AN ACT Relating to nursing home wages; amending RCW 74.46.020 and 74.46.520; and adding new sections to chapter 74.46 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that licensed nursing homes throughout the state of Washington are experiencing serious difficulties in attracting and retaining the qualified staff necessary to maintain the high quality health care which the state expects from its licensed nursing homes. Accordingly, the secretary of the department of social and health services shall, notwithstanding the provisions of chapter 74.46 RCW, prospectively adjust the medicaid reimbursement rates for personnel wages and benefits, exclusive of the facility administrator, assistant administrator, and administrators-in-training, pursuant to a wage enhancement plan submitted by a contractor as established by sections 1 through 4 of this act, for those contractors who are unable to recruit and retain the caliber, quality, and quantity of staff necessary to meet existing and emergent patient care needs. The wage enhancement plan shall bring the nursing homes' wages and benefits more closely into line with those being paid by hospitals in the same labor recruitment intake market as the nursing home contractor submitting such a plan.

NEW SECTION. Sec. 2. Any nursing home contractor that contracts to provide care to medicaid recipients may prepare and submit to the secretary a wage enhancement plan for the orderly adjustment of total compensation including, but not limited to, employee benefits that will bring that contractor's total compensation package up to a level that equals, but does not exceed, the following percentages of currently prevailing wages or benefits paid by hospitals drawing upon the same labor recruitment market.

(1) Commencing with the effective date of this act and continuing through the end of calendar year 1985, such nursing home contractors may submit wage enhancement plans for bringing their compensation up from the present level to an amount not to exceed eighty-five percent of parity;

(2) During the calendar year 1986, such nursing home contractors may submit wage enhancement plans to bring their total compensation package up to a level not to exceed ninety percent of currently prevailing parity with hospitals;

(3) During the calendar year 1987, such nursing home contractors may submit a plan to bring their total compensation package up to a level not to exceed ninety-three percent of currently prevailing parity with hospitals;

(4) During the calendar year 1988, such nursing home contractors may submit wage enhancement plans to bring their total compensation package up to a level not to exceed ninety-six percent of currently prevailing parity with hospitals;

(5) During the calendar year 1989, such nursing home contractors may submit wage enhancement plans to bring their total compensation package up to a level not to exceed one hundred percent of currently prevailing parity with hospitals.

NEW SECTION. Sec. 3. If a contractor challenges the determination of a wage enhancement plan, the contractor shall follow the procedures and remedies in RCW 74.46.780.

NEW SECTION. Sec. 4. Any nursing home contractor that has a wage enhancement plan accepted and thus qualifies for a prospective adjustment in its medicaid reimbursement rate under section 1 of this act is entitled to receive those funds pursuant to a written addendum to its medicaid reimbursement contract which shall specifically require that funds made available for the purpose of implementation of the contractor's plan must be spent on wages and benefits. Funds obtained pursuant to a wage enhancement plan approved under section 1 of this act shall be used solely for wages and benefits for employees and shall not be available for shifting funds pursuant to authority otherwise granted in RCW 74.46.180(3).

Sec. 5. Section 2, chapter 177, Laws of 1980 as amended by section 1, chapter 117, Laws of 1982 and RCW 74.46.020 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Accrual method of accounting" means a method of accounting in which revenues are reported in the period when they are earned, regardless of when they are collected, and expenses are reported in the period in which they are incurred, regardless of when they are paid.

(2) "Ancillary care" means those services required by the individual, comprehensive plan of care provided by qualified therapists.

(3) "Appraisal" means the process of estimating the fair market value or reconstructing the historical cost of an asset acquired in a past period as performed by a professionally designated real estate appraiser with no pecuniary interest in the property to be appraised. It includes a systematic, analytic determination and the recording and analyzing of property facts, rights, investments, and values based on a personal inspection and inventory of the property.

(4) "Arm's-length transaction" means a transaction resulting from good-faith bargaining between a buyer and seller who are not related organizations and have adverse positions in the market place. Sales or exchanges of nursing home facilities among two or more parties in which all parties subsequently continue to own one or more of the facilities involved in the transactions shall not be considered as arm's-length transactions for purposes of this chapter. Sale of a nursing home facility which is subsequently leased back to the seller within five years of the date of sale shall not be considered as an arm's-length transaction for purposes of this chapter.

(5) "Assets" means economic resources of the contractor, recognized and measured in conformity with generally accepted accounting principles.

(6) "Bad debts" means amounts considered to be uncollectable from accounts and notes receivable.

(7) "Beds" means the number of set-up beds in the facility, not to exceed the number of licensed beds.

(8) "Beneficial owner" means:

(a) Any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares:

(i) Voting power which includes the power to vote, or to direct the voting of such ownership interest; and/or

(ii) Investment power which includes the power to dispose, or to direct the disposition of such ownership interest;

(b) Any person who, directly or indirectly, creates or uses a trust, proxy, power of attorney, pooling arrangement, or any other contract, arrangement, or device with the purpose or effect of divesting himself of beneficial ownership of an ownership interest or preventing the vesting of such beneficial ownership as part of a plan or scheme to evade the reporting requirements of this chapter;

(c) Any person who, subject to subparagraph (b) of this subsection, has the right to acquire beneficial ownership of such ownership interest within sixty days, including but not limited to any right to acquire:

(i) Through the exercise of any option, warrant, or right;

(ii) Through the conversion of an ownership interest;

(iii) Pursuant to the power to revoke a trust, discretionary account, or similar arrangement; or

(iv) Pursuant to the automatic termination of a trust, discretionary account, or similar arrangement;

except that, any person who acquires an ownership interest or power specified in subparagraphs (i), (ii), or (iii) of this subparagraph (c) with the purpose or effect of changing or influencing the control of the contractor, or in connection with or as a participant in any transaction having such purpose or effect, immediately upon such acquisition shall be deemed to be the beneficial owner of the ownership interest which may be acquired through the exercise or conversion of such ownership interest or power;

(d) Any person who in the ordinary course of business is a pledgee of ownership interest under a written pledge agreement shall not be deemed to be the beneficial owner of such pledged ownership interest until the pledgee has taken all formal steps necessary which are required to declare a default and determines that the power to vote or to direct the vote or to dispose or to direct the disposition of such pledged ownership interest will be exercised; except that:

(i) The pledgee agreement is bona fide and was not entered into with the purpose nor with the effect of changing or influencing the control of the contractor, nor in connection with any transaction having such purpose or effect, including persons meeting the conditions set forth in subparagraph (b) of this subsection; and

(ii) The pledgee agreement, prior to default, does not grant to the pledgee:

(A) The power to vote or to direct the vote of the pledged ownership interest; or

(B) The power to dispose or direct the disposition of the pledged ownership interest, other than the grant of such power(s) pursuant to a pledge agreement under which credit is extended and in which the pledgee is a broker or dealer.

(9) "Capitalization" means the recording of an expenditure as an asset.

(10) "Contractor" means an entity which contracts with the department to provide services to medical care recipients in a facility and which entity is responsible for operational decisions.

(11) "Department" means the department of social and health services (DSHS) and its employees.

(12) "Depreciation" means the systematic distribution of the cost or other basis of tangible assets, less salvage, over the estimated useful life of the assets.

(13) "Direct care supplies" means medical, pharmaceutical, and other supplies required for the direct nursing and ancillary care of medical care recipients.

(14) "Entity" means an individual, partnership, corporation, or any other association of individuals capable of entering enforceable contracts.

(15) "Employees" means all nursing home employees, except nursing home administrators as defined in RCW 18.52.020.

(16) "Equity" means the net book value of all tangible and intangible assets less the recorded value of all liabilities, as recognized and measured in conformity with generally accepted accounting principles.

((~~(16)~~)) (17) "Facility" means a nursing home licensed in accordance with chapter 18.51 RCW, or that portion of a hospital licensed in accordance with chapter 70.41 RCW which operates as a nursing home.

((~~(17)~~)) (18) "Fair market value" means the replacement cost of an asset less observed physical depreciation on the date for which the market value is being determined.

((~~(18)~~)) (19) "Financial statements" means statements prepared and presented in conformity with generally accepted accounting principles including, but not limited to, balance sheet, statement of operations, statement of changes in financial position, and related notes.

((~~(19)~~)) (20) "Fringe benefits" means compensation for:

(a) Leave time, including vacation, holiday, civil, and personal leave;

(b) Employer retirement contributions;

(d) Other benefits included in RCW 41.06.163, or authorized by administrative action of the board.

(21) "Generally accepted accounting principles" means accounting principles approved by the financial accounting standards board (FASB).

((~~(20)~~)) (22) "Generally accepted auditing standards" means auditing standards approved by the American institute of certified public accountants (AICPA).

((~~(21)~~)) (23) "Goodwill" means the excess of the price paid for a business over the fair market value of all other identifiable, tangible, and intangible assets acquired.

((~~(22)~~)) (24) "Historical cost" means the actual cost incurred in acquiring and preparing an asset for use, including feasibility studies, architect's fees, and engineering studies.

((~~(23)~~)) (25) "Hospital" means public, private, and state hospitals.

(26) "Imprest fund" means a fund which is regularly replenished in exactly the amount expended from it.

((~~(24)~~)) (27) "Joint facility costs" means any costs which represent resources which benefit more than one facility, or one facility and any other entity.

((~~(25)~~)) (28) "Medical aid recipients" means those persons without income or resources sufficient to secure necessary nursing home care and treatment for whom the department purchases nursing home care and treatment by contract pursuant to RCW 74.09.120.

(29) "Medical care program" means medical assistance provided under RCW 74.09.500 or authorized state medical care services.

((~~(26)~~)) (30) "Medical care recipient" or "recipient" means an individual determined eligible by the department for the services provided in chapter 74.09 RCW.

((~~(27)~~)) (31) "Net book value" means the historical cost of an asset less accumulated depreciation.

((~~(28)~~)) (32) "Net invested funds" means the net book value of tangible fixed assets employed by a contractor to provide services under the medical care program, including land, buildings, and equipment as recognized and measured in conformity with generally accepted accounting principles, plus an allowance for working capital which shall be five percent of the allowable costs of each contractor for the previous calendar year.

((~~(29)~~)) (33) "Nursing home" means any home, place, or institution that operates or maintains facilities providing convalescent or chronic care, or both, for a period in excess of twenty-four consecutive hours for three or more patients not related by blood or marriage to the operator who, by reason of illness or infirmity, are unable to care properly for themselves. Convalescent and chronic care may include, but is not limited to, any or all procedures commonly employed in waiting on the sick, such as administration of medicines, preparation of special diets, providing bedside nursing care, application of dressings and bandages, and carrying out the treatment prescribed by a licensed practitioner of the healing arts. Convalescent or chronic care may also include care of mentally incompetent persons. This definition does not include general hospitals or other places that provide care and treatment for the acutely ill or maintain and operate facilities for major surgery or obstetrics. This definition does not include any boarding home, guest home, hotel, or related institution that is held forth to the public as providing, and that is operated to give only board, room, and laundry to persons not in need of medical or nursing treatment or supervision except in the case of temporary acute illness.

(34) "Operating lease" means a lease under which rental or lease expenses are included in current expenses in accordance with generally accepted accounting principles.

((~~(30)~~)) (35) "Owner" means a sole proprietor, general or limited partners, and beneficial interest holders of five percent or more of a corporation's outstanding stock.

((~~(31)~~)) (36) "Ownership interest" means all interests beneficially owned by a person, calculated in the aggregate, regardless of the form which such beneficial ownership takes.

((~~(32)~~)) (37) "Parity" means equality.

(38) "Patient day" or "client day" means a calendar day of care which will include the day of admission and exclude the day of discharge; except that, when admission and discharge occur on the same day, one day of care shall be deemed to exist.

((~~(33)~~)) (39) "Professionally designated real estate appraiser" means an individual who is regularly engaged in the business of providing real estate valuation services for a fee, and who is deemed qualified by a nationally recognized real estate appraisal educational organization on the basis of extensive practical appraisal experience, including the writing of real estate valuation reports as well as the passing of written examinations on valuation practice and theory, and who by virtue of membership in such organization is required to subscribe and adhere to certain standards of professional practice as such organization prescribes.

((~~(34)~~)) (40) "Qualified therapist" means:

(a) An activities specialist who has specialized education, training, or experience as specified by the department;

(b) An audiologist who is eligible for a certificate of clinical competence in audiology or who has the equivalent education and clinical experience;

(d) A mental retardation professional who is either a qualified therapist or a therapist approved by the department who has had specialized training or one year's experience in treating or working with the mentally retarded or developmentally disabled;

(e) A social worker who is a graduate of a school of social work;

(f) A speech pathologist who is eligible for a certificate of clinical competence in speech pathology or who has the equivalent education and clinical experience;

(g) A physical therapist as defined by chapter 18.74 RCW; and

(h) An occupational therapist who is a graduate of a program in occupational therapy, or who has the equivalent of such education or training.

((~~(35)~~)) (41) "Questioned costs" means those costs which have been determined in accordance with generally accepted accounting principles but which may constitute disallowed costs or departures from the provisions of this chapter or rules and regulations adopted by the department.

((~~(36)~~)) (42) "Records" means those data supporting all financial statements and cost reports including, but not limited to, all general and subsidiary ledgers, books of original entry, and transaction documentation, however such data are maintained.

((~~(37)~~)) (43) "Related organization" means an entity which is under common ownership and/or control with, or has control of, or is controlled by, the contractor.

(a) "Common ownership" exists when an entity is the beneficial owner of five percent or more ownership interest in the contractor and any other entity.

(b) "Control" exists where an entity has the power, directly or indirectly, significantly to influence or direct the actions or policies of an organization or institution, whether or not it is legally enforceable and however it is exercisable or exercised.

((~~(38)~~)) (44) "Restricted fund" means those funds the principal and/or income of which is limited by agreement with or direction of the donor to a specific purpose.

((~~(39)~~)) (45) "Secretary" means the secretary of the department of social and health services.

((~~(40)~~)) (46) "Title XIX" or "Medicaid" means the 1965 amendments to the social security act, P.L. 89-07, as amended.

(47) "Total compensation" means wages, fringe benefits, and payroll taxes.

(48) "Wages" means basic compensation whether by annual, monthly, or weekly salary, hourly rate of pay, or other unit of computation.

Sec. 6. Section 52, chapter 177, Laws of 1980 and RCW 74.46.520 are each amended to read as follows:

The rates determined in RCW ((~~74.46.480~~)) 74.46.481 through 74.46.510 shall be adjusted by the department utilizing appropriate indices or other measures of economic trends and conditions projected for the ensuing year: PROVIDED, That these indices and other measures shall include the amount of employee benefits provided or agreed to and payroll taxes as assessed pursuant to wage enhancement plans approved in accordance with section 2 of this 1985 act.

NEW SECTION. Sec. 7. Sections 1 through 4 of this act are each added to chapter 74.46 RCW.

NEW SECTION. Sec. 8. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.