the only possible measures and goals that could be set using this RIA would be costs. One sentence notes, "we intend to monitor the use of therapy aides and, if necessary, to propose changes to MDS reporting requirements in the future."	2/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so? There are some general references to data collection, and these data could perhaps be used to evaluate the regulation in the future: "Section 1888(e)(6) of the Act requires nursing facilities to provide the Secretary, in a manner and within the time-frames prescribed by the Secretary, the resident assessment data necessary to develop and implement SNF payment rates." HHS collects nursing home staffing data and makes it availble to the public, but suggests no way that it would use this data to assess results of the rule. No extensive "quality of care" measures like those that appear in other HHS rules.	1/5

Total	26 / 60

Additional details

Agency: Department of Health and Human Services
Regulatory Identification Number: 0938-AP46
Agency Name: Department of Health and Human Services
Rule Publication Date: 07/20/2009