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A clear need currently exists to consider new approaches for classifying nursing home residents. The traditional intermediate care facility/skilled nursing facility (ICF/SNF) dichotomy cannot provide adequate information on the type of care required by any one individual, and it provides only the most limited information required to address the care and quality-of-life needs of the total patient population within a facility, as well as the level of reimbursement appropriate for their care. This article describes an alternative procedure for allocating nursing home residents according to a more comprehensive array of internally homogeneous categories. This system is based on an operational perspective focused on the total nursing and staffing requirements for types of nursing home residents. The tool is titled "Functionally Ranked Explanatory Designations," or FRED.