June 5, 2013

New Nursing Facility Rate Setting Outlined by the General Assembly: Biennial Budget Legislation Adopted

New Nursing Facility Rate Setting Outlined by the General Assembly: Biennial Budget Legislation Adopted

On June 5, 2013, the General Assembly passed House Bill 6705 containing the statutory changes necessary to implement the budget plans for SFY 2014 and SFY 2015.

Section 74 of the 238 page bill outlines the Medicaid nursing facility rate-setting method to be used by the Department of Social Services for the July 1, 2013 through June 30, 2014 (SFY 2014) and July 1, 2014 through June 30, 2015 (SFY 2015) rate periods. The biennial budget includes savings of $11.0 million in SFY 2014 and $14.8 million in SFY 2015 related to Medicaid rate revisions for nursing facilities as part of a state restructuring of the Medicaid rate increase and provided tax adjustment adopted in 2011 to take advantage of federal matching funds which added approximately 4% ($59 million) to Medicaid rates and increased Nursing Home User Fees paid to the state by $39.4 million.

For the SFY 2014 rate period, DSS will calculate rates based upon 2011 cost reports and applicable statutes and regulations except: 1) DSS will use a 90% minimum occupancy standard and not the 95% standard currently prescribed in statute; 2) no rate may increase above the rate in effect on June 30, 2013, unless DSS adjusts for 2012 fair rent or movable equipment additions based upon available funding; and 3) no rate will decrease by more than 4%. Under House Bill 6705, DSS was also granted general authority to reduce rates to remain within available funding and, therefore, it is possible that rates capped at current levels may be reduced by a fixed percentage to meet the budget savings target.

The budget legislation specifies that SFY 2014 facility rates will continue through SFY 2015 except for fair rent and movable equipment additions subject to available funds. Again, DSS may apply rate reductions as needed to remain within funding levels.

It is our understanding that state officials were made aware that a number of facilities facing Medicaid rate reductions would likely seek interim rate increases due to financial hardship.

Given the opportunity for a rate increase adjustment associated with fair rent or movable equipment additions or replacements, facilities may want to consider accelerating planned capital projects and equipment purchases to meet the September 30, 2013 cost report period end date.

We encourage you to review this information with your reimbursement advisor.

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