Skilled Nursing Facility & ICFs/MR Update
Governor Strickland signed Amended Substitute House Bill 1 (H.B. 1) into law on Friday, July 17, 2009. The provisions of the bill relating to Medicaid reimbursement for skilled nursing facilities remained relatively unchanged from the “framework” version adopted by the Conference Committee. Unfortunately, most of the increases suggested by the House and/or Senate were eliminated due to an additional state budget shortfall of $3.2 billion.
A summary of important H.B. 1 provisions are as follows:
- Phase In:The stop gain/stop loss methodology will be used to calculate rates, with a 1.75% stop gain and 1% stop loss in FY 2010 and a 2.25% stop gain and 1% stop loss in FY 2011. A significant change is that once a provider is in “price”, they are no longer subject to the stop loss/gain calculation for interim or fiscal year end rate calculations. They will remain in price and any future case mix changes (positive or negative) will result in adjustments in the provider’s rate and will not be subject to further stop loss/gain provisions.
- Prices: No inflation to peer group prices but may increase based upon FPF - see below.
- Franchise Permit Fee (FPF): FPF increase of $5.70 (referred to as "Work Force Development Payment") is added to the rate after stop gain/loss calculations. Total FPF is $11.95 (6.25 + 5.70) per day. The franchise permit fee amount is subject to change once ODJFS uses the 2008 Medicaid cost report data to determine if the franchise fee can be increased further under federal guidelines. Any increase will be used to increase prices. Therefore, final skilled nursing facility rates will not be known until October, 2009 at which time there will be a retroactive adjustment to 7/1/09.
- Capital: No capital provisions (hold harmless or capital compensation add-on) are included in the price; however, 6/30/09 rate used for stop gain/loss calculation does include the H.B. 562 capital compensation add-on for previously qualified facilities. Price will not include the capital hold harmless to the 6/30/05 rate as called for in earlier budget version.
- Bundling: Consolidated Service Payment (the "bundling" of certain ancillary Medicaid services into the SNF rate) of $3.91 will be added to the rate after stop gain/loss calculation and will no longer be separately billed to Medicaid by the supplier, effective 8/1/09. These ancillaries included Oxygen ($.33), Therapies ($1.75), Transportation ($1.14), certain OTC Pharmacy ($.03) and Wheelchairs ($.66). The cost incurred by the SNF will now be reported on teh annual cost report. It is important to note that the facility will incur additional expenses related to these items. See "Bundling" article for more information.
In a change from prior years, the July 1, 2009 Medicaid rates will not be paid until October. Until that time, each facility will continue to receive their current rate until the new rate is finalized, and then a lump sum adjustment retroactive to 7/1/09 will be made. Please contact us if you have not previously received your facility’s 7/1/09 Final Estimated Rate Setting. This analysis will include the just-released detail of your facility's 7/1/09 quality add-on calculation.
For illustration purposes, we have prepared a sample analysis of the 7/1/09 & 7/1/10 Estimated Rate Setting providing the rate and revenue impact to a sample over-price, at-price, and under-price facility. Click here for sample rate calculation. The goal of ODJFS has been to move providers toward price. As you can see in the chart below that goal is being accomplished as only 18% of providers were at price for FY 2009 while 39% are estimated to be at price for FY 2011.
|
Actual 7/1/08 |
Estimate 7/1/09 |
Estimate 7/1/10 | |
| Facilities at Price |
18% |
21% |
39% |
| Facilities Over Price (Stop Loss) |
48% |
44% |
38% |
| Facilities Under Price (Stop Gain) |
34% |
35% |
23% |
|
TOTAL |
100% |
100% |
100% |
| Positive Impact on Rate |
|
7% |
24% |
| Negative Impact on Rate |
93% |
76% | |
|
TOTAL |
100% |
100% |
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After a roller coaster ride for ICFs/MR providers and three, week-long interim budgets, Governor Strickland signed Amended Substitute House Bill 1 (H.B. 1) into law on Friday, July 17, 2009. The provisions of the bill cover the period 7/1/2009-6/30/2011. This was a difficult state budget that was only passed after interim budgets were implemented in response to unexpected revenue shortages and no overall consensus on how to fill an unexpected announcement by the Office of Budget and Management of a $3.2 billion dollar deficit. The end result was a very slight increase in ICFs/MR rates achieved primarily through an agreement to delay the last vendor payment (June 2011) of the biennium budget, which pushes the payment into the next fiscal year (FY) 2012. This action allowed the stated to save a month’s vendor payment in the FYs 2010-2011 Biennium and allowed those funds to support the ICFs/MR rate through an increase in the targeted statewide average (SWA) of $274.98 for FY2009 to $278.15 in FYs 2010-2011. The SWA is used to calculate the overall rollback percentage used which providers have been subject to since FY2005.
Just to give a brief overview, Governor Strickland’s proposals that were ultimately defeated included the following:
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Implementation of a 108%/107% rate cap limit for FYs 2010 and 2011, respectively. This would have prohibited the increase of an ICFs/MRs Medicaid rate (before rollback calculation) for any single provider from one year to another by no more than the prescribed percentages.
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Removing from State law (with the "intent" of inclusion in Administrative rule) the specific inflation measuring index used to calculate the direct care, other protected, indirect and capital inflation adjustment. The proposal would have also removed from state law the requirement of a correction factor to adjust estimated inflation factors to actual in the subsequent fiscal year. This would have lead to unpredictability in the funding formula and the removal of legislative control.
A summary of major H.B. 1 provisions affecting ICFs/MRs are as follows:
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ICFs/MR franchise permit fee (FPF) will fluctuate throughout the biennium. For July, 2009 the fee will remain at the current level of $11.98. For August, 2009 through June, 2010 the fee will increase by $2.77 to a total of $14.75 per day. For FY2011, the fee will be reduced to $13.55.
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Movement of the June, 2011 vendor payment into July, 2011. There is no language in H.B. 1 addressing the payment delay or when the payment will be paid however, it was the intent of all stakeholders that the payment would only be delayed for a short period. Providers need to closely monitor cash flow and plan for any cash flow difficulties that may arise.
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A change from prior years, new rates (based on calendar year 2008 cost report) will not be effective until 8/1/09-6/30/10, providers will continue to receive their 6/30/09 rate for the period 7/1/09-7/31/09.
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While Skilled Nursing Facilities are no longer subject to depreciation recapture it remains for ICFs/MRs. There was discussion of possible budget correction language for ICFs/MRs in the fall. Please call your health care consultant if you are contemplating the sale of an ICFs/MR since there are strategies to avoid depreciation recapture that should be considered.
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Clarification of reporting off-site day programming costs in the direct care cost center whether or not the area which the day programming is provided is less than two-hundred feet away from the ICF/MR facility.
Several Items of interest to ICFs/MR providers that were subject to Governor Strickland’s line item veto include:
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Language reforming ODJFS’s practice of holding vendor payments when an ICF/MR is subject to a sale or change of provider. Although stakeholders had reached an understanding with ODJFS to reform the escrow process the final language of H.B. 1 did not accurately reflect this agreement. It is anticipated the agreed-upon language will be included in the budget correction bill in the fall. Please visit our website for updates as more information becomes available.
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Language stipulating the conditions and reimbursement of oxygen services for medically fragile children residing in ICFs/MRs.
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Language that would have created an ICFs/MR Reimbursement Study Counsel.
In summary, as in previous years, the Ohio Department of Job and Family Services (ODJFS) will determine a rate for each provider using the 2008 cost report data. Once all costs have gone through the reimbursement formula, ODJFS will then calculate a mean total per diem for all ICFs/MR facilities in the state, weighted by the May, 2009 Medicaid days. This per diem is compared to the $278.15 targeted SWA to arrive at the roll-back percentage. The SWA per diem for FY2010 was $282.72 resulting in a fiscal year 2010 of 1.62% (FY2009 rollback was 4.27%). Although the inflation factors and ceilings are based on stipulated indices and costs, one unexpected outcome of these calculations is the indirect care index resulted in a negative inflation (deflation) of 10.91% for fiscal year 2010. The deflation factor is not only applied against filed costs but also used to calculate the indirect care ceilings. The fiscal year 2010 final ceilings and inflation factors for all cost centers are the following:
INFLATION FACTORS:
* Protected 6.99%
* Direct Care 2.95%
* Indirect (10.91)%
* Capital 1.83%
DIRECT CARE CEILING:
* ICF/MR Large $114.83
* ICF/MR Small $108.07
INDIRECT CARE CEILING:
* ICF/MR Large $71.77
* ICF/MR Small $54.56
INDIRECT EFFICIENCY INCENTIVE:
* ICF/MR Large $5.10
* ICF/MR Small $3.96
CAPITAL EFFICIENCY INCENTIVE:
* ICF/MR Small $4.65
If you would like a sample analysis of your 7/1/09-6/30/10 Estimated Medicaid Rate Setting, please contact our HW Healthcare Advisors group at 877-FOR-HWCO or email us below.