Subject: State plan amendment for medicaid nursing facility payment system.

     Effective Date: July 1, 2013.

     Document Description: The purpose of this notice is to advise nursing facilities and the general public that the state of Washington is considering adjustments to the methodology by which nursing facilities are paid for services they provide to medicaid recipients, as of July 1, 2013. This notice is furnished in accordance with federal Medicaid law, at 42 U.S.C. Sec. 1396a (a)(13)(A) and 42 C.F.R. Sec. 447.205, and state regulations, at WAC 388-96-718.

     This notice is furnished in accordance with federal Medicaid law, at 42 U.S.C. Sec. 1396a(a)(13)(A) and 42 C.F.R. Sec. 447.205, and state regulations, at WAC 388-96-718. Under these provisions, the Department of Social and Health Services (DSHS) must publish proposed new methodologies for determining the payment rates, and the justification for those new methodologies, when the changes would amount to "material" changes that require DSHS to amend its Medicaid State Plan under Title XIX of the federal Social Security Act.

     The current rate methodology was calculated to produce a weighted average daily rate of $170.37 in SFY 2012, and $171.43 in SFY 2013. (The state fiscal year runs from July 1 of one year to June 30 of the following calendar year, with the later year used for designation. For example, SFY 2013 runs from July 1, 2012 through June 30, 2013.) The weighted average daily rate designated in the operating budget is commonly known as the "budget dial" amount. DSHS is directed by state law to ensure that the weighted average daily rate actually paid does not exceed that amount; see RCW 74.46.421. In the following paragraphs, estimates are given for the weighted average daily rates which would be produced by the various proposals. Following each estimate is the difference between that figure and the "budget dial" amount of $171.43 for SFY 2013; to set it apart, this figure is bolded and set in brackets - for example, [+$2.50]. All cited weighted average daily rate amounts exclude the rate add-on used to reimburse facilities for the Safety Net Assessment paid in relation to Medicaid-funded residents.

     In the current session of the Washington State Legislature, several measures are being considered in relation to the Medicaid nursing facility rate methodology:

     1) First, the State Senate has passed an operating budget for the coming biennium, SB 5034. Sec. 206 of this bill provides for weighted average daily rates not to exceed $171.32 for SFY 2014 [-$.11] and $171.53 for SFY 2015 [+$.10]. PSSB 5874, a separate bill that would implement the intent of Sec. 206, has also been presented to the Senate Ways and Means Committee. PSSB 5874 would do the following:

     a. Postpone the rebase to the 2011 Medicaid cost report year, which is currently scheduled to affect rates beginning July 1, 2013. Instead of a July 1, 2013 rebase of the non-capital rate components to the 2011 cost report, there would be a July 1, 2015 rebase of the non-capital components to the 2013 cost report. The 2007 Medicaid cost report would continue to be used for rates between July 1, 2013 and June 30, 2015. This would amend RCW 74.46.431.

     b. Freeze the Medicaid case mix index for all facilities at the level in effect on January 1, 2013. There would be no adjustments to case mix scores for the period July 1, 2013 through June 30, 2015. This would amend RCW 74.46.501.

     c. Continue the "comparative analysis" and "acuity" rate add-ons that have applied to rates during the current biennium. The "comparative analysis" would give a facility the higher of its rate on July 1, 2013 or its rate on June 30, 2010. The "acuity add-on" would reward facilities for taking on higher-acuity residents by giving them a 10% add-on to their direct care component rate. A new section would be added to Ch. 74.46 RCW.

     PSSB 5874 has an emergency clause with an effective date of July 1, 2013.

     2) Second, HB 2042 has been introduced in the House. In regard to Medicaid nursing facility rates, this bill is similar to PSSB 5874, except that it would not freeze Medicaid case mix scores at their level in effect on January 1, 2013. Instead, case mix scores in effect on January 1, 2013 would be used, but the automatic increase of .5% (one-half of one percent) every six months would be continued. The version of the operating budget announced by the House Democratic majority, reflecting the substance of HB 2042 in relation to Medicaid nursing home rates, provides for a weighted average daily rate not to exceed $171.35 in SFY 2014 [-$.08] and $171.58 in SFY 2015 [+$.15].

     HB 2042 also has an emergency clause with an effective date of July 1, 2013.

     3) Third, there is HB 1885 and its companion measure SB 5838. These bills, identical at the time this notice is written, would do the following:

     a. Repeal almost all the changes made to the nursing home rate methodology in 2011 in c. 7, Laws of 2011, 1st ex sess. Provisions include:

     1. For the operations, property, and finance allowance rate components, the minimum occupancy thresholds would return to lower levels.

     2. For the finance allowance component, for all facilities, the factor used to multiply net invested funds would increase to 8.5% from 4.0%.

     3. The authority for DSHS to adjust the case mix index for any of the 10 lowest Resource Utilization Group categories would be repealed.

     4. In the direct care component, the lid on the cost per case mix unit would increase to 112% of the peer group median, from 110%.

     5. In the support services component, the lid would rise to 110% of the peer group median, from 108%.

     b. Add a new component to the methodology, the "Medicaid disproportionate share component rate allocation" (MDS). The MDS would reward nursing facilities that had a high percentage of Medicaid-funded residents. Each facility would be given an MDS factor based on its percentage of Medicaid recipients served at the facility as reported in the preceding year's cost report, as follows:

•	75.1% to 100% - a factor of 2.5%
•	50.1% to 75% - a factor of 1.5%
•	25.01% to 50.0% - a factor of 0.5%
•	25% or less - a factor of 0%.

     The MDS factor would be multiplied by a facility's total Medicaid per patient day rate, less the Safety Net Assessment provided for in Ch. 74.48 RCW. The MDS payment would not be subject to settlement; it would be subject to the "budget dial."

     DSHS estimates that if the provisions of this bill were implemented, the respective weighted average daily rates would be $191.69 for SFY 2014 [+$20.26] and $194.23 for SFY 2015 [+$22.80]. The bills contain an emergency clause that would make them effective July 1, 2013. Note that this proposal is silent on the rebase to the 2011 Medicaid cost report which is currently scheduled, so that rebase would occur on July 1, 2013.

     4) Fourth, DSHS is aware of one other alternative that has been proposed. It has not been put into a formal bill, or included in any proposed operating budget. This proposal would postpone the rebase to the 2011 Medicaid cost report except as to the direct care component; direct care would be rebased to the 2011 cost report. For the finance allowance component, it would increase the factor used to multiply net invested funds to 8.0% from 4.0% for all facilities. Also, it would terminate the low-wage worker add-on of $1.57 per patient day. DSHS estimates that if the provisions of this alternative were implemented, the weighted average daily rate for SFY 2014 would be $178.32 [+$6.89] and for SFY 2015 would be $180.80 [+$9.37].

     DSHS emphasizes that none of the alternatives described have been adopted yet by the full Legislature, and all are obviously subject to change. It is possible that some other alternative might emerge and be adopted. However, as of the day this notice was filed, these are the alternatives of which DSHS is aware. To find and read the full text of bills before the Legislature go to http://apps.leg.wa.gov/billinfo/. To assist the Legislature in its deliberations, DSHS has supplied a variety of information to it. This information may be found at the website of the Office of Rates Management: http://www.altsa.dshs.wa.gov/professional/rates/. It is listed under "Notices" at "Notice of Possible Changes Effective July 1, 2013; Legislative Information." Attention is particularly directed to the cost study titled "Analysis of the Washington Nursing Facility Medicaid Payment Methodology" prepared by Navigant Consulting, Inc.

     Persons or organizations that have comments on these changes may contact Edward Southon, Manager, Nursing Home Rates, Aging and Disability Services, P.O. Box 45600, Olympia, WA 98504-5600, or edward.southon@dshs.wa.gov. Comments must be submitted by May 31, 2013. Of course, comments may also be directed to members of the Legislature at any time. See the Legislature's website, http://www.leg.wa.gov.

     To receive a copy of the interpretive or policy statements, contact Ed Southon, Nursing Home Rates, Office of Rates Management, 4450 10th Avenue S.E., Lacey, WA 98503, phone (360) 725-2469, TDD/TTY 1-877-905-0454, fax (360) 725-2641, e-mail Edward.Southon@dshs.wa.gov, web site http://www.aasa.dshs.wa.gov/professional/rates/.

     Reviser's note: The brackets and enclosed material in the text of the above section occurred in the copy filed by the agency and appear in the Register pursuant to the requirements of RCW 34.08.040.