Nursing home community cautiously optimistic on new RUGs proposal

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Providers remained cautiously optimistic Monday following Friday's highly anticipated release of newly proposed nursing home payment reforms by the Centers for Medicare & Medicaid Services.

While many provider advocates had expected Medicare rate cuts of about 10%, there will be essentially no change in overall SNF Medicare payments in FY 2006, CMS said.

The proposal eliminates $1.4 billion of temporary "add-on" payments established by the Balanced Budget Refinement Act of 1999, but it also advocates increasing the case mix index for all of the RUGs. The increase in the index is equal to half the value of the temporary "add-on" payments, CMS said. Other pay increases, including a full 3% marketbasket update, will eventually bring an infusion of payments equal to the  $1.4 billion lost, according to one analysis of the proposal.

CMS also is proposing increasing the number of resource utilization groups (RUGs) from 44 to 53. Providers will not know the full effect of this aspect or other parts of the rule until after further review.

"We are looking at the rule closely to get a better sense of how skilled nursing facilities will come out," said Larry Minnix, president and CEO of the American Association of Homes and Services for the Aging. "Whether there is enough money in the system to ensure quality care with the changes proposed in the rule remains to be seen."