BEFORE THE Department of Public

health and human services of the

STATE OF MONTANA

 

In the matter of the amendment of ARM 37.40.307, 37.40.326, and 37.40.361 pertaining to nursing facility reimbursement

) ) ) )

NOTICE OF AMENDMENT

 

TO: All Concerned Persons

 

1. On April 24, 2014, the Department of Public Health and Human Services published MAR Notice No. 37-671 pertaining to the public hearing on the proposed amendment of the above-stated rules at page 811 of the 2014 Montana Administrative Register, Issue Number 8.

 

2. The department has amended the above-stated rules as proposed.

 

3. The department has thoroughly considered the comments and testimony received. A summary of the comments received and the department's responses are as follows:

 

COMMENT #1: The statement of reasonable necessity indicates that the department is implementing a 2% rate increase provided by House Bill 2 (HB2) of the 63rd Montana Legislature.  However, the department has provided proposed rates that implement a 1.64% rate increase. This increase is 20% less than the increase approved by the legislature. We are asking that the full 2% be implemented. There are sufficient appropriated funds to do so. We believe the department's calculations are deficient in two ways and we ask that the department make appropriate adjustments to address these issues:

1. Nursing facility bed days have been declining for about 15 years. We ask that the department adjust the proposed bed days in the rate spreadsheet to account for an approximately 15-year trend of declining days. The spreadsheet is based on days increasing above what is projected for fiscal year (FY) 2014 which simply hasn't happened in many years.

2. The department inaccurately accounts for swing bed days. The rate spreadsheet assumes that all bed days will be nursing facility bed days, but a growing number of bed days are in swing beds. The actual net reimbursement in state and federal funds for swing bed days is substantially less than for nursing facility bed days, largely because of patient contribution which includes an increasing Medicare participation. We are asking that the department take into account the fact that nursing facility bed days are decreasing significantly while the less expensive, on a net basis, swing bed days are increasing.

RESPONSE #1: The funding level being distributed in the reimbursement spreadsheet agrees with the funding appropriated by the Legislature for nursing facility providers at $145,522,658 of state and federal funds for the per diem rate calculation. The funding has increased from $134.48 in 2014 up to the proposed $137.21 per day of state and federal funds which is a calculated 2% rate increase.

The current patient contribution or third-party payor funds and nursing facility bed days are not components that are appropriated by the Legislature. They are components that the department uses to calculate the per day amounts from year to year in the reimbursement methodology. The department has reevaluated its calculation and will agree to adjust the nursing facility bed days and the rate components to achieve a 2% overall statewide average rate increase. The total revised statewide average Medicaid rate will be $169.42 up from the 2014 statewide average rate of $166.10 for an increase of $3.32 per Medicaid day. We would propose to adopt this rate increase in the final calculated rate sheet that will be provided to all providers with their rate letter notification. Rate increases will be effective retroactively to July 1, 2014.  Any rate decreases will be effective after the final notice of these rules and will be implemented August 1, 2014.

 

There are two separate reimbursements for nursing facilities and swing beds and the commenter is correct in that there are differences in how those expenditures are actually billed and paid under Medicaid. However, historically we have aggregated the swing bed and the nursing facility expenditures into one calculation of the statewide average rate due to the swing bed expenditures representing less than 4% of the overall Medicaid spending for this category of services. This rate setting methodology has been in existence since 2002 and has calculated rates in this way since its establishment. We have reviewed past and current trends in Medicaid expenditures and find that there is no need to separate nursing facility and swing bed days for projection purposes.

COMMENT #2: The department claims to be proposing rates that are at a level consistent with efficiency, economy, quality of care, and to ensure the continued participation of providers; that simply is not the case. According to Skilled Nursing Facility (SNF) Total Market Basket projections from Global Insight, skilled nursing facilities have experienced inflation of about 14% from July 1, 2008 to July 1, 2014. Over that period of time, nursing facility rates have risen 2% and now the department is proposing to raise them by only 1.64% for a total of 3.64% over a seven-year period. In order to establish reasonable rates for this service the department should consider the factors outlined in 53-6-113, MCA, in addition to other pertinent factors, which include the:

availability of appropriated funds - the legislature appropriated additional funds for nursing facilities beyond 2%;

 

actual cost of services - the current cost to provide a day of nursing facility care is about $192.23 while the current rate is about $166.09.  A 1.64% increase is woefully inadequate to bridge that gap;

 

quality of services - facilities struggle to meet state and federal quality standards, and only a handful of facilities are in full compliance when they are surveyed annually; professional knowledge and skills necessary for the delivery of services - increased acuity necessitates more professional knowledge and skills for those delivering care; and availability of services.

 

There is no evidence in the statement of reasonable necessity that the department took these and other pertinent factors into account in proposing a 1.64% increase.  We are asking the department to consider the effects of inflation on nursing facilities and to properly account for inflation in setting rates.  No one can deny that costs that are beyond facilities' control are increasing more than 1.64% - food, utilities, health insurance, liability insurance, medical supplies and the like, to say nothing of the need to provider wage increases to staff to maintain a competent and reliable work force.

 

RESPONSE #2: Federal laws or regulations do not mandate that established Medicaid rates must cover all of the actual costs incurred by nursing facility providers.

 

The department has developed rates which are reasonable and adequate and in compliance with all requirements. The price is reflective of many factors that impact the ways that nursing facilities do business and is set at a level that is fair when considering all of those factors together.

 

The statewide price is determined through a public process. Factors that are considered in the establishment of this price include the cost of providing nursing facility services, Medicaid recipient's access to nursing facility services, the quality of nursing facility care, as well as budgetary or funding levels. The price-based rate reflects a rate commensurate with the services that are required to be provided by nursing facility providers when meeting federal and state requirements. Predictability of the reimbursement calculation is one of the required features of the price-based reimbursement approach, as is the recognition of the changes in acuity of the residents in a facility over time.

 

Each nursing facility receives the same operating per diem rate, which is 80% of the statewide price. The remaining 20% of the statewide price represents the direct resident care component of the rate and is acuity adjusted. Each facility's direct resident care component rate is specific to that facility and is based on the acuity of Medicaid residents served in that facility. As acuity changes in each facility based on the level of complexity of the residents being served relative to the statewide acuity, facility rates adjust upward or downward to account for this change in acuity.

 

Montana contracts with Myers and Stauffer LC to prepare an annual analysis of each nursing facility's cost of providing nursing facility services to Medicaid recipients, and each facility's reimbursement rate. The analysis provides the department with an evaluation tool as to the adequacy of the statewide pricing for Montana nursing facilities and has done so since 2002. The annual rate-to-cost analysis that is performed for the rate-setting process indicates for State Fiscal Year (SFY) 2013 that Montana's Medicaid day-weighted average total rate that includes all supplemental payments (IGT and direct care wages) was $182.08 compared to the Medicaid inflated cost of $186.89, or that on average Medicaid is covering approximately 97.43% of cost through the various forms of reimbursement to nursing facility providers. This rate comparison supports the determination as to the adequacy of the Medicaid reimbursement rates for nursing facilities and that there is a process for such a determination.

 

COMMENT #3: The department received several comments about the increased costs that are being incurred by nursing facilities and the adequacy of the rate that is being proposed effective July 1, 2014.

 

The Legislature recognized that nursing facilities needed additional funding to account for inflation and the difference between cost and rates as well as increased acuity of those we care for. After hours of testimony and careful consideration the 2013 Legislature provided funding for rate increase above the 2% per year level. Unfortunately the Governor vetoed this important and necessary funding and now the department is proposing funding below even the 2% that was left after the veto. There is no relationship between rates and cost of services, and inflation and acuity are not taken into account.

 

RESPONSE #3: The department has utilized the appropriated level of funding that was included in HB2 that was signed into law by the Governor for SFY 2015 rate setting.  The Governor's administration proposed and supported a 2% provider rate increase for all department providers as part of the Governor's 2014/2015 biennial budget.

 

The department has reevaluated its calculation and will agree to adjust the nursing facility bed days and the rate components to achieve a 2% overall statewide average rate increase. The total revised statewide average Medicaid rate will be $169.42 up from the 2014 statewide average rate of $166.10 for an increase of $3.32 per Medicaid day. We would propose to adopt this rate increase in the final calculated rate sheet that will be provided to all providers with their rate letter notification. Rate increases will be effective retroactively to July 1, 2014. Any rate decreases will be effective after the final notice of these rules and will be implemented August 1, 2014.

 

Please refer to the response to Comment #2, which explains in detail why the department believes nursing facility reimbursement is adequate.

 

COMMENT #4: The Montana Legislature approved a 2% increase for providers. With the department's plan to keep the patient contribution amount the same at $31.62, the intended increase falls short to approximately 1.64%. I feel this is unacceptable. It causes the providers to be penalized because the patient contribution falls short.

 

Every year we have to increase the private pay rate considerably to attempt to make up losses. Our current rate for private pay is more than $40 dollars per day than the reimbursement rate paid by Medicaid. The gap will become ever increasing each year.

 

I can tell you that nearly every one of our nursing facilities has total daily expenses that are significantly higher than the daily Medicaid rate. We rely on premium payers to make up the large losses we take on the majority of our census (Medicaid census is around 65-70% of our total census). In today's market, more and more of those premium payers are staying at home or going to assisted living and that is making it tougher and tougher to cover expense.

 

Year after year, we face a growing percentage of Medicaid patients; however, the level of clinical complexity and administrative costs to care for these patients continue to climb. The Medicaid rate is too low already to meet current costs for care. It is imperative that our facility receive the full payment adjustment, as intended by the Legislature.

 

It is my understanding that this proposal will increase state and federal rates, but ignores reimbursement for patients. It is unfortunate that the facilities that provide frontline care for these patients and their families are penalized. The burden of the decreased portion of funding should not be shifted to those already receiving the short end of the stick. Oftentimes these patients are already unable to meet their minimum Medicaid monthly portion. Our facility and others across the state end up absorbing that loss of payment every day and suffering that loss year after year.

 

Although we continue to increase our private pay rate each year by 5% to offset escalating costs associated with decreasing reimbursements for our high Medicaid patient population, the high and increasing cost of care is often shifted to others, like our private pay patients and our staff. As fewer and fewer organizations are able to accept Medicaid patients for long term care, the impact of not receiving the full 2% increase for Medicaid payments intensifies the challenges and costs for all of us who still serve Medicaid patients.

 

RESPONSE #4: The funding level being distributed in the reimbursement spreadsheet comports with the funding appropriated by the Legislature for nursing facility providers at $145,522,658 of state and federal funds for the per diem rate calculation which has increased from $134.48 in 2014 up to the proposed $137.21 per day of state and federal funds which is a calculated 2% rate increase.

 

The current patient contribution or third party payor funds and nursing facility bed days are not components that are appropriated by the Legislature. They are components that the department uses to calculate the per day amounts from year to year.

 

Please refer to the response to Comment #2, which explains in detail why the department believes nursing facility reimbursement is adequate.

 

COMMENT #5: A commenter stated that with your proposed cuts, we will be reducing staff because we will be reducing our Medicaid resident intake. At this time 60% of our residents are on Medicaid; we cannot afford a higher percentage; in fact, we will reduce our Medicaid intake. Your communities of elders need and deserve to be cared for. A majority of the residents come from the hospital and want to return to the community. I know the department is looking to return residents to the community from the nursing facility, but it won't be the nursing facility where they are staying; it will be the hospital because they require a higher level of skilled care. We are asking you as representatives to honor our elders and give to them what was promised. We ask that you produce rates that are keeping up with the demands of our economy and residents who need nursing facility care.

 

RESPONSE #5: Occupancy in Montana for nursing facility care has been declining for some time but has slowed in recent years. The current statewide occupancy level is at 69% with several facilities operating at occupancy levels of under 50%. Medicaid occupancy statewide is at 59%. With these levels of occupancy there are open and available beds for those individuals that seek to access nursing facility placements. While some facilities are operating at a much fuller occupancy level, there is capacity in many of Montana's nursing facilities to place individuals that require this level of service.

 

There is designated funding provided above the calculated per diem rate funding for each nursing facility in the form of supplemental direct care wage funds. In SFY 2015 Montana nursing facilities will continue to receive increases from direct care wage (DCW) funding through an appropriation that is separate and in addition to the provider rate funding provided through the price-based methodology. The DCW program provides funding separately from the reimbursement rate calculation, to help facilities provide wage increases to its direct care workforce and will provide over $3.9 million dollars in ongoing funding during this SFY that can only be used to provide for lump sum bonuses or to sustain or increase wage payments to direct care and ancillary workers in nursing facilities. This payment is approximately $3.99 per day above the calculated per diem rate for 2015.

 

COMMENT #6:  Commenters stated they remain concerned about the adequacy of Medicaid payments to meet the cost to provide services to nursing facility residents. The gap between the cost to deliver care and the amount Medicaid pays continues to grow. Over the most recent six-year period Medicaid payments have never kept up with inflation. For four years no inflationary adjustment was made at all. Just 2% per year in the current biennium was authorized. It now appears that even that 2% will not be realized.

 

We encourage the department to delineate a plan to address three important goals: improve payment adequacy in the near term future; provide incentives to improve the quality and cost effectiveness of services; and assure continued access to care for Medicaid beneficiaries.

 

We make this request because we sincerely believe that an alternative approach to the current rate methodology is needed. To continue making minor inflationary adjustments to the current per diem rate will fail to achieve any of the three goals we have identified.

 

RESPONSE #6: The annual rate-to-cost analysis that is performed for the rate-setting process indicates for SFY 2013 that Montana's Medicaid day-weighted average total rate that includes all supplemental payments (IGT and direct care wages) was $182.08 compared to the Medicaid inflated cost of $186.89, or that on average Medicaid is covering approximately 97.43% of cost through the various forms of reimbursement to nursing facility providers. This rate comparison supports the determination as to the adequacy of the Medicaid reimbursement rates for nursing facilities and that there is a process for such a determination.

 

Montana nursing facilities continue to receive additional funding from the Intergovernmental Fund Transfer (IGT) program by taking advantage of the ability to match existing county funds with enhanced federal funds up to the higher Medicare Upper Payment Limit amount thus providing an enhanced IGT payment to Montana nursing facilities up to the total appropriation of $23,945,170 in 2015 of total funds.

 

Additionally nursing facility providers received direct care wage funds to support their direct care staffing. In SFY 2015 Montana nursing facilities will continue to receive increases from direct care wage (DCW) funding through an appropriation that is separate and in addition to the provider rate funding provided through the price-based methodology. The funding will provide over $3.9 million dollars in ongoing funding during this SFY that can only be used to provide for lump sum bonuses or to sustain or increase wage payments to direct care and ancillary workers in nursing facilities. This funding helps facilities provide wage increases to its direct care workforce.

The department will take under consideration these comments and will discuss with Myers and Stauffer any new options or trends in analyzing and measuring payment adequacy for nursing facilities or new payment options such as pay for performance, etc. that would better recognize acuity.

 

COMMENT #7: The department received several comments about the increased costs that are being incurred by nursing facilities related to staffing and wages. The difficulty in recruiting and retaining staff is due to the continued development of the Bakken oil fields in North Dakota. Although we are not directly impacted as communities further east are, we continue to have difficulty recruiting staff since people from here are employed in the oil fields in the area. The other issue that we are seeing in the community is the continued building of businesses that are indirectly related to the Bakken expansion including hotels, restaurants, expanded customer base for Wal-Mart, and other businesses being less than adequately staffed. We currently have one motel that is using short term staffing from Mexico to provide room services due to the difficulty in finding adequate staffing. Our staffing salaries need to be competitive with the area due to the continued difficulty in finding staff. Our Certified Nursing Aide pay is currently similar to other businesses in the area.

 

In March we had to conduct a reduction in force which affected seven staff members, and three other staff members had their hours reduced. We most likely will not be offering wage increases this year. Staff members received a 1% increase in 2013 and did not receive an increase in 2012.

 

RESPONSE #7: Nursing facility providers have benefited from additional funding that has been appropriated and targeted specifically at direct care wages for several years. This funding is in addition to the funding allocated through the reimbursement methodology. In SFY 2015 Montana nursing facilities will continue to receive increases from direct care wage (DCW) funding through an appropriation that is separate and in addition to the provider rate funding provided through the price-based methodology. The funding will provide over $3.9 million dollars in ongoing funding during this SFY that can only be used to provide for lump sum bonuses or to sustain or increase wage payments to direct care and ancillary workers in nursing facilities. This funding helps facilities provide wage increases to its direct care workforce. This is approximately $3.99 per Medicaid day that will be passed on to facilities to provide for wage or bonus increases for direct care and ancillary workers. This funding should serve to mitigate some of the concerns related to providing wages and bonuses to facility workers during the next SFY.

 

COMMENT #8: The department received several comments about the waiting time it takes for a person to get approved by Medicaid.

 

RESPONSE #8: These comments do not relate directly to this rule amendment. The department will respond to these comments through separate correspondence.

 

COMMENT #9: The department received several comments about the acuity of the residents in nursing facilities. The acuity of the resident continues to increase. Due to the longer life span of people, residents require more time with safe lift practices, assistance to toilet and bath, dress, and eat. We currently serve mostly people 85 and older with two residents over the age of 100. This requires adequate staffing and the ability to provide the necessary education to ensure that we are caring for the residents appropriately. Due to the increased acuity of the resident, the registered nurse services we provide are critical to maintaining the health and quality of life of the residents. Nursing services continue to be an important part of our care and are also part of the rising costs of future care provision.

 

We manage a high acuity patient mix in our facility. This results in the need for high cost intravenous drugs and medical supplies to appropriately treat patients with complex medical conditions. Each day, we care for patients on Medicaid who need expensive medications and treatments for acute and chronic illnesses. Our goal is to help our patients regain enough functional strength to safely return to their families, homes, and communities. However, a lack of support and resources often forces many of them to remain in our facility for long term care further compounding the financial constraints of poor reimbursement.

 

We accept high acuity of care for those that have closed head injuries, severe strokes, wound care, tracheostomy (trach), and extensive IVs.  Residents are transferring from the hospitals sicker and sooner from intensive care units and surgeries than they ever have in the past. In order to meet the demands of our increasing acuity we have had to have physicians on site and purchase more specialty equipment such as bladder scanner, special IV products, and specialty beds.

 

We used to accept ventilator patients, not anymore; they go out of state or stay in the hospital for continued care. The reimbursement rate does not cover the expense for these individuals to stay in their home town.

RESPONSE #9: The current reimbursement methodology recognizes acuity of residents and makes adjustments for the variation of the Case Mix Indexes in the calculation of the nursing portion of the rate that is acuity adjusted.   Each nursing facility receives the same operating per diem rate, which is 80% of the statewide price. The remaining 20% of the statewide price represents the direct resident care component of the rate and is acuity adjusted. Each facility's direct resident care component rate is specific to that facility and is based on the acuity of Medicaid residents served in that facility. As acuity changes in each facility based on the level of complexity of the residents being served relative to the statewide acuity, facility rates adjust upward or downward to account for this change in acuity. The statewide average acuity utilized in the reimbursement system has gone from .9933 in 2012, to 1.0071 in 2013, to 1.0105 in 2014, and is currently at 1.0100. The current methodology adjusts 20% of the total rate for acuity which was a desired characteristic when the price-based reimbursement system was first adopted in order to mitigate wide fluctuations in rates when acuity changes occurred in facilities.

COMMENT #10: One person commented that when their father-in-law, a private pay patient, spent his final days in a Billings nursing home they discovered the extra charge for nursing home bed tax imposed on him and other private pay patients, who had no idea there was such a tax. This bed tax is just another one of the continued tax shifts to the elderly, homeowners, and college students. This law is insidious.

 

RESPONSE #10: The nursing facility utilization fee for bed days in nursing facilities is a tax on nursing facilities whereby they must pay a utilization fee for each bed day in the facility regardless of payor. The Montana Code Annotated at 15-6-102(3) is very clear that a nursing facility may not place a fee created in this section on the patient's bill.

 

            4. The department intends to apply these proposed rule amendments retroactively to July 1, 2014. A retroactive application of the proposed rule amendments does not result in a negative impact to any affected party.

 

 

 

/s/ Valerie A. Bashor                                    /s/ Richard H. Opper                                   

Valerie A. Bashor                                         Richard H. Opper, Director

Rule Reviewer                                              Public Health and Human Services

 

           

Certified to the Secretary of State June 30, 2014.