Section 4432(a) of the Balanced Budget Act (BBA) of 1997 modified how payment will be made for Medicare skilled nursing facility (SNF) services. Effective with cost reporting periods beginning on or after July 1, 1998, SNFs will no longer be 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 PPS payment rates will be adjusted for case mix and geographic variation in wages and will cover all costs of furnishing covered SNF services (routine, ancillary, and capital-related costs).
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