Although the service-exclusion criteria and the services removed from the daily payment rate appear reasonable, questions remain about whether certain other services should also be excluded and how to modify the exclusions over time. HCFA generally relied on three criteria in choosing services to exclude. Excluded services must be high cost, infrequently provided during a SNF stay, and not likely to be overprovided. Because SNFs have an incentive under the PPS to minimize costs that are covered under the daily payment, these criteria are intended to identify services that may be inappropriately foregone, while maintaining the PPS incentives to control service use and cost. However, raising concerns about beneficiary access to services that remain in the daily rate, many of the clinical experts we interviewed questioned whether additional services should have been excluded from the PPS. Because information on the frequency and cost of all services provided to beneficiaries is not available, it is difficult to confirm that the criteria have been applied consistently and that all of the services that meet these criteria were excluded from the PPS. CMS does not intend to collect data on all services provided to beneficiaries receiving SNF care, or to develop a process for systematically reviewing the services included and excluded from the PPS rate.

Current exclusion policies have three unintended consequences. First, because of the way HCFA defined coverage for excluded facility services, beneficiary liability is increased and beneficiaries may lose coverage for certain services if they are excluded from the PPS. Second, some services are excluded only if they are provided in a hospital outpatient department, creating incentives for SNFs to refer patients to this setting, even though there may be alternative medically appropriate sites of care that would be less expensive for beneficiaries and the program. Finally, to ensure prompt medical attention in emergency situations, HCFA excluded emergency room services from the PPS rate, but the broad definition of emergency services may result in SNFs classifying care as "emergency" to gain separate payments.

Congress may wish to clarify Medicare's coverage for facility services excluded from the SNF PPS. We are also recommending that the Administrator of CMS exclude any service that meets the criteria, regardless of where it is provided. To refine the SNF PPS and ensure adequate beneficiary access to appropriate medical services, we are also recommending that CMS develop a strategy to collect and analyze cost and utilization data on all services provided to beneficiaries during SNF stays. In commenting on a draft of this report, CMS stated that it can not disregard the site of service delivery in excluding certain services because it believes it does not have the administrative authority to do so and because these services can not be provided safely in nonhospital settings. It acknowledged the need for service-level data, but noted that collecting these data could meet with considerable industry opposition.