Medicaid Nursing Home Reimbursement - Rate Setting

Overview

Medicaid Rate Setting Nursing Home Overview

Cost Basis of Rates
 
For the rate year ending June 30, 2014, the cost report for the year ending September 30, 2011 was used as the base year for rate computation purposes. Under 17b-340 CGS, the Commissioner is permitted to use the most recent cost reports for determining the property component of each facility rate to reflect capital improvements. In this way, facilities receive additional revenue through their rates to account for debt service and related costs associated with major property improvements. Currently, the cost reports for the year ended September 30, 2012 are being used to calculate the property included in the rates for the period ending June 30, 2014.
 
Categorization of Costs
 
Desk reviewed reported expenditures are categorized into five cost groups as follows in the rate computation:
1. Direct - Nursing and nurse aide personnel salaries, related fringe benefits and nursing pool costs.
 
2. Indirect - Professional fees, dietary, housekeeping, laundry personnel costs and expenses and supplies related to patient care.
 
3. Administrative and General - Maintenance and plant operation expenses, and salaries and related fringe benefits for administrative and maintenance personnel.
 
4. Property (Fair Rent) - A fair rental value allowance is calculated to yield a constant amount each year in lieu of interest and depreciation costs. The allowance for the use of real property (non-moveable equipment) other than land is determined by amortizing the base value of property over its remaining useful life, using the Hospital Fixed Asset Guide Book, and applying a rate of return (ROR) on the base value. The ROR is linked to the Medicare borrowing rate and is currently 2.310% for assets placed in service in 2012. Under state statute the maximum ROR is 11%. Non-profit facilities receive the lower of the fair rental value allowance or actual interest and depreciation plus certain other disallowed costs.
 
5. Capital Related - Property taxes, insurance expenses, moveable equipment leases and moveable equipment depreciation.
 
Allowable Cost Maximums
 
Facility costs, calculated on a per diem basis by category, are limited to maximums established as percentages of median costs in the Direct, Indirect and Administrative/General categories. The allowable cost maximums are currently as follows:
 
 
    Allowable Cost Maximum Percentages By Category* - Effective 7/1/2001 to Current

Direct

Indirect

Admin/General

135%

115%

100%

*(% of median)
  
  Current Cost Component Limit Amounts
Under the statute, there are separate "peer groupings" by licensure type within the Direct category and for facilities in Fairfield County in recognition of higher wages in that area.

Fairfield County

Direct

Indirect

Admin/General

CCNH Licensure

$192.18

$62.16

$34.37

RHNS Licensure

$177.64

$62.16

$34.37

Non-Fairfield County

Direct

Indirect

Admin/General

CCNH Licensure

$167.46

$62.16

$34.37

RHNS Licensure

$119.70

$62.16

$34.37

 
 
Inflation Update
The Regional Consumer Price Index and the projected value of that index (by Data Resources Inc.) are employed to inflate costs from the cost year to the rate year. Reductions to the inflation update have been included in statute for certain rate periods to promote efficiency and to limit the update to meet necessary cost increases. Allowable cost year 2011 costs have been inflated by 10.97% for the July 1, 2013 rate period representing actual and estimated inflation between the cost period and rate period.
 
 
Incentives/Efficiency Allowances
The system provides a rate increase adjustment or "efficiency allowance" to facilities having lower costs in the Indirect and Administrative cost categories. The incentive is 25% of the difference between the facility's cost per day and the state-wide median cost per day in the component category.
 
 
Minimum Occupancy for Rate Setting
For rate computation purposes, allowable costs are divided by the higher of reported total resident days for the year or facility occupancy at 90% of licensed capacity.
 
 
Interim Rates
Under state statute and regulations, the Commissioner may grant an interim rate when a facility changes ownership, has a significant change in licensed bed capacity or faces a financial distress. In reviewing rates for hardship increases, area bed availability is considered. Over the past several years, due to the excess nursing facility beds available in Connecticut, there have been no hardship rate increases granted.
 
 
Resident Day User Fee
Public Acts 05-251 and 05-280 established a nursing facility resident day user fee to be imposed effective for calendar quarters commencing on or after July 1, 2005 and calculated by multiplying a nursing home's total non-Medicare resident days during the calendar quarter by the user fee. The current User Fee is $21.02 per non-Medicare resident day. For facilities with over 230 beds or owned by municipality, the User Fees is $16.13.
 
The resident day user fee is paid to the Department of Revenue Services by electronic funds transfer on or before the last day of October, January, April and July for the calendar quarter ending on the last day of the preceding month.
 
Resident days mean each resident service day and include the day a resident is admitted and any day for which the facility is eligible for payment for reserving a resident's bed due to hospitalization or temporary leave or death. Resident days do not include the day a resident is discharged or days for which a resident is eligible for payment, in full or with a coinsurance requirement, under the Medicare program.
 
The User Fee legislation required that DSS apply to the Federal government for a waiver of tax uniformity rules to exempt nursing homes owned by entities registered as Continuing Care Retirement Communities (CCRCs) from the resident day user fee. There are 16 nursing homes associated with CCRCs and 13 are exempt from the resident day user fee under the Federal waiver.