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Date:  March 31, 1995
FOR IMMEDIATE RELEASE 
CONTACT:  Anne Verano, HCFA (202) 690-6145

For the first time, Medicare will pay skilled nursing facilities for post-acute care on a basis largely tied to residents' needs. Using a single form to capture information for payment rates and quality indicators, this innovative system is expected to enhance Medicare patient's access to care, improve the equity and predictability of payment amounts, streamline the payment and quality processes, and ultimately improve the quality of patient care.

The system will use a common classification method, known as Resource Utilization Groups, Version III or RUGS-III, to set prospectively determined rates for a large portion of the payment amounts to nursing facilities under both the Medicare and Medicaid programs. Classification will be based on residents' clinical conditions; extent of services needed, such as rehabilitation, respirator/ventilator care or tube feedings; and functional status, such as the amount of support needed to eat or dress.

Under the new system, skilled nursing facilities will know in advance whether the patient is eligible for Medicare-covered post-acute care and how much HCFA will pay for each patient. Claims for payment will no longer be retroactively denied based on the patient's condition.

"As a result of the new system, coverage and payment will be dramatically simplified and based on real-world resource requirements," said HCFA Administrator Bruce C. Vladeck. "This will result in fairer, more predictable payments to nursing facilities and a reduction in their administrative burden.

"In addition, the new system has built-in incentives for nursing facilities to admit more clinically complex Medicare patients with heavy resource needs. This should improve access to care for some of our most vulnerable beneficiaries," Vladeck said.

Unlike the current Medicare system, which pays the same amount per resident based on each facility's average costs, the new system will pay varying amounts for residents of the same facility based on each resident's resource needs.

The system will also significantly enhance the quality assurance process in skilled nursing facilities. Data for measuring quality of care will come from an expanded version of the standardized resident assessment instrument currently used by states. The same tool will be used to determine both Medicare and Medicaid payment. The instrument, which measures residents' needs, strengths and preferences, is used in care planning.

In the developmental phase of the demonstration, data from the assessment instruments were used to create 30 facility-level quality indicators. Under the demonstration, these indicators will help the facilities evaluate their own performance and help Medicare and Medicaid target nursing facilities that need to be surveyed. Facilities providing high-quality care would be surveyed less frequently, while those with problems would have more frequent inspections. The evaluation of the demonstration will provide further information about the effectiveness of the quality indicators in the survey process.

The system will be tested in skilled nursing facilities in Kansas, Maine, Mississippi, New York, South Dakota and Texas. Phase I of the demonstration is underway. Some 1,900 skilled nursing facilities in the six states have been invited to participate in the Medicare payment portion of the demonstration and at least half are expected to enroll.

Phase II, which is expected to begin later this year, will involve switching participating skilled nursing facilities over to the new payment system and changing related operations at HCFA and the fiscal intermediaries who will be handling the SNF claims. Phase III of the demonstration will incorporate therapies into the new prospective rates.