Final rule addresses (some) industry concerns about PPS.

HCFA'S LONG-AWAITED FINAL RULE REGARDING MEDICARE'S prospective payment system and consolidated billing for skilled nursing facilities was the agency's opportunity to address industry concerns about the interim final rule it had issued 14 months earlier. Instead, HCFA used the opportunity to justify the original intent of the rule and to clarify certain points.

HCFA received nearly 500 comments on the interim final rule, most of which fell into one of three major categories:

* Payment rate questions. These generally involved the high cost of non-therapy ancillaries, inadequate reimbursement for high-acuity residents, calculation of the federal and transition rates, and questions regarding the Part B add-on.

* Clinical questions. These usually involved the MDS assessment and scheduling requirements, certification and recertification procedures, medical review criteria, nurse staffing and staff time measurement studies, and coverage and level-of-care determinations.

* Consolidated billing questions. These involved excluded services, the $1,500 cap on outpatient therapy services, and the implementation time frame for residents in a non-covered Part A stay.

On payment rates, HCFA said its hands are tied by the Balanced Budget Act (BBA) of 1997, but that it is funding two research projects with an eye toward refining the RUG III model. A new indexing system, based on ancillary charges rather than nursing time, also is being evaluated as a basis for payment for non-therapy ancillaries.

In another conciliatory gesture, HCFA revised its initial ruling that in order to qualify for a transitional payment, providers had to have a cost-report period beginning in fiscal year 1995 (from October 1, 1994 through September 30, 1995). Now, facilities that submit 13-month cost reports for that time frame with the cost report period beginning in September 1994 are eligible.

Clinical concerns dominated HCFA's clarifications. One area of confusion involved eligibility to receive periodic interim payments. The BBA eliminated these payments for home health agencies transitioning to a PPS. However, because there was no such provision in the SNF requirements, HCFA says SNFs may be reimbursed under a periodic interim payment method.

HCFA also clarified the use of grace days in completing the MDS. Current regulations allow facilities to set the assessment reference up to day 8 of a Medicare stay. To allow nurses some flexibility, days 6, 7, and 8 were provided as grace days in setting the reference date. HCFA reiterated that the use of grace days is permitted for residents with any diagnosis, but warned that routine use of grace days could result in an audit to evaluate whether the appropriate assessment reference date is being used.

In addition, HCFA is revising Section 413.64 of the Federal Register to clarify the required Medicare assessment schedule, which says that assessments must be performed on days 5, 14, 30, 60, and 90 after admission. Because this language does not consider instances where a resident's Medicare coverage does not occur until after the date of admission, language was included to account for that possibility.

Several comments were directed at the role played by the RUG III assignment in determining eligibility for extended care benefits. In the preamble to the interim final rule, HCFA said the assignment of a RUG in one of the upper 26 RUG categories would automatically qualify a beneficiary for such benefits. This caused providers to question the role of existing coverage guidelines in determining extended care benefits. HCFA clarified its position in the final rule, stating that the presumption of extended care benefits applies only to the period up to the reference date for the initial five-day assessment and not to subsequent assessments.

HCFA reinstated as examples of skilled services overall management and evaluation of the care plan, observation and assessment of the patient's changing condition, and patient education, as well as the insertion, irrigation, and replacement of suprapubic catheters.

HCFA said it was delaying until next October the requirement that providers complete Section U relating to collection of medication information, due to Y2K complications.

On consolidated billing, HCFA declined to expand the list of exempt services, but said to stay tuned for future instructions. The agency also clarified uncertainty involving outpatient procedures not included in a resident's care plan. HCFA's Program Memorandum A-98-37 of last November listed specific HCPCS codes that were excluded from consolidated billing. The final rule says an outpatient procedure is subject to consolidated billing if it would be included in the customary scope of care plans generally, regardless of whether it appears in the individual care plan.

Scott Welden is vice president-finance for The Whitman Group, a management consulting firm in Huntingdon Valley, Pennsylvania.