May 24, 2013

Cost-Based Nursing Facility Rates Possible for July 1, 2013 New Information Suggests Rate "Rebasing"

Cost-Based Nursing Facility Rates Possible for July 1, 2013 New Information Suggests Rate "Rebasing"

The State of Connecticut budget plan presented by the Governor on February 6, 2013, included a $14.8 million annualized cut to current Medicaid nursing facility rate levels equating to approximately 1.2% reduction. Budget implementation legislation (House Bill 6367) released later in the month indicated state fiscal year (SFY) 2013 rates would remain in effect through SFY 2015 unless the Department deemed a rate reduction was warranted based on facility costs or available funding levels.

It was recently learned that July 1, 2013 Medicaid nursing facility rates may be rebased using the September 30, 2011 or 2012 Annual Report of Long Term Care Facility cost report and the statutory cost-based rate setting method. That means that the rates for some facilities may increase while others may decrease.

When assessing whether your Medicaid rate may increase or decrease, facility occupancy rate is an integral factor. At 95%, Connecticut has one of the highest occupancy standards for Medicaid rate setting in the country. The vast majority of states use a 90% or lower minimum standard which is more reflective of the average occupancy of nursing facilities. Based upon our review approximately two-thirds of Connecticut facilities had utilization below 95% in 2011 and 2012.

When computing a Connecticut nursing facility’s Medicaid rate, allowable costs are divided by the higher of actual resident days during the report year or the number of days at 95% utilization of licensed beds. For example, a 90-bed facility with approximately $6,504,300 in allowable Medicaid costs that operated at 90% occupancy would have allowed costs of $220.00 per day. However, application of the 95% occupancy standard results in an approved Medicaid rate of $208.42 – a reduction of $11.58 per day. If sixty of facility’s residents are reimbursed under Medicaid, the facility would effectively be uncompensated for nearly $254,000 in allowable Medicaid costs.

In order to determine how your facility may fare, we recommend reviewing the most recently issued Medicaid rate computation report. If the rate calculated for the rate period beginning July 1, 2012 is different than your current Medicaid rate, your Medicaid rate may change effective July 1, 2013. We encourage you to review this information and or call your advisor in order to discuss how this rebasing may impact your facility.

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