1174 Payment for nursing facility services provided by county and nonpublic nursing facilities; notice of change in methods and standards of setting payment rates; budget adjustment factor

Payment for Nursing Facility Services Provided by County and Nonpublic Nursing Facilities; Notice of Change in Methods and Standards of Setting Payment Rates; Budget Adjustment Factor

[43 Pa.B. 3583]
[Saturday, June 29, 2013]

 The Department of Public Welfare (Department) is announcing its intent to revise the Medical Assistance (MA) payment methodology and standards for payment of MA nursing facility services in Fiscal Year (FY) 2013-2014 to authorize the continued use of a budget adjustment factor (BAF) in setting payment rates for nursing facility services.

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 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 and again in 2011. See the act of June 30, 2011 (P. L. 89, No. 22), the act of July 8, 2008 (P. L. 557, No. 44) and the act of June 30, 2011 (P. L. 89, No. 22).

 Since the implementation of the BAF, case-mix per diem rates have increased on an annual average basis by $3.45 per day and in the aggregate by 16.62% overall from FY 2004-2005 through FY 2012-2013. In contrast, had the BAF not been used, rates would have increased on an annual average basis by $7.22 per day and overall by 34.76%, well in excess of either the Consumer Price Index or the Federal Centers for Medicare and Medicaid Services (CMS) Nursing Home without Capital Market Basket Index.

 Under section 443.1(7)(iv) of the Public Welfare Code (62 P. S. § 443.1(7)(iv)), the current statutory provision mandating use of the BAF expires June 30, 2013. Because it would be fiscally irresponsible to revert to a payment methodology that produces unsustainable rate increases, particularly given current economic conditions, the Department is proposing and expects that the General Assembly will enact legislation to continue the use of a BAF in FY 2013-2014, subject to CMS approval. Use of a BAF has assured, and will continue to assure, that payments to nursing facilities under the MA Program are consistent with efficiency and economy.

 Further, during the past 7 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 2013-2014, and will continue our enforcement and monitoring activities to ensure that is the case.

 In addition, 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 equal 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 if the BAF continues in FY 2013-2014.

Proposed BAF Methodology for FY 2013-2014

 As previously noted, the Department intends to submit a State Plan Amendment (SPA) to the CMS to continue use of the BAF. Under the proposed SPA, the Department will apply a BAF and make adjustments to nonpublic nursing facility and county nursing facility payment rates in FY 2013-2014. As in prior years, the BAF will limit the estimated Statewide day-weighted average payment rate for MA nursing facility services for county and nonpublic nursing facilities so that the average payment rate in effect for the fiscal year is limited to the amount permitted by the funds appropriated by the General Appropriations Act for the fiscal year.

Nonpublic Nursing Facilities

 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 FY for nonpublic nursing facilities instead of calculating one BAF for the fiscal year. For the 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. See 39 Pa.B. 4958 (August 15, 2009). The Department is proposing to calculate the BAF in FY 2013-2014 for nonpublic nursing facilities as follows:

Nonpublic Nursing Facilities' BAF Determination

 Base BAF Formula—Prior to establishing the July rate for the rate year, the Department will use the following formula to determine the base BAF:

 Target rate divided by the acuity-adjusted weighted average rate equals the base BAF.

 If the base BAF as calculated is greater than 1.0, the base BAF will equal 1.0.

 April BAF Formula—Prior to establishing the April rate for the rate year, the Department will use the following formula to determine the April BAF:

 The weighted average April rate will be compared to the April target rate. If the difference between the weighted average April rate and the April target rate is $0.25 or more, the formula for the April BAF will be the April target rate divided by the weighted average April rate at 100% equals the April BAF. Otherwise, the April BAF is equal to the base BAF.

Terms Related to the BAF Determination

 The following words and terms, when used in the BAF determination, have the following meanings, unless the context clearly indicates otherwise:

 Acuity-adjusted weighted average rate—The weighted average July rate at 100% adjusted by the acuity factor.

 Acuity factor—The percentage of change from the July rate to the October, January and April rates representing the estimated quarterly change in payments for the nonpublic nursing facilities. (See 55 Pa. Code § 1187.95(b) (relating to general principles for rate and price setting).)

 April BAF—The BAF applied to each nonpublic nursing facility's April rate.

 April target rate—The rate year's Statewide day-weighted average April rate needed to meet the rate year target rate.

 Base BAF—The BAF applied to each nonpublic nursing facility's July, October and January rates.

 Base days—The source of days for the day-weighted calculation used in determining the base rate, the weighted average April rate at 100% and the weighted average July rate at 100%. For FY 2013-2014, the base days are the sum of each nonpublic nursing facility's paid facility days, therapeutic leave days and 1/3 of the paid hospital bed reserve days from the PROMISe data file used to determine the June 30, 2012, disproportionate share payments.

 Base rate—The base rate is the prior year's annual target rate.

 Target rate—The base rate multiplied by one plus the percentage rate of change permitted by the funds appropriated by the General Appropriations Act for the applicable rate year.

 Weighted average April rate—The Statewide day-weighted average of the nonpublic nursing facilities' April rates for the applicable rate year determined in accordance with 55 Pa. Code Chapter 1187 (relating to nursing facility services), calculated using base days and the base BAF.

 Weighted average April rate at 100%—The Statewide day-weighted average of the nonpublic nursing facilities' April rates for the applicable rate year determined in accordance with 55 Pa. Code Chapter 1187 calculated using base days, prior to application of a BAF.

 Weighted average July rate at 100%—The Statewide day-weighted average of the nonpublic nursing facilities' July rates for the applicable rate year determined in accordance with 55 Pa. Code Chapter 1187 calculated using base days prior to application of the base BAF.

County Nursing Facilities

 Under the proposed SPA, the Department will continue to calculate and apply the BAF to county nursing facility payment rates as it has in prior rate-setting years. Specifically, the Department will adjust each county nursing facility's per diem rate by multiplying the rate by a BAF. A county nursing facility's per diem rate for an MA resident will be the facility's July 1, 2012, per diem rate as calculated under 55 Pa. Code Chapter 1189, Subchapter D (relating to rate setting) and 55 Pa. Code § 1189.91(b) (relating to per diem rates for county nursing facilities) multiplied by the county BAF.

 Use of the calculations previously described is contingent upon the approval by CMS of the SPA.

Fiscal Impact

 No fiscal impact is anticipated as a result of these changes through June 30, 2014. 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 formulas to the Department of Public Welfare, Office of Long-Term Living, Bureau of Policy and Regulatory Management, Attention: Marilyn Yocum, P. O. Box 8025, Harrisburg, PA 17106-8025. Comments received within 30 days will be reviewed and considered for any subsequent revision of the notice.

 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).

BEVERLY D. MACKERETH, 
Acting Secretary

 Fiscal Note: 14-NOT-831. No fiscal impact; (8) recommends adoption.

[Pa.B. Doc. No. 13-1174. Filed for public inspection June 28, 2013, 9:00 a.m.]