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June 20, 2016

Andrew M. Slavitt
Acting Administrator
Centers for Medicare & Medicaid Services
Department of Health and Human Services
Room 445-G, Hubert H. Humphrey Building
200 Independence Ave., S.W.
Washington, D.C.  20201

Re: CMS-1655-P, Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities Proposed Rule for FY2017, SNF Value-Based Purchasing Program, SNF Quality Reporting Program, and SNF Payment Models Research; Proposed Rule

Submitted electronically:

Dear Mr. Slavitt and CMS Colleagues:

The Center for Medicare Advocacy (Center) is a national, private, non-profit law organization, founded in 1986, that provides education, analysis, advocacy, and legal assistance to assist people nationwide, primarily the elderly and people with disabilities, to obtain necessary health care, therapy, and Medicare.  The Center focuses on the needs of Medicare beneficiaries, people with chronic conditions, and those in need of long-term care and provides training regarding Medicare and health care rights throughout the country.  It advocates on behalf of beneficiaries in administrative and legislative forums, and serves as legal counsel in litigation of importance to Medicare beneficiaries and others seeking health coverage.  These comments are based on our experiences talking with and representing hundreds of Medicare beneficiaries and their families who have been caught in observation status.

First, we oppose increasing Medicare rates paid to skilled nursing facilities (SNFs).  The Medicare Payment Advisory Commission (MedPAC) has reported that SNFs are overpaid by the Medicare program and have enjoyed Medicare margins exceeding 10% for 15 consecutive years.  In 2014, Medicare margins were 12.5%.  MedPAC recommends no increase in the Medicare rates for SNFs for FY 2016 and we agree.  MedPAC, Comments on CMS-1645-P (May 26, 2016),; MedPAC, Report to the Congress: Medicare Payment Policy, Chapter (skilled nursing facility services), p. 172, (May 2016,

Second, as we have recommended in previous years, we urge the Centers for Medicare & Medicaid Services (CMS) to develop a nursing home-specific wage index.  Medicare overpays SNFs by using the hospital wage index.  CMS has had the authority since 2000, under §315 of the Medicare, Medicaid and SCHIP Benefits Improvement Act of 2000, to establish a geographic reclassification procedure specific to SNFs, using a SNF wage index.  We are not persuaded by CMS’s comment in the preamble to the proposed rules that “the volatility of existing SNF wage data and the significant amount of resources that would be required to improve the quality of that data” make it “unfeasible” to establish an appropriate wage index for SNFs.  81 Fed. Reg., 24237. 

Consolidated Billing

CMS takes a restricted view of drugs that should be excluded from consolidated billing.  81 Fed. Reg., 24242-24243.  The Center hears from Medicare beneficiaries who are denied admission to SNFs because of the high charges for drugs they need.  We urge CMS to do a careful analysis of drug costs to determine whether additional drugs should be excluded from consolidated billing.

SNF Value-Based Purchasing Program

Section 215 of the Protecting Access to Medicare Act of 2014 required establishment of a value-based purchasing program for SNFs.  The provision requires the Secretary to specify an all-cause all-condition hospital readmission measure.  Reducing unnecessary rehospitalization is its explicit goal and purpose.

CMS needs to avoid the pitfalls of its prior value-based purchasing initiatives in SNFs, which were not successful.  An analysis of the CMS demonstration of VBP in skilled nursing facilities between 2009 and 2012 found that VBP “did not directly lower Medicare spending and improve quality for nursing home residents.”  L&M Policy Research, Evaluation of the Nursing Home Value-Based Purchasing Demonstration, page 50, Contract No. HHSM-500-2006-0009i/TO 7,

Concern about reducing rehospitalization as an independent goal

Before discussing the specific components of the proposed rule, the Center addresses concerns about encouraging a reduction in rehospitalizations, as an independent goal, without recognizing that some hospitalizations are necessary. 

Writing in The New England Journal of Medicine, Joseph G. Ouslander, M.D. and Robert A. Berenson, M.D. recognize the high cost of unnecessary hospitalization of nursing home residents and support the reduction of such hospitalization, but they add a cautionary note:

Multifaceted strategies will be needed to address the current incentives for hospitalization if we are to improve nursing home care and prevent unnecessary hospitalizations, with their related complications and costs. Two caveats are critical. First, not all hospitalizations for conditions that can theoretically be managed outside an acute care hospital are preventable. Second, given fiscal constraints and the dearth of health care professionals trained in geriatrics and long-term care, not all nursing homes have the capacity to safely evaluate and manage changes in the condition of the clinically complex nursing home population. Setting unrealistic expectations and providing incentives to poorly prepared nursing homes to manage such care rather than transferring residents to a hospital could have unintended negative effects on the quality of care and health outcomes.

Joseph G. Ouslander and Robert A. Berenson, “Reducing Unnecessary Hospitalizations of Nursing Home Residents,” N Engl J Med 2011; 365:1165-1167 (Sep. 29, 2011),

Dr. Ouslander developed a tool, INTERACT II (Interventions to Reduce Acute Care Transfers), that can carefully and successfully reduce unnecessary hospitalization of nursing home residents.  Joseph G. Ouslander, M.D., et al, “Interventions to Reduce Hospitalizations from Nursing Homes: Evaluation of the INTERACT II Collaborative Quality Improvement Project,” The Commonwealth Fund (April 26, 2011), also Ouslander, “Improving Geriatric Care by Reducing Potentially Avoidable Hospitalizations,”

However, “the goal of INTERACT is to improve care quality, not to prevent all hospital transfers” and INTERACT “can result in more rapid transfer of residents who need hospital care” (bold font and italics in original, slide 16).  INTERACT’s goals are to avoid hospitalizations that should be avoided and to support hospitalizations that are medically necessary. 

We have several specific concerns about reducing hospitalizations as a free-standing goal.

1. If nursing homes are encouraged not to hospitalize residents, many residents who need hospital care will be endangered.  Under contract with CMS, the Center analyzes nursing home decisions of the Departmental Appeals Board, both the Civil Remedies Division and the Appellate Division, and prepares a monthly report and searchable database.  Over the past 10 years of the contract, the Center has never seen a case involving inappropriate hospitalization of a resident, but has read many cases where a facility was sanctioned for failing to contact a resident’s physician and hospitalize a resident who needed to be hospitalized.

2. Numerous studies show that improving staffing levels in nursing homes can reduce the perceived (and actual) need to hospitalize nursing home residents.  Dr. Ouslander’s INTERACT II tool demonstrates the need for better staffing as do additional studies cited in the Center’s Weekly Alerts: “Reducing Rehospitalizations . . . The Right Way” (March 1, 2012),; “More Nurses in Nursing Homes Would Mean Fewer Patients Headed to Hospitals” (March 10, 2011),; “Preventable Emergency Department Visits by Nursing Home Residents” (Aug. 19, 2010),

3. Any effort to avoid rehospitalization must recognize observation status and other long outpatient stays as types of hospitalizations.  Observation status refers to patients in acute care hospitals being called outpatients, even though, like inpatients, they receive nursing and medical care, diagnostic tests and procedures, therapy, prescription and over-the-counter medications, and food and the patients may remain in a hospital bed for multiple days.  The care provided to inpatients and observation status patients is indistinguishable.  Any effort to reduce hospital admissions must recognize observation status as a hospital admission by another name.  See additional information on observation status at

A Technical Expert Panel to consider a readmission/rehospitalization measure strongly supported counting observation time.  RTI wrote in an August 23, 2012 paper entitled “Key Issues for TEP Consideration,” “The TEP was definitive that the SNF HRRM should include observation stays.  RTI agrees that observation stays should be included in the measure.” 

Observation status should be counted because the issue, for purposes of readmission, is whether a SNF sent the resident to the hospital for care and treatment.  Whether the resident is called an inpatient or an outpatient (in observation status) is not within the control of the SNF; the decision about how to classify a patient in the hospital is made solely by the hospital.  However, what is within the control of the SNF is the decision to send the resident to the hospital in the first place.  If the SNF sends a resident to the hospital, its decision to hospitalize the patient is a rehospitalization decision.  Whether the hospital calls the patient an inpatient or an outpatient (observation status) is irrelevant and has no significance for purposes of the rehospitalization quality measure. 

Over the past few years, hospitals have increasingly categorized patients as outpatients in observation status, largely because of their concern about the Recovery Auditor (formerly known as Recovery Auditor Contractor (RAC) program).  Under the procedures, if a RAC reviewed a hospital’s decision to classify a patient as an inpatient and decided that the patient should have been classified as an outpatient, the hospital had to return the Medicare reimbursement it received and was left with virtually no reimbursement from the Medicare program for whatever medically necessary services it provided.  Avoiding RAC review, and the significant financial consequences of a RAC’s reversal of an inpatient decision, led hospitals to call increasing numbers of patients “outpatients” in observation status. 

While Quality Improvement Organizations replaced RACs as the initial reviewers of hospital admission decisions and CMS recently placed the QIO review process on hold, hospitals nevertheless remain concerned about classifying patients as inpatients.  The common use of observation status leads to highly inaccurate data on rehospitalization rates.

Researchers documented that hospitals’ use of outpatient observation status paralleled the decline in inpatient stays.  Reviewing 100% of Medicare claims data for 2007-2009, researchers found that the number of outpatient observation stays for Medicare beneficiaries increased over the three-year period, while inpatient admissions decreased, suggesting "a substitution of outpatient observation services for inpatient admissions."  Zhanlian Feng, David B. Wright, and Vincent Mor, "Sharp Rise In Medicare Enrollees Being Held In Hospitals For Observation Raises Concerns About Causes And Consequences," Health Affairs 31, No. 6 (2012).

Observation and other outpatient status time must be recognized as rehospitalization.

Proposed measures

We support use of claims-based measures, rather than measures based on self-reported minimum data set (MDS) information, which are too susceptible to gaming by providers.

We also support CMS’s determination not to limit the 30-day potentially preventable readmission measure to readmissions during a SNF stay and to count both within-stay hospital readmissions and post-stay hospital readmissions.  81 Fed. Reg., 24244-24245. 

However, we propose that the time period for rehospitalization should be 90 days, not 30 days.  Thirty days is too short a period for this measure.  A rapid rehospitalization may reflect poor care at the hospital or a premature discharge; rehospitalization later in a resident’s stay may reflect poor care provided by the nursing facility.  We note that other efforts underway to change health care delivery systems that also seek to reduce rehospitalization, such as bundling demonstrations, use a 90-day time period following hospitalization.

Finally, the Center proposes that CMS promulgate regulations prohibiting payment of a bonus under the Value-Based Purchasing Program to any nursing facility that, regardless of its performance under VBP,

  • Does not accurately report staffing data to CMS;
  • Does not have sufficient nursing staff to meet each resident’s needs.

SNF Quality Reporting Program

            Sociodemographic status

We strongly support CMS’s determination not to use sociodemographic status in quality measurement.  CMS write, “[W]e continue to have concerns about holding providers to different standards for the outcomes of their patients of diverse sociodemographic status because we do not want to mask potential disparities or minimize incentives to improve the outcomes of disadvantaged populations.”  81 Fed. Reg., 24257.  We support this statement and encourage CMS to hold firm on this issue.

We are concerned that risk adjustment for quality reporting and pay-for-performance programs based on SES/SDS factors will lead to several harmful unintended consequences for poor and minority residents.  First, risk adjustment has the potential to mask existing disparities in care that low-income patients receive, rather than expose and address these disparities.  Simply adjusting away these real differences only perpetuates the inequities.

Moreover, risk adjustment could create two divergent standards of care for SNFs based on the wealth or poverty of the populations they serve.  Adjusting scores for SNFs with significant proportions of poor and minority populations would in effect lower the bar for facilities that treat these populations.  This type of adjustment allows distinct and unequal standards for poor patients and wealthy patients.

Finally, the root of the disparities in care is not likely to be addressed if the differences are concealed through the automatic and inaccurate inflation of performance scores. 

Research documenting that poor and minority residents have better outcomes when they get care in better quality hospitals and SNFs illustrates flaws in using socioeconomic data to adjust Medicare ratings.  A study analyzing readmissions to hospitals from nursing homes found that hospital readmission rates within 30 days from nursing homes were lower when the quality of both the hospitals and nursing homes was better.  Kali S. Thomas, Momotazur Rahman, Vincent Mor, and Oma Intrator, “Influence of Hospital and Nursing Home Quality on Hospital Readmissions,” Am J Manag Care, 2014; 20(11):e523-e531 (published online Feb. 10, 2015),   The study used a “retrospective, statistical association-based research design” to analyze hospital and nursing home minimum data set (MDS) data for 2006-2008.  The study’s findings were based on a final sample of 1,382,477 individualized hospitalizations and discharges to 15,356 nursing homes from 3683 hospitals.

“Hospital quality was assessed using staffing levels [National Quality Forum measure #0204] and processes of care measures [one for each of three clinical areas, AMI, CHF, and pneumonia].”  Nursing home quality was measured by nurse staffing (RN, LPN, aides) hours per resident day and weighted deficiency citations, based on annual surveys. 

The researchers found that 22% of residents were rehospitalized within 30 days of discharge from the hospital.  “Approximately 5% of patients were discharged from higher-quality hospitals (those with AMI, CHR, and pneumonia scores greater than 90% and whose ratio of RNs to licensed nurses were greater than the mean) to higher-quality NHs (those with staffing ratios greater than the mean and weighted deficiency scores less than the mean).”  Approximately 59% of patients were discharged from lower quality hospitals to lower-quality nursing homes. 

Nursing home residents were more likely to be rehospitalized when their nursing homes

  • had lower nurse staffing levels.  Lower RN staffing levels were associated with an increase in rehospitalization of 0.19%.
  • had more weighted deficiencies.  A higher weighted deficiency score was associated with an increase in rehospitalization of 0.16%.
  • had low occupancy rates.  Low occupancy rates were associated with an increase in rehospitalization of 0.55%, “representing a 3% relative increase over the unadjusted mean likelihood of rehospitalization.”
  • “Patients who were discharged to freestanding, for-profit NHs with a higher proportion of Medicaid residents and a higher number of admissions per bed were associated with an increased likelihood of rehospitalization.”

The researchers found that hospital and nursing home quality accounted for 2.8% of the variation in rehospitalization rates and that many factors beyond providers’ control, such as “demographic characteristics, functional impairment, cognitive functioning, and even preferences [i.e., advance directives], affect rehospitalization.”  Nevertheless, they conclude, “Increased attention and efforts to boost the quality of lower-performing NHs may have the added benefit of reducing the rehospitalization rate.” 

            IMPACT Act

The Center supports the development of quality measures across post-acute settings that will make more meaningful comparisons of post-acute settings possible.  Nevertheless, we have concerns about the measures that CMS is developing.

            IMPACT Act Domains of Resource Use and Other Measures, MSPB-PAC SNF QRP

The Center is concerned about the measure Medicare spending per beneficiary post acute care (MSPB-PAC SNF), which appears to be limited to Medicare payments under both Parts A and B during an episode window.  The measure’s focus on Medicare is flawed.  Unless a comprehensive measure considers ALL sources of funding for post-SNF care, not just Medicare payments, SNFs will have an incentive to discontinue Medicare coverage for a beneficiary and shift ongoing costs to another payer, such as Medicaid.  We have seen cost-shifting like this before. 

When Congress enacted a prospective payment system for acute care hospitals, one explicit purpose was reducing hospital costs.  A considerable amount of research found, as expected, that hospital lengths of stay were reduced following the introduction of PPS.  There is certainly a benefit to that result, in and of itself, both for public payment systems and for beneficiaries.  But some less predictable and less beneficial results also occurred. 

Research on the treatment of beneficiaries with hip fractures found enormous changes in care settings and costs following the implementation of PPS.  One study found that before PPS, patients received rehabilitation in the hospital and generally went home, either directly from the hospital or following a short stay in a SNF.  After PPS, hospital lengths of stay declined from 22 days to 13 days and the percentage of residents discharged to SNFs increased from 38% to 60%.  The expectation was that patients could get the same rehabilitation services in SNFs that they had received in acute care hospitals, but at lower cost.  This did not prove true.  After PPS, the researchers found that, for various reasons, “rehabilitation therapy within the nursing homes was less effective than inpatient therapy before PPS.”  The outcomes for patients with hip fracture were worse following PPS.  Instead of getting therapy and returning home, patients were more likely to be in the nursing home a full year after their hip fracture; a 200% increase in the rate of nursing home residence was reported by the study after PPS was implemented.  John F. Fitzgerald, M.D., et al, “The Care of Elderly Patients with Hip Fracture,” New England Journal of Medicine 319(21):1392-1397 (Nov. 24, 1988).  The researchers called this finding “alarming” and their most important finding.  Services were not the same in the different settings.

Not only were care outcomes worse for beneficiaries with hip fractures following PPS, but expected cost savings also did not materialize as costs moved elsewhere.  After PPS, people with hip fractures spent less time in the hospital, but these patients became Medicare patients in SNFs and then, frequently, as the researchers found, long-term residents of nursing homes.  Medicare payments to SNFs increased in the years following implementation of PPS for hospitals.  And patients who would have gone home from the hospital now found themselves living in nursing facilities on a long-term basis, generally, as Medicaid beneficiaries.  Savings in Medicare acute care hospital costs were accompanied by increases in Medicare and Medicaid post-acute costs.   Costs shifted from one setting to another, with worse care outcomes for beneficiaries.  Lessons learned from this experience are that lower-cost settings do not necessarily provide comparable services and that new health care costs may emerge in other settings.

By counting only Medicare payments following a SNF stay, the MSPB-PAC SNF measure may not actually measure the real costs of ongoing care after a SNF stay; it may simply lead to cost-shifting to Medicaid and other payers.

            Discharge to Community-Post Acute Care (PAC)

This measure reflects an important concern of Medicare beneficiaries – returning home following care.

The Center has two concerns.  First, we fully support CMS’s recognition that the measure is not limited to beneficiaries who are returning to their prior level of functioning and independence.  As CMS recognizes, “Returning to the community is also an important outcome for many residents who are not expected to make functional improvement during their SNF stay, and for residents who may be expected to decline functionally due to their medical condition.”  81 Fed. Reg., 24262.  Medicare coverage for maintenance nursing and therapy, as confirmed by Jimmo v. Burwell, Civ. No. 5:11-CV-17 (D. VT, Jan. 18, 2011), must be ensured and reflected by the discharge measure.

Second, we believe that discharge to a nursing facility should not be treated like a discharge to the community, even when a nursing facility was the resident’s prior (pre-hospital, pre-SNF) residence.  Counting a return to a nursing facility just like a return to the community would give SNFs an unjustified boost in their ratings and provide an incentive not to do the hard work that actual, meaningful discharge planning requires.

            Potentially Preventable 30-Day Post-Discharge Readmission Measure

For the reasons discussed above, we are concerned about rehospitalization measures.  Our concerns are as applicable for reporting purposes as for payment.

            Drug Regiment Review Conducted with Follow-Up for Identified Issues

The Center recognizes the critical importance of medication reconciliation and brings to CMS’s attention a study finding that registered nurses (RNs) are more likely to identify medication discrepancies in nursing facilities than licensed practical nurses (LPNs). 

Reporting that “70% of nursing home residents have at least one discrepancy in their medication

order” when they are admitted from another health care setting, a study evaluates how RNs and LPNs detect discrepancies in medication orders. Amy Vogelsmeier, Allison Anbari, Larry Ganong, Ruth A. Anderson, Lynda Oderda, Amany Farag, and Richard Madsen, “Detecting Medication Order Discrepancies in Nursing Homes: How RNs and LPNs Differ,” Journal of Nursing Regulation, Vol. 6, Issue 3, page 48 (Oct. 2015).

The study found that RNs identified more discrepancies, especially with high-risk medications.

Identification of Detection of Medication Discrepancies, RNs and LPNs




Identified a discrepancy



Identified a high-risk medication discrepancy



Identified a low-risk medication discrepancy



Whether nurse would seek additional information about medication



Whether nurse would seek additional information about high-risk medication



Article 53.

The researchers describe as “perhaps one of their most important findings” that

RNs more often identified discrepancies in medication orders involving high-risk medications, suggesting that RNs assess orders for discrepancies based on the potential risk to resident safety.  In contrast, LPN responses were similar regardless of the medication risk level, suggesting that LPNs are following rote instructions to complete the task for medication reconciliation rather than engaging in cognitive behavior regarding risk.

Id. 54. They conclude, “RNs are more likely than LPNs to identify high-risk medications as discrepancies, suggesting RNs may have a greater clinical focus on assessment and problem identification, including risk to resident safety.” Id.  The researchers express concern about nursing facilities’ using RNs interchangeably with LPNs, especially “because of the rising acuity of resident care.” Id.

The Center encourages CMS, in the Requirements of Participation for skilled nursing facilities and nursing facilities, to require that facilities employ RNs 24 hours per day.

This measure, if properly implemented, will be a proxy for nurse staffing.

Thank you for the opportunity to submit comments.

Respectfully submitted,

Toby S. Edelman
Senior Policy Attorney

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