In its June 2008 Report to Congress, the Medicare Payment Advisory Commission (MedPAC) recommended revision of the prospective payment system (PPS) for skilled nursing facilities (SNFs). The proposed revisions consist of a new component to pay for non-therapy ancillaries (NTA) based on predicted NTA costs, an alternative therapy component that bases therapy payments on predicted therapy needs, and addition of an outlier policy for the PPS. This technical report to MedPAC provides detail on the data, methods, and specific predictive models that underlie the analysis in the Report to Congress.