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PROPOSED RULEMAKING

[55 PA. CODE CH. 1187]

Metropolitan Statistical Area

[34 Pa.B. 4465]

   The Department of Public Welfare (Department), under the authority of sections 201(2), 206(2), 403(b) and 443.1 of the Public Welfare Code (62 P. S. §§ 201(2), 206(2), 403(b) and 443.1), proposes to amend § 1187.94 (relating to peer grouping for price setting) to read as set forth in Annex A.

Purpose of the Proposed Rulemaking

   If adopted, the proposed rulemaking will amend the method by which the Department establishes the peer groups used to set net operating prices under the case-mix payment system. See § 1187.94.

Need for the Proposed Rulemaking

   The Medical Assistance (MA) Program pays each enrolled MA nursing facility provider for nursing facility services provided to MA residents using the Department's case-mix payment system. See Chapter 1187 (relating to nursing facility services). Under this payment system, the Department sets a prospective per diem rate for each MA nursing facility provider. A nursing facility's case-mix per diem rate is comprised of three ''net operating'' rate components and one ''capital rate'' component. See § 1187.96(e) (relating to price and rate setting computations). The three net operating rate components are based upon peer group prices. See § 1187.96(a)--(e).

   The Department computes net operating peer group prices annually using the nursing facility cost report data available in the Nursing Home Information System database. See § 1187.94 and § 1187.95 (relating to general principles for rate; and price setting). The Department's case-mix payment system regulations specify that, in setting net operating prices, the Department will classify each nursing facility participating in the MA Program, except nursing facilities that meet the definition of a hospital-based nursing facility or special rehabilitation facility (as defined in § 1187.2 (relating to definitions)), into 1 of 12 mutually exclusive peer groups based on Metropolitan Statistical Areas (MSA) group classification and the nursing facility's certified bed complement. See § 1187.94(1). The regulations further state that ''the Department will use the most recent MSA group classification, as published by the Federal Office of Management and Budget (OMB) on or before April 1 of each year'' to make the peer group classifications. See § 1187.94(1)(i).

   Prior to 2003, the OMB categorized MSAs into three levels based on the total population of the counties in the MSA: Level A (areas with a total population of 1 million or more), Level B (areas with a total population of 250,000 to 999,999) and Level C (areas with a total population of 100,000 to 249,000). The Department's case-mix payment system regulations in § 1187.94(1)(iii), make explicit reference to MSA groups A, B and C in identifying the 12 peer groups into which nursing facilities are classified under the case-mix payment system.1

   On June 6, 2003, the OMB published OMB Bulletin No. 03-04 (relating to revised definitions of ''Metropolitan Statistical Areas,'' new definitions of ''Micropolitan Statistical Areas'' and ''Combined Statistical Areas'' and guidance on uses of the statistical definitions of these areas) that revised the definitions of MSAs. In publishing these revised MSA definitions, the OMB added definitions for ''Micropolitan Statistical Areas'' and ''Combined Statistical Areas'' based on Federal Census Bureau data derived from the 2000 census. However, the OMB eliminated the use of the MSA group levels A, B and C that are specifically referenced in § 1187.94(1)(iii).

   The OMB's elimination of the three MSA group levels makes it impossible for the Department to apply the existing language of § 1187.94(1) in classifying nursing facilities into peer groups. More specifically, the Department cannot use the most recent MSA group classifications published by the OMB, as required by § 1187.94(1)(i), and also classify nursing facilities into the 12 peer groups identified in § 1187.94(1)(iii). To address this problem, the Department has determined that the language of § 1187.94 should be amended.

   In evaluating the alternative ways in which § 1187.94 might be amended, the Department considered the potential effects that adopting the new Federal definitions for MSAs might have on peer group prices and nursing facility rates. The Department's preliminary analyses indicate that a majority of nursing facility providers would be adversely affected (that is, the case-mix payment system would compute lower rates for the majority) if the Department were to adopt the new Federal MSA definitions.

   Instead of adopting the new Federal definitions, the Department is proposing to amend § 1187.94(1)(i) and the Commonwealth's Title XIX State Plan to specify that the Department will use the MSA group classification published by the OMB in OMB Bulletin No. 99-04 (relating to revised statistical definitions of ''Metropolitan Areas'' and guidance on uses of ''Metropolitan Area'' definitions) to peer group nursing facilities. By using the MSA classification in OMB Bulletin No. 99-04, the Department will maintain the historical MSA groups and will continue to classify each MA nursing facility as MSA A, B or C or as non-MSA. Although the language of § 1187.94 will change, the effect of this amendment will be to preserve the status quo.

Requirements

   The Department is proposing to amend § 1187.94 to change the method used for peer grouping by specifying that the Department will use the MSA group classification published in OMB Bulletin No. 99-04 to classify nursing facilities into peer groups instead of the most recent MSA group classification published on or before April 1 of each year.

Affected Organizations

   Nursing facilities enrolled in the MA Program except nursing facilities that meet the definition of ''hospital-based nursing facility'' or ''special rehabilitation facility.'' See § 1187.2.

Accomplishments and Benefits

   Amending § 1187.94 to specify that the Department will use the MSA group classifications published in OMB Bulletin 99-04 enables the Department to ensure that the case-mix payment system takes into account variables that may impact the cost of providing nursing facility services while the Department continues and completes its discussions with the nursing facility industry, consumers and other stakeholders on a more comprehensive overhaul of the case-mix payment system.

Fiscal Impact

Commonwealth, Political Subdivisions and Private Sector

   No fiscal impact will result from this proposed rulemaking since the effect is to preserve the status quo by maintaining the same MSA group classification method which the Department has used to assign nursing facilities to peer groups since the case-mix payment system was implemented in January 1996.

   No fiscal impact will result from this proposed amendment since the effect is to preserve the status quo by maintaining the same MSA group classification method which the Department has used to assign nursing facilities to peer groups since the case-mix payment system was implemented in January 1996.

General Public

   There will be no fiscal impact on the general public.

Paperwork Requirements

   No new or additional paperwork requirements result from the proposed rulemaking.

Effective Date

   The proposed rulemaking will take effect with July 1, 2004, rate setting.

Sunset Date

   There is no sunset date. However, the Department will review the effectiveness of the regulation and the issue of peer group classifications as part of its continuing discussions with the nursing facility industry, consumers and other stakeholders on a more comprehensive overhaul of the case-mix payment system.

Public Comment

   Interested persons are invited to submit written comments, suggestions or objections regarding the proposed rulemaking to the Department of Public Welfare, Division of Long Term Care Client Services, Attn: Gail Weidman, P. O. Box 2675 Harrisburg, PA 17105-2675 within 30 calendar days after the date of publication in the Pennsylvania Bulletin. Persons with a disability may use the AT&T Relay Service, (800) 654-5984 (TDD users) or (800) 654-5988 (voice users).

Regulatory Review

   Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on August 3, 2004, the Department submitted a copy of this proposed rulemaking and a copy of a Regulatory Analysis Form to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Committee on Health and Human Services and the Senate Committee on Public Health and Welfare. A copy of this material is available to the public upon request.

   Under section 5(g) of the Regulatory Review Act, IRRC may convey any comments, recommendations or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections shall specify the regulatory review criteria which have not been met. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Department, the General Assembly and the Governor of comments, recommendations or objections raised.

ESTELLE B. RICHMAN,   
Secretary

   Fiscal Note: 14-483. No fiscal impact; (8) recommends adoption.

Annex A

TITLE 55. PUBLIC WELFARE

PART III. MEDICAL ASSISTANCE MANUAL

CHAPTER 1187. NURSING FACILITY SERVICES

Subchapter G. RATE SETTING

§ 1187.94. Peer grouping for price setting.

   To set net operating prices under the case-mix payment system, the Department will classify the nursing facilities participating in the MA Program into 14 mutually exclusive groups as follows:

   (1)  Nursing facilities participating in the MA Program, except those nursing facilities that meet the definition of a special rehabilitation facility or hospital-based nursing facility, will be classified into 12 mutually exclusive groups based on MSA group classification and nursing facility certified bed complement:

   (i)  [The] Effective for rate-setting periods commencing July 1, 2004, the Department will use the [most recent] MSA group classification[, as] published by the Federal Office of Management and Budget [on or before April 1 of each year] in the OMB Bulletin No. 99-04 (relating to revised definitions of Metropolitan Areas and guidance on uses of Metropolitan Area definitions), to classify each nursing facility into one of three MSA groups or one non-MSA group.

*      *      *      *      *

[Pa.B. Doc. No. 04-1492. Filed for public inspection August 13, 2004, 9:00 a.m.]

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1  Nursing facilities that are located in counties that are not included in one of the three MSA group levels are classified in a ''non-MSA'' peer group under the regulations. See § 1187.94(1)(iii).



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