1214 Payment for nursing facility services provided by nonpublic nursing facilities; notice of change in formula for calculating budget adjustment factor

Payment for Nursing Facility Services Provided by Nonpublic Nursing Facilities; Notice of Change in Formula for Calculating Budget Adjustment Factor

[45 Pa.B. 3425]
[Saturday, June 27, 2015]

 The Department of Human Services (Department) is announcing its intent to amend the Commonwealth's Title XIX State Plan to revise the formula for calculating the budget adjustment factor (BAF) applied to Medical Assistance (MA) payments for nursing facility services provided by nonpublic nursing facilities in Fiscal Year (FY) 2015-2016.

Background

 Since 1996, the Department has used a case-mix prospective payment methodology to set per diem rate payments for MA nursing facility providers. One of the reasons the Department adopted this payment methodology was that the prior retrospective cost-based payment system had proven to be ''highly inflationary'' and change was necessary to curb an ''explosive growth of nursing facility expenditures.'' See 25 Pa.B. 4477 (October 14, 1995). In 2006, the Department noted that ''since the case-mix payment system was implemented in 1996, MA nursing facility payment rates have risen more than 56% and, since 2000, have increased by 27.4% overall. During this same period, expenditures for MA nursing facility services have grown to nearly $3 billion and expenditures for MA services to the elderly and disabled now consume approximately 70% of the $14 billion MA Program budget.'' See 36 Pa.B. 3207 (June 24, 2006).

 Realizing that the MA Program could not continue to sustain the pace at which long-term care expenditures were growing, the Department amended the Commonwealth's Title XIX State Plan and issued regulations changing the case-mix payment methodology effective July 1, 2005, to include the use of a BAF in annual rate-setting. See 35 Pa.B. 6232 (November 12, 2005). Application of a BAF was continued in 2007, 2008, 2011 and again in 2013. See the act of June 30, 2007 (P. L. 49, No. 16), the act of July 4, 2008 (P. L. 557, No. 44), the act of June 30, 2011 (P. L. 89, No. 22) and the act of July 9, 2013 (P. L. 369, No. 55). The BAF limits the estimated Statewide day-weighted average payment rate for MA nursing facility services for county and nonpublic nursing facilities in effect for the fiscal year to the amount permitted by the funds appropriated by the General Appropriations Act for the fiscal year.

 Since the implementation of the BAF, case-mix per diem rates have increased on an annual average basis by $3.40 per day and in the aggregate by 20.5% overall from FY 2004-2005 through FY 2014-2015. In contrast, had the BAF not been used, rates would have increased on an annual average basis by $6.64 per day and overall by 40%, well in excess of either the Consumer Price Index or the Centers for Medicare and Medicaid Services (CMS) Nursing Home without Capital Market Basket Index.

 In addition, during the past 10 years the BAF has been in place, the Department has uncovered no evidence that the quality of care in this Commonwealth's MA nursing facilities has been adversely impacted by use of the BAF. To the contrary, MA nursing facility providers continue to deliver a high quality of care. The Department does not expect the quality of care to decline in FY 2015-2016, and will continue our enforcement and monitoring activities to ensure that is the case.

 Finally, although the BAF has served to moderate the overall aggregate increases in case-mix per diem rates, the adjusted case-mix per diem rate payments, together with the other supplemental payments to nursing facilities authorized under the Commonwealth's approved State Plan, have been and will continue to be sufficient to assure that MA recipients have access to medically necessary nursing facility services. The vast majority of licensed nursing facilities in this Commonwealth participate as providers in the MA Program, and the MA Program pays for more days of nursing facility care than all other payors combined. The Department does not expect this to change in FY 2015-2016.

 In short, use of the BAF has served to conserve taxpayer funds while assuring, and continuing to assure, that payments to nursing facilities under the MA Program are consistent with efficiency and economy and at the same time sufficient to assure access to quality care.

Proposed BAF Methodology for Nonpublic Nursing Facilities for FY 2015-2016

 Under the proposed State Plan Amendment (SPA) that the Department intends to submit to CMS to revise the BAF formula for FY 2015-2016 for nonpublic nursing facilities, the Department will continue to apply a BAF and make adjustments to nonpublic nursing facility payment rates in FY 2015-2016. As directed by the General Assembly, the BAF will limit the estimated Statewide day-weighted average payment rate for MA nursing facility services for county and nonpublic nursing facilities to the amount permitted by the funds appropriated by the General Appropriations Act for the fiscal year. Application of the revised BAF formula for the upcoming fiscal year is contingent on CMS approval.

 From July 1, 2005, through June 30, 2011, the Department calculated one BAF each rate-setting year and applied that BAF to the nursing facility payment rates in effect for the rate-setting year. For the FY 2011-2012, the nursing facility industry requested and the Department responded by calculating a BAF each quarter of the fiscal year for nonpublic nursing facilities instead of calculating one BAF for the fiscal year. For FY 2012-2013, the Department returned to a formula very similar to the formula used in FYs 2009-2010 and 2010-2011, which allowed for an adjustment in the fourth quarter if certain conditions were met. For FYs 2013-2014 and 2014-2015, the Department used a formula very similar to FY 2012-2013.

 After meeting with and receiving input from the nursing facility industry, the Department is proposing to calculate a facility-specific BAF in FY 2015-2016 for each nonpublic nursing facility that takes into account both the number of MA recipients the facility serves and the extent to which the facility operates efficiently. Each facility-specific BAF will be calculated as follows:

 Facility-Specific BAF = Base BAF + MA Occupancy Adjustment for Qualified Facilities + Efficiency Adjustment.

 The Base BAF will be calculated by comparing the rate computed using the data in the 2015-2016 rate-setting database without an acuity adjustment to the anticipated day-weighted average rate under the proposed appropriation.

 The MA Occupancy Adjustment will only be applied to the Base BAF of each facility that satisfies both of the following:

 a. Over a 12-month period admitted 30 residents.

 b. Has an MA Day-One Occupancy Percentage that is equal to or greater than 50% of the County Average MA Day-One Occupancy Percentage of the county in which the nursing facility is located.

 The MA Day-One Occupancy Percentage will be determined from data in the February 2015 Participation Review workbook, which may be accessed at http://www.dhs.state.pa.us/dhsorganization/officeoflongtermliving/workbook/madayone/index.htm.

 The Efficiency Adjustment (EA) will be a function of the relationship of the facility to the peer group median. For facilities above the peer group median, there will be a negative adjustment. For facilities below the peer group median, there will be a positive adjustment. The EA will also be based on five tiers:

 a. Nursing facilities with costs of 10% or more BELOW the Peer Group Median − Estimated EA = +0.375%.

 b. Nursing facilities with costs between 10% BELOW and 10% ABOVE the Peer Group Median − Estimated EA = +0.75%.

 c. Nursing facilities with costs between 10% and 15% ABOVE the Peer Group Median − Estimated EA = −1.50%.

 d. Nursing facilities with costs 15% or more ABOVE the Peer Group Median − Estimated EA = −2.25%.

 e. Nursing facilities with costs 10% or more ABOVE the Peer Group Median AND an MA occupancy of 80% or higher − Estimated EA = -0.75%.

 f. Nursing facilities with no cost reports in the rate setting database − Estimated EA = +0.10%.

 The actual value of the EA for each tier will be determined when the appropriations for nursing facility payments are finalized.

 The Department will also adjust the facility-specific BAF for the facility-specific April 1 rate to determine if actual nursing facility payments are consistent with the appropriated amounts for nursing facility payments. Prior to establishing the April rate for the rate year, the Department will use the following formula to determine the April BAF and the facility-specific April BAFs:

 The weighted average April rate using the facility-specific base BAFs will be compared to the April target rate. If the difference between the two rates is less than $0.25, the facility-specific April BAFs are equal to the facility-specific base BAFs.

Fiscal Impact

 No fiscal impact is anticipated as a result of these changes through June 30, 2016. The amount of funding available for this program is dependent upon the funds appropriated by the General Assembly in the forthcoming fiscal year. Therefore, until a budget bill is passed and enacted, any estimated fiscal impact associated with this notice is solely based on the funding levels as proposed in the Governor's Executive Budget.

Public Comment

 Interested persons are invited to submit written comments regarding the BAF formula to the Department of Human Services, Office of Long-Term Living, Bureau of Policy and Regulatory Management, Attention: Marilyn Yocum, P. O. Box 8025, Harrisburg, PA 17105-8025. Comments received within 30 days will be reviewed and considered for any subsequent revision of the formula.

 Persons with a disability who require an auxiliary aid or service may submit comments using the Pennsylvania AT&T Relay Service at [phone] (TDD users) or [phone] (voice users).

THEODORE DALLAS, 
Secretary

 Fiscal Note: 14-NOT-964. No fiscal impact; (8) recommends adoption.

[Pa.B. Doc. No. 15-1214. Filed for public inspection June 26, 2015, 9:00 a.m.]