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Mike Cheek
Senior VP, Reimbursement Policy & Legal Affairs


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SNF Resource Utilization Group (RUGs) PPS

The Centers for Medicare and Medicaid Services’ explanation of SNF RUGs PPS:

"Section 4432(a) of the Balanced Budget Act (BBA) of 1997 modified how payment is made for Medicare skilled nursing facility (SNF) services. Effective with cost reporting periods beginning on or after July 1, 1998, SNFs are no longer paid on a reasonable cost basis or through low volume prospectively determined rates, but rather on the basis of a prospective payment system (PPS). The RUGs PPS payment rates are adjusted for case mix and geographic variation in wages and cover all costs of furnishing covered SNF services (routine, ancillary, and capital-related costs).”

AHCA closely monitors the release of the SNF RUGs PPS proposed and final rules each fiscal year, to solicit input from members and analyze the impact the rules may have on the profession. AHCA traditionally submits comments to CMS after the release of the proposed rule to notify the agency of any concerns by the Association and the profession.



On April 21, 2016, CMS issued its proposed rule for the SNF prospective payment system (PPS) fiscal year (FY) 2017 update. CMS is proposing a net market basket increase of 2.1 percent. CMS is holding off another year on a major overhaul of the payment system for SNF, and instead, proposing a PPS update tied with updates in quality measures. The FY 2017 proposed rule continues to advance the integration of payment policy and quality-related provisions with payment and quality reporting, producing new implications from the proposed rule for SNFs.

The FY 2017 rule further develops proposals for implementation of the Protecting Access to Medicare (PAMA) Act of 2014 SNF rehospitalization program and includes the second set of proposed measures mandated by the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act). Going forward, the profession will see additional quality provisions in its payment rules.