AN ACT Relating to nursing home auditing and
reimbursement; amending RCW 74.46.020, 74.46.230, 74.46.280, 74.46.380,
74.46.410, 74.46.420, 74.46.430, 74.46.450, 74.46.460, 74.46.470, 74.46.481,
74.46.490, 74.46.500, 74.46.510, and 74.46.530; reenacting and amending RCW
74.46.180; adding a new section to chapter 74.46 RCW; creating new sections;
repealing RCW 74.46.260 and 74.46.495; providing an effective date; and
declaring an emergency.
BE
IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1.
RCW 74.46.020 and 1991 sp.s. c 8 s 11 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) "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) "Facility" means a nursing home
licensed in accordance with chapter 18.51 RCW, excepting nursing homes
certified as institutions for mental diseases, or that portion of a hospital
licensed in accordance with chapter 70.41 RCW which operates as a nursing home.
(17) "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) "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) (("Gain on sale" means the
difference between the total net book value of nursing home assets, including
but not limited to land, building and equipment, and the total sales price of
all such assets.
(20)))
"Generally accepted accounting principles" means accounting
principles approved by the financial accounting standards board (FASB).
(((21))) (20) "Generally
accepted auditing standards" means auditing standards approved by the
American institute of certified public accountants (AICPA).
(((22))) (21)
"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.
(((23))) (22) "Historical
cost" means the actual cost incurred in acquiring and preparing an asset
for use, including feasibility studies, architect's fees, and engineering
studies.
(((24))) (23) "Imprest
fund" means a fund which is regularly replenished in exactly the amount
expended from it.
(((25))) (24) "Joint
facility costs" means any costs which represent resources which benefit
more than one facility, or one facility and any other entity.
(((26))) (25) "Lease
agreement" means a contract between two parties for the possession and use
of real or personal property or assets for a specified period of time in
exchange for specified periodic payments. Elimination (due to any cause other
than death or divorce) or addition of any party to the contract, expiration, or
modification of any lease term in effect on January 1, 1980, or termination of
the lease by either party by any means shall constitute a termination of the
lease agreement. An extension or renewal of a lease agreement, whether or not
pursuant to a renewal provision in the lease agreement, shall be considered a
new lease agreement. A strictly formal change in the lease agreement which
modifies the method, frequency, or manner in which the lease payments are made,
but does not increase the total lease payment obligation of the lessee, shall
not be considered modification of a lease term.
(((27))) (26) "Medical care
program" means medical assistance provided under RCW 74.09.500 or
authorized state medical care services.
(((28))) (27) "Medical care
recipient" or "recipient" means an individual determined
eligible by the department for the services provided in chapter 74.09 RCW.
(((29))) (28) "Net book
value" means the historical cost of an asset less accumulated
depreciation.
(((30))) (29) "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)) product of the
per patient day rate multiplied by the prior calendar year reported total
patient days of each contractor ((for the previous calendar year)).
(((31))) (30) "Operating
lease" means a lease under which rental or lease expenses are included in
current expenses in accordance with generally accepted accounting principles.
(((32))) (31) "Owner"
means a sole proprietor, general or limited partners, and beneficial interest
holders of five percent or more of a corporation's outstanding stock.
(((33))) (32) "Ownership
interest" means all interests beneficially owned by a person, calculated
in the aggregate, regardless of the form which such beneficial ownership takes.
(((34))) (33) "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.
(((35))) (34)
"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.
(((36))) (35) "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;
(c) A mental health professional as defined by
chapter 71.05 RCW;
(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; and
(i) A respiratory care practitioner
certified under chapter 18.89 RCW.
(((37))) (36) "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.
(((38))) (37) "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.
(((39))) (38) "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.
(((40))) (39) "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.
(((41))) (40)
"Secretary" means the secretary of the department of social and
health services.
(((42))) (41) "Title
XIX" or "Medicaid" means the 1965 amendments to the social
security act, P.L. 89‑07, as amended.
(((43))) (42) "Physical
plant capital improvement" means a capitalized improvement that is limited
to an improvement to the building or the related physical plant.
Sec. 2.
RCW 74.46.180 and 1987 c 476 s 1 and 1987 c 283 s 9 are each reenacted and
amended to read as follows:
(1) The state shall make payment of any
underpayments within thirty days after the date the preliminary or final
settlement report is submitted to the contractor.
(2) A contractor found to have received either
overpayments or erroneous payments under a preliminary or final settlement
shall refund such payments to the state within thirty days after the date the
preliminary or final settlement report is submitted to the contractor, subject
to the provisions of subsections (3), (4), and (7) of this section.
(3) Within the cost centers of nursing services
and food, all savings resulting from the respective allowable costs being lower
than the respective reimbursement rate paid to the contractor during the report
period shall be refunded to the department. However, in
computing a preliminary or final settlement, savings in a cost center may be
shifted to cover a deficit in another cost center up to the amount of any
savings((: PROVIDED, That)). Not more than twenty percent of
the rate in a cost center may be shifted into that cost center and no shifting
may be made into the property cost center((: PROVIDED FURTHER, That)).
There shall be no shifting out of nursing services, and savings in food
shall be shifted only to cover deficits in the nursing services cost center. There
shall be no shifting from the operational to the administrative cost center.
(4) Within the administrative and property
cost centers ((of administration and operations and property)), the
contractor shall retain at least fifty percent, but not more than seventy-five
percent, of any savings resulting from the respective audited allowable costs
being lower than the respective reimbursement rates paid to the contractor
during the report period multiplied by the number of authorized medical care
client days in which said rates were in effect, except that no savings may be
retained if reported costs in the administrative and property cost centers
((and the administration and operations cost center)) exceed audited
allowable costs in these cost areas by a total of ten cents or
more per patient day. The secretary, by rule ((and regulation)), shall
establish the basis for the specific percentages of savings to the
contractors. Such rules ((and regulations)) may provide for differences
in the percentages allowed for each cost center to individual facilities based
on performance measures related to administrative efficiency.
(5) All ((allowances)) return on
investment rate payments provided by RCW 74.46.530 shall be retained by the
contractor to the extent net invested funds are substantiated by department
field audit. Any industrial insurance dividend or premium discount under
RCW 51.16.035 shall be retained by the contractor to the extent that such
dividend or premium discount is attributable to the contractor's private
patients.
(6) In the event the contractor fails to make
repayment in the time provided in subsection (2) of this section, the
department shall either:
(a) Deduct the amount of refund due, plus any
interest accrued under RCW 43.20B.695, from payment amounts due the contractor;
or
(b) In the instance the contract has been terminated,
(i) deduct the amount of refund due, plus interest assessed at the rate and in
the manner provided in RCW 43.20B.695, from any payments due; or (ii) recover
the amount due, plus any interest assessed under RCW 43.20B.695, from security
posted with the department or by any other lawful means.
(7) Where the facility is pursuing timely-filed
judicial or administrative remedies in good faith regarding settlement issues,
the contractor need not refund nor shall the department withhold from the
facility current payment amounts the department claims to be due from the
facility but which are specifically disputed by the contractor. If the
judicial or administrative remedy sought by the facility is not granted after
all appeals are exhausted or mutually terminated, the facility shall make
payment of such amounts due plus interest accrued from the date of filing of
the appeal, as payable on judgments, within sixty days of the date such
decision is made.
Sec. 3.
RCW 74.46.230 and 1980 c 177 s 23 are each amended to read as follows:
(1) The necessary and ordinary one-time
expenses directly incident to the preparation of a newly constructed or
purchased building by a contractor for operation as a licensed facility shall
be allowable costs. These expenses shall be limited to start-up and
organizational costs incurred prior to the admission of the first patient.
(2) Start-up costs shall include, but not be
limited to, administrative and nursing salaries, utility costs, taxes, insurance,
repairs and maintenance, and training; except, that they shall exclude
expenditures for capital assets. These costs will be allowable in the ((administration
and operations)) administrative cost center if they are amortized
over a period of not less than sixty months beginning with the month in which
the first patient is admitted for care.
(3) Organizational costs are those necessary,
ordinary, and directly incident to the creation of a corporation or other form
of business of the contractor including, but not limited to, legal fees
incurred in establishing the corporation or other organization and fees paid to
states for incorporation; except, that they do not include costs relating to
the issuance and sale of shares of capital stock or other securities. Such
organizational costs will be allowable in the ((administration and
operations)) administrative cost center if they are amortized over a
period of not less than sixty months beginning with the month in which the
first patient is admitted for care.
Sec. 4.
RCW 74.46.280 and 1980 c 177 s 28 are each amended to read as follows:
(1) Management fees will be allowed only if:
(a) A written management agreement both creates
a principal/agent relationship between the contractor and the manager, and sets
forth the items, services, and activities to be provided by the manager; and
(b) Documentation demonstrates that the
services contracted for were actually delivered.
(2) To be allowable, fees must be for
necessary, nonduplicative services. ((Allowable fees for general management
services, including the portion of a management fee which is not allocated to
specific services such as accounting, are limited to
(a) the maximum allowable compensation under
RCW 74.46.260 of the licensed administrator and, if the facility has at least
eighty beds, of an assistant administrator, less
(b) actual compensation received by the
licensed administrator and by the assistant administrator and
administrator-in-training, if any.
In computing maximum allowable compensation under RCW
74.46.260 for a facility with at least eighty beds, include the maximum
compensation of an assistant administrator even if an assistant administrator
is not employed.))
(3) A management fee paid to or for the benefit
of a related organization will be allowable to the extent it does not exceed
the lower of((:
(a) The limits set out in subsection (2) of
this section; or
(b) The lower of)) the actual cost to the related organization of
providing necessary services related to patient care under the agreement((,))
or the cost of comparable services purchased elsewhere. Where costs to the
related organization represent joint facility costs, the measurement of such
costs shall comply with RCW 74.46.270.
(4) A copy of the agreement must be received
by the department at least sixty days before it is to become effective. A copy
of any amendment to a management agreement must also be received by the
department at least thirty days in advance of the date it is to become
effective.
(((5) Central office costs for general
management services, including the portion of a management expense which is not
allocated to specific services, such as accounting, shall be subject to the
management fee limits determined in subsections (2) and (3) of this section.))
Sec. 5.
RCW 74.46.380 and 1991 sp.s. c 8 s 12 are each amended to read as follows:
(1) Where depreciable assets are disposed of
through sale, trade-in, scrapping, exchange, theft, wrecking, or fire or other
casualty, depreciation shall no longer be taken on the assets. No further
depreciation shall be taken on permanently abandoned assets.
(2) Where an asset has been retired from active
use but is being held for stand-by or emergency service, and the department has
determined that it is needed and can be effectively used in the future,
depreciation may be taken.
(((3) If there is a sale of a nursing
facility on or after July 1, 1991, that results in a gain on sale, the actual
reimbursement for depreciation paid to the selling contractor through the
medicaid reimbursement program shall be recovered by the department to the
extent of any gain on sale. The purchaser is obligated to reimburse the
department, whether or not the purchaser is a medicaid contractor. If the
department is unable to collect from the purchaser, then the seller is
responsible for reimbursing the department. The department may establish an
appropriate repayment schedule to recover depreciation. If the purchaser is a
medicaid contractor and the contractor does not comply with the repayment
schedule established by the department, the department may deduct the recovery
from the contractor's monthly medicaid payments. The department may adopt
rules, as appropriate, to insure that the principles of this section are
implemented with respect to leased assets, or with respect to sales of
intangibles or specific assets only.))
Sec. 6.
RCW 74.46.410 and 1991 sp.s. c 8 s 15 are each amended to read as follows:
(1) Costs will be unallowable if they are not
documented, necessary, ordinary, and related to the provision of care services
to authorized patients.
(2) Unallowable costs include, but are not
limited to, the following:
(a) Costs of items or services not covered by
the medical care program. Costs of such items or services will be unallowable
even if they are indirectly reimbursed by the department as the result of an
authorized reduction in patient contribution;
(b) Costs of services and items provided to
recipients which are covered by the department's medical care program but not
included in care services established by the department under this chapter;
(c) Costs associated with a capital expenditure
subject to section 1122 approval (part 100, Title 42 C.F.R.) if the department
found it was not consistent with applicable standards, criteria, or plans. If
the department was not given timely notice of a proposed capital expenditure,
all associated costs will be unallowable up to the date they are determined to
be reimbursable under applicable federal regulations;
(d) Costs associated with a construction or
acquisition project requiring certificate of need approval pursuant to chapter
70.38 RCW if such approval was not obtained;
(e) Interest costs other than those provided by
RCW 74.46.290 on and after the effective date of RCW 74.46.530;
(f) Salaries or other compensation of owners,
officers, directors, stockholders, and others associated with the contractor or
home office, except compensation paid for service related to patient care;
(g) Costs in excess of limits or in violation
of principles set forth in this chapter;
(h) Costs resulting from transactions or the
application of accounting methods which circumvent the principles of the
cost-related reimbursement system set forth in this chapter;
(i) Costs applicable to services, facilities,
and supplies furnished by a related organization in excess of the lower of the
cost to the related organization or the price of comparable services,
facilities, or supplies purchased elsewhere;
(j) Bad debts of non-Title XIX recipients. Bad
debts of Title XIX recipients are allowable if the debt is related to covered
services, it arises from the recipient's required contribution toward the cost
of care, the provider can establish that reasonable collection efforts were
made, the debt was actually uncollectible when claimed as worthless, and sound
business judgment established that there was no likelihood of recovery at any
time in the future;
(k) Charity and courtesy allowances;
(l) Cash, assessments, or other contributions,
excluding dues, to charitable organizations, professional organizations, trade
associations, or political parties, and costs incurred to improve community or
public relations;
(m) Vending machine expenses;
(n) Expenses for barber or beautician services
not included in routine care;
(o) Funeral and burial expenses;
(p) Costs of gift shop operations and
inventory;
(q) Personal items such as cosmetics, smoking
materials, newspapers and magazines, and clothing, except those used in patient
activity programs;
(r) Fund-raising expenses, except those
directly related to the patient activity program;
(s) Penalties and fines;
(t) Expenses related to telephones,
televisions, radios, and similar appliances in patients' private
accommodations;
(u) Federal, state, and other income taxes;
(v) Costs of special care services except where
authorized by the department;
(w) Expenses of key-man insurance and other
insurance or retirement plans not made available to all employees;
(x) Expenses of profit-sharing plans;
(y) Expenses related to the purchase and/or use
of private or commercial airplanes which are in excess of what a prudent
contractor would expend for the ordinary and economic provision of such a
transportation need related to patient care;
(z) Personal expenses and allowances of owners
or relatives;
(aa) All expenses of maintaining professional
licenses or membership in professional organizations;
(bb) Costs related to agreements not to
compete;
(cc) Amortization of goodwill;
(dd) Expenses related to vehicles which are in
excess of what a prudent contractor would expend for the ordinary and economic
provision of transportation needs related to patient care;
(ee) Legal and consultant fees in connection
with a fair hearing against the department where a decision is rendered in
favor of the department or where otherwise the determination of the department
stands;
(ff) Legal and consultant fees of a contractor
or contractors in connection with a lawsuit against the department;
(gg) Lease acquisition costs and other
intangibles not related to patient care;
(hh) All rental or lease costs other than those
provided in RCW 74.46.300 on and after the effective date of RCW 74.46.510 and
74.46.530;
(ii) Postsurvey charges incurred by the
facility as a result of subsequent inspections under RCW 18.51.050 which occur
beyond the first postsurvey visit during the certification survey calendar
year;
(jj) ((Costs and fees otherwise allowable
for legal services, whether purchased, allocated by a home office, regional
office or management company, or performed by the contractor or employees of
the contractor, in excess of the eighty-fifth percentile of such costs reported
by all contractors for the most recent cost report period: PROVIDED, That this
limit shall not apply if a contractor has not exceeded this percentile in any
of the preceding three annual cost report periods;
(kk) Costs and fees otherwise allowable for
accounting and bookkeeping services, whether purchased, allocated by a home
office, regional office or management company, or performed by the contractor
or employees of the contractor, in excess of the eighty-fifth percentile of
such costs reported by all contractors for the most recent cost report period:
PROVIDED, That this limit shall not apply if a contractor has not exceeded this
percentile in any of the preceding three annual cost report periods;
(ll)))
Compensation paid for any purchased nursing care services, including registered
nurse, licensed practical nurse, and nurse assistant services, obtained through
service contract arrangement in excess of the amount of compensation paid for
such hours of nursing care service had they been paid at the average hourly
wage, including related taxes and benefits, for in-house nursing care staff of
like classification at the same nursing facility, as reported in the most
recent cost report period;
(((mm))) (kk) For all partial or
whole rate periods after July 17, 1984, costs of land and depreciable assets
that cannot be reimbursed under the Deficit Reduction Act of 1984 and
implementing state statutory and regulatory provisions.
Sec. 7.
RCW 74.46.420 and 1985 c 361 s 18 are each amended to read as follows:
The following principles are inherent in RCW
74.46.430 through 74.46.590:
(1) Reimbursement rates will be set
prospectively on a per patient day basis on a two-year cycle corresponding
to each state biennium; and
(2) The rates ((so established will)),
in the nursing services, food, administrative, and operational cost centers,
shall be adjusted downward or upward when set effective July 1 of the
first fiscal year of the two-year rate-setting cycle and adjusted again
downward or upward effective July 1 of the second fiscal year of the
rate-setting cycle for economic ((conditions and)) trends ((in
accordance with appropriations made by the legislature as consistent with
federal requirements for the period to be covered by such rates)) and
conditions.
(3) The July 1 rates for the first year of
each biennium shall be adjusted by the change in the implicit price deflator
for personal consumption expenditures index published by the bureau of labor
statistics of the United States department of labor. The period used to
measure the increase or decrease to be applied to these first year biennial
rates shall be the calendar year preceding the July 1 commencement of the state
biennium.
(4) The July 1 rates for the second year of
each biennium shall be adjusted by the change in the nursing home input price
index without capital costs published by the health care financing
administration of the department of health and human services, HCFA index,
however, any increase shall be multiplied by one and one-half. The period used
to measure the HCFA index increase to be multiplied by one and one-half and
applied or decrease to be applied to these second-year biennial rates shall
also be the calendar year preceding the July 1 commencement of the state
biennium: PROVIDED, However, That in the event the change in the HCFA index
measured over the following calendar year, the one terminating six months after
the start of the state biennium, is twenty-five percent greater or less than
the change in the HCFA index measured over the calendar year preceding
commencement of the state biennium, the department shall use the HCFA index
increase multiplied by one and one-half or decrease in such following calendar year
to inflate or decrease nursing facilities' nursing services, food,
administrative, and operational rates for July 1 of the second biennial year.
(5) If either the implicit price deflator
index or the health care financing administration index ceases to be published
in the future, the department shall select by rule and use in their place one
or more measures of change from an alternate source or sources for the same or
comparable time periods.
Sec. 8.
RCW 74.46.430 and 1987 2nd ex.s. c 1 s 2 are each amended to read as follows:
(1) The department, as provided by this
chapter, will determine prospective cost-related reimbursement rates for
services provided to medical care recipients. Each rate so determined shall
represent the contractor's maximum compensation within each cost center for
each patient day for such medical care recipient.
(2) As required, the department may modify such
maximum per patient day rates pursuant to the administrative review provisions
of RCW 74.46.780.
(3) ((Until the effective date of RCW
74.46.510 and 74.46.530, the maximum prospective reimbursement rates for the
administration and operations and the property cost centers shall be
established based upon a minimum facility occupancy level of eighty-five
percent.
(4) On and after the effective date of RCW
74.46.510 and 74.46.530,)) The
maximum prospective reimbursement rates for the ((administration and
operations)) administrative, operational, and ((the))
property cost centers, and the return on investment ((allowance))
rate shall be established based upon a minimum facility occupancy level
of eighty-five percent.
(((5))) (4) All contractors shall
be required to adjust and maintain wages for all employees to a minimum hourly
wage ((established by the legislature in the biennial appropriations act, if
the legislature appropriates moneys to fund prospectively the portion of the
minimum wage attributable to services to medicaid patients. Prospective rate
revisions to fund any minimum wage increases shall be made only on the dates
authorized in the appropriation act. The department shall by regulation limit
reimbursement to the amount appropriated for legislatively authorized
enhancement for nonadministrative wages and benefits above the moneys necessary
to fund minimum wages specified in this section. The department in considering
reimbursement for legislatively authorized wage enhancements will take into
consideration facility wage history over the past three cost report periods))
of four dollars and seventy-six cents per hour beginning January 1, 1988,
and five dollars and fifteen cents per hour beginning January 1, 1989.
Sec. 9.
RCW 74.46.450 and 1983 1st ex.s. c 67 s 20 are each amended to read as follows:
(1) Prospective reimbursement rates for a new
contractor will be established within sixty days following receipt by the
department of the properly completed projected budget required by RCW
74.46.670. Such reimbursement rates will become effective as of the effective
date of the contract and shall remain in effect until ((rates can be
established under RCW 74.46.460 based on a contractor's cost report including
at least six months of cost data)) adjusted or reset as provided in this
chapter.
(2) Such reimbursement rates will be based on
the contractor's projected cost of operations and on costs and payment rates of
the prior contractor, if any, or of other contractors in comparable
circumstances.
(3) If a properly completed budget is not
received at least sixty days prior to the effective date of the contract, the
department will establish preliminary rates based on the other factors
specified in subsection (2) of this section. These preliminary rates will
remain in effect until ((a determination is made pursuant to RCW 74.46.460))
adjusted or reset as provided in this chapter.
(4) The department is authorized to develop
policies and procedures in rule to address the computation of rates for the
first and second fiscal years of each biennium, including steps necessary to
prorate rate adjustments for economic trends and conditions as authorized in
RCW 74.46.420, for contractors having less than twelve months of cost report
data for the prior calendar year.
Sec. 10.
RCW 74.46.460 and 1987 c 476 s 3 are each amended to read as follows:
(1) Each contractor's reimbursement rates will
be determined or adjusted prospectively at least once each calendar
year, as provided in this chapter, to be effective July 1st. Provided,
that a contractor's rate for the first fiscal year of each biennium must be
established upon its own prior calendar period report of at least six months of
cost data.
(2) Rates may be adjusted as determined by the
department to take into account variations in the distribution of patient
classifications or changes in patient characteristics from the prior reporting
year, program changes required by the department, or changes in staffing levels
at a facility required by the department. ((Rates shall be adjusted by the
amount of legislatively authorized enhancements in accordance with RCW
74.46.430(5) and 74.46.470(2).)) Rates may also be adjusted to cover costs
associated with placing a nursing home in receivership which costs are not
covered by the rate of the former contractor, including: Compensation of the
receiver, reasonable expenses of receivership and transition of control, and
costs incurred by the receiver in carrying out court instructions or rectifying
deficiencies found. Rates shall be adjusted for any capitalized additions or
replacements made as a condition for licensure or certification. Rates shall
be adjusted for capitalized improvements done under RCW 74.46.465.
(((3) Where the contractor participated in
the provisions of prospective cost-related reimbursement in effect prior to
July 1, 1983, such contractor's prospective rate effective July 1, 1983, will
be determined utilizing the contractor's desk-reviewed allowable costs for
calendar year 1982.
(4) All prospective reimbursement rates for
1984 and thereafter shall be determined utilizing the prior year's
desk-reviewed cost reports.))
Sec. 11.
RCW 74.46.470 and 1987 c 476 s 4 are each amended to read as follows:
(1) A contractor's reimbursement rates for
medical care recipients will be determined utilizing net invested funds and
desk-reviewed cost report data within the following cost centers:
(a) Nursing services;
(b) Food;
(c) ((Administration and operations)) Administrative;
((and))
(d) Operational; and
(e) Property.
(2) There shall be for the time period
January 1988 through June 1990 only an enhancement cost center established
to reimburse contractors for specific legislatively authorized enhancements for
nonadministrative wages and benefits to ensure that such enhancements are used
exclusively for the legislatively authorized purposes. For purposes of
settlement, funds appropriated to this cost center shall only be used for
expenditures for which the legislative authorization is granted. Such funds
may be used only in the following circumstances:
(a) The contractor has increased expenditures
for which legislative authorization is granted to at least the highest level
paid in any of the last three cost years, plus, beginning July 1, 1987, any
percentage inflation adjustment as was granted each year under RCW
74.46.495; and
(b) All funds shifted from the enhancement cost
center are shown to have been expended for legislatively authorized
enhancements.
(3) If the contractor does not spend the amount
appropriated to this cost center in the legislatively authorized manner, then
the amounts not appropriately spent shall be recouped at preliminary or final
settlement pursuant to RCW 74.46.160.
(4) For purposes of this section,
"nonadministrative wages and benefits" means wages and payroll taxes
paid with respect to, and the employer share of the cost of benefits provided
to, employees in job classes specified in an appropriation, which may not
include administrators, assistant administrators, or administrators in
training.
(5) Amounts expended in the enhancement cost
center in excess of the minimum wage established under RCW 74.46.430 are
subject to all provisions contained in this chapter.
Sec. 12.
RCW 74.46.481 and 1991 sp.s. c 8 s 16 are each amended to read as follows:
(1) The nursing services cost center shall
include for reporting and audit purposes all costs related to the direct
provision of nursing and related care, including fringe benefits and payroll
taxes for the nursing and related care personnel, and the cost of nursing
supplies. ((For rates effective for state fiscal year 1984,)) The
department shall adopt by administrative rule a definition of "related
care" ((which shall incorporate, but not exceed services reimbursable
as of June 30, 1983. For rates effective for state fiscal year 1985, the
definition of related care shall include ancillary care)). For rates
effective after June 30, 1991, nursing services costs, as reimbursed within
this chapter ((and as tested for reasonableness within this section)),
shall not include costs of any purchased nursing care services, including
registered nurse, licensed practical nurse, and nurse assistant services,
obtained through service contract arrangement in excess of the amount of
compensation paid for such hours of nursing care service had they been paid at
the average hourly wage, including related taxes and benefits, for in-house
nursing care staff of like classification at the same nursing facility, as
reported in the most recent cost report period.
(2) The department shall adopt ((by)) through
administrative rules a method for establishing a nursing services cost center
rate consistent with the principles stated in this section.
(3) Utilizing regression or other statistical
technique, the department shall determine a reasonable limit on facility
nursing staff taking into account facility patient characteristics. For
purposes of this section, facility nursing staff refers to registered nurses,
licensed practical nurses and nursing assistants employed by the facility or
obtained through temporary labor contract arrangements. Effective January 1,
1988, the hours associated with the training of nursing assistants and the
supervision of that training for nursing assistants shall not be included in
the calculation of facility nursing staff. In selecting a measure of patient
characteristics, the department shall take into account:
(a) The correlation between alternative
measures and facility nursing staff; and
(b) The cost of collecting information for and
computation of a measure.
If regression is used, the limit shall be set at
predicted nursing staff plus 1.75 regression standard errors. If another
statistical method is utilized, the limit shall be set at a level corresponding
to 1.75 standard errors above predicted staffing computed according to a
regression procedure. A regression calculated shall be effective for the
entire biennium.
(4) No facility shall receive reimbursement for
nursing staff levels in excess of the limit((, except that, if a facility
was reimbursed for a nursing staff level in excess of the limit as of June 30,
1983, the facility may chose [choose] to continue to receive its June, 1983
nursing services rate plus any adjustments in rates, such as adjustments for
economic trends, made available to all facilities)). However, nursing
staff levels established under subsection (3) of this section shall not apply
to the nursing services cost center reimbursement rate only for the
pilot facility especially designed to meet the needs of persons living with
AIDS as defined by RCW 70.24.017 and specifically authorized for this purpose
under the 1989 amendment to the Washington state health plan. ((The
reasonableness limit established pursuant to this subsection shall remain in
effect for the period July 1, 1983 through June 30, 1985. At that time the
department may revise the measure of patient characteristics or method used to
establish the limit.))
(5) ((The department shall select an index
of cost increase relevant to the nursing and related services cost area. In
the absence of a more representative index, the department shall use the
medical care component index as maintained by the United States bureau of labor
statistics.)) Every two years when rates are set at the beginning of
each new biennium, the department shall divide into two peer groups nursing
facilities located in the state of Washington providing services to medicaid
residents: (a) Those facilities located within a metropolitan statistical area
as defined and determined by the United States office of management and budget
or other applicable federal office and (b) those not located in such an area.
The facilities in each peer group shall then be arrayed from lowest to highest
by magnitude of per patient day adjusted nursing services cost from the prior
report year, regardless of whether any such adjustments are contested by the
nursing facility, and the median or fiftieth percentile cost for each peer
group shall be determined. Nursing services rates for facilities within each
peer group for the first year of the biennium shall be set at the lower of the
facility's adjusted per patient day nursing services cost from the prior report
period or the median cost for the facility's peer group plus twenty-five
percent. This rate shall be reduced or inflated as authorized by RCW
74.46.420. However, the per patient day peer group median cost plus
twenty-five percent limit shall not apply to the nursing services cost center
reimbursement rate only for the pilot facility especially designed to meet the
needs of persons living with AIDS as defined by RCW 70.24.017 and specifically
authorized for this purpose under the 1989 amendment to the Washington state
health plan.
(6) ((If a facility's nursing staff level is
below the limit specified in subsection (3) of this section, the department
shall determine the percentage increase for all items included in the nursing
services cost center between the facility's most recent cost reporting period
and the next prior cost reporting period.
(a) If the percentage cost increase for a
facility is below the increase in the selected index for the same time period,
the facility's reimbursement rate in the nursing services cost center shall
equal the facility's cost from the most recent cost reporting period plus any
allowance for inflation provided by legislative appropriation.
(b) If the percentage cost increase for a
facility exceeds the increase in the selected index, the department shall limit
the cost used for setting the facility's rate in the nursing services cost area
to a level reflecting the increase in the selected index.
(7) If the facility's nursing staff level
exceeds the reasonableness limit established in subsection (3) of this section,
the department shall determine the increase for all items included in the nursing
services cost center between the facility's most recent cost reporting period
and the next prior cost reporting period.
(a) If the percentage cost increase for a
facility is below the increase in the index selected pursuant to subsection (5)
of this section, the facility's reimbursement rate in the nursing cost center
shall equal the facility's cost from the most recent cost reporting period
adjusted downward to reflect the limit on nursing staff, plus any allowance for
inflation provided by legislative appropriation subject to the provisions of
subsection (4) of this section.
(b) If the percentage cost increase for a
facility exceeds the increase in the selected index, the department shall limit
the cost used for setting the facility's rate in the nursing services cost
center to a level reflecting the nursing staff limit and the cost increase
limit, subject to the provisions of subsection (4) of this section, plus any
allowance for inflation provided by legislative appropriation.
(8) Prospective rates for the nursing services
cost center, for state fiscal year 1992 only, shall not be subject to the cost
growth index lid in subsections (5), (6), and (7) of this section. The lid
shall apply for state fiscal year 1991 rate setting and all state fiscal years
subsequent to fiscal year 1992.
(9))) If
a nursing facility is impacted by the limit authorized in subsection (5) of
this section, it shall not receive a prospective rate in nursing services for
July 1, 1993, less than the same facility's prospective rate in nursing
services as of June 30, 1993, adjusted by any increase in the implicit price
deflator for personal consumption expenditures, IPD index, as measured over the
period authorized by RCW 74.46.420(3).
(7) A nursing facility's rate in nursing
services for the second year of each biennium shall be that facility's rate as
of July 1 of the first year of that biennium reduced or inflated as authorized
by RCW 74.46.420. The alternating procedures prescribed in this section for a
facility's two July 1 nursing services rates occurring within each biennium
shall be followed in the same order for each succeeding biennium.
(8) Median costs for peer groups shall be
calculated initially as provided in this chapter on the basis of the most
recent adjusted cost information available to the department prior to the
calculation of the new rate for July 1 of the first fiscal year of each
biennium, regardless of whether the adjustments are contested or subject to
pending administrative or judicial review. Median costs for peer groups shall
be recalculated as provided in this chapter on the basis of the most recent
adjusted cost information available to the department on October 31 of the
first fiscal year of each biennium, and shall apply retroactively to the prior
July 1 rate, regardless of whether the adjustments are contested or subject to
pending administrative or judicial review. Median costs shall not be adjusted
to reflect subsequent administrative or judicial rulings, whether final or not.
(9) The department is authorized to
determine on a systematic basis facilities with unmet patient care service
needs. The department may increase the nursing services cost center
prospective rate for a facility beyond the level determined in accordance with
subsection (6) of this section if the facility's actual and reported nursing
staffing is one standard error or more below predicted staffing as determined
according to the method selected pursuant to subsection (3) of this section and
the facility has unmet patient care service needs: PROVIDED, That prospective
rate increases authorized by this subsection shall be funded only from
legislative appropriations made for this purpose during the periods
authorized by such appropriations or other laws and the increases shall be
conditioned on specified improvements in patient care at such facilities.
(10) The department shall establish a method
for identifying patients with exceptional care requirements and a method for
establishing or negotiating on a consistent basis rates for such patients.
(11) The department, in consultation with
interested parties, shall adopt rules to establish the criteria the department
will use in reviewing any requests by a contractor for a prospective rate
adjustment to be used to increase the number of nursing staff. These rules
shall also specify the time period for submission and review of staffing
requests: PROVIDED, That a decision on a staffing request shall not take
longer than sixty days from the date the department receives such a complete
request. In establishing the criteria, the department may consider, but is not
limited to, the following:
(a) Increases in ((acuity)) debility
levels of contractors' residents determined in accordance with the
department's assessment and reporting procedures and requirements utilizing the
minimum data set;
(b) Staffing patterns for similar facilities in
the same peer group;
(c) Physical plant of contractor; and
(d) Survey, inspection of care, and department
consultation results.
Sec. 13.
RCW 74.46.490 and 1983 1st ex.s. c 67 s 25 are each amended to read as follows:
(1) The food cost center shall include for
reporting purposes all costs for bulk and raw food and beverages purchased
for the dietary needs of medical care recipients.
(2) ((Reimbursement for the food cost center
shall be at the January 1, 1983, reimbursement rate, adjusted annually for
inflation.)) Every two years when rates are set at the beginning of
each new biennium, the department shall divide into two peer groups nursing
facilities located in the state of Washington providing services to medicaid
residents: (a) Those facilities located within a metropolitan statistical area
as defined and determined by the United States office of management and budget
or other applicable federal office and (b) those not located in such an area.
The facilities in each peer group shall then be arrayed from lowest to highest
by magnitude of per patient day adjusted food cost from the prior report year,
regardless of whether any such adjustments are contested by the nursing
facility, and the median or fiftieth percentile cost for each peer group shall
be determined. Food rates for facilities within each peer group for the first
year of the biennium shall be set at the lower of the facility's adjusted per
patient day food cost from the prior report period or the median cost for the
facility's peer group plus twenty-five percent. This rate shall be reduced or
inflated as authorized by RCW 74.46.420.
(3) A nursing facility's food rate for the
second year of each biennium shall be that facility's rate as of July 1 of the
first year of that biennium reduced or inflated as authorized by RCW
74.46.420. The alternating procedures prescribed in this section for a
facility's two July 1 food rates occurring within each biennium shall be
followed in the same order for each succeeding biennium.
(4) Median costs for peer groups shall be
calculated initially as provided in this chapter on the basis of the most
recent adjusted cost information available to the department prior to the
calculation of the new rate for July 1 of the first fiscal year of each
biennium, regardless of whether the adjustments are contested or subject to
pending administrative or judicial review. Median costs for peer groups shall
be recalculated as provided in this chapter on the basis of the most recent
adjusted cost information available to the department on October 31 of the
first fiscal year of each biennium, and shall apply retroactively to the prior
July 1 rate, regardless of whether the adjustments are contested or subject to
pending administrative or judicial review. Median costs shall not be adjusted
to reflect subsequent administrative or judicial rulings, whether final or not.
Sec. 14.
RCW 74.46.500 and 1992 c 182 s 1 are each amended to read as follows:
(1) The ((administration and operations))
administrative cost center shall include ((all items not included in
the cost centers of nursing services, food, and property.
(2) Subject to subsection (4) of this section,
the administration and operations cost center reimbursement rate for each
facility shall be based on the computation in this subsection and shall not
exceed the eighty-fifth percentile of (a) the rates of all reporting facilities
derived from the computation below, or (b) reporting facilities grouped in
accordance with subsection (3) of this section:
AR = TAC/TPD, where
AR
= the administration and operations cost center reimbursement rate for a
facility;
TAC
= the total costs of the administration and operations cost center plus the
retained savings from such cost center as provided in RCW 74.46.180 of a
facility; and
TPD = the total
patient days for a facility for the prior year.
(3) The secretary may group facilities based on
factors which could reasonably influence cost requirements of this cost center,
other than ownership or legal organization characteristics.
(4) In applying the eighty-fifth percentile
reimbursement limit authorized by subsection (2) of this section to the pilot
facility specially designed to meet the needs of persons living with AIDS as
defined by RCW 70.24.017, and specifically authorized for this purpose under
the 1989 amendment to the Washington state health plan, the department shall
exempt the cost of nursing supplies reported by the pilot facility in excess of
the average of nursing supplies cost for medicaid nursing facilities state-wide)) for cost reporting purposes all administrative,
oversight, and management costs whether facility on-site or allocated in
accordance with a department-approved joint-cost allocation methodology. Such
costs shall be identical to the cost report line item costs categorized under
"general and administrative" in the "administration and
operations" combined cost center existing prior to January 1, 1993, except
for nursing supplies and purchased medical records.
(2) Every two years when rates are set at
the beginning of each new biennium, the department shall divide into two peer
groups nursing facilities located in the state of Washington providing services
to medicaid residents: (a) Those facilities located within a metropolitan
statistical area as defined and determined by the United States office of
management and budget or other applicable federal office and (b) those not
located in such an area. The facilities in each peer group shall then be
arrayed from lowest to highest by magnitude of per patient day adjusted
administrative cost from the prior report year, regardless of whether any such
adjustments are contested by the nursing facility, and the median or fiftieth
percentile cost for each peer group shall be determined. Administrative rates
for facilities within each peer group for the first year of the biennium shall
be set at the lower of the facility's adjusted per patient day administrative
cost from the prior report period or the median cost for the facility's peer
group plus ten percent. This rate shall be reduced or inflated as authorized
by RCW 74.46.420.
(3) A nursing facility's administrative rate
for the second year of each biennium shall be that facility's rate as of July 1
of the first year of that biennium reduced or inflated as authorized by RCW
74.46.420. The alternating procedures prescribed in this section for a
facility's two July 1 administrative rates occurring within each biennium shall
be followed in the same order for each succeeding biennium.
(4) Median costs for peer groups shall be
calculated initially as provided in this chapter on the basis of the most
recent adjusted cost information available to the department prior to the
calculation of the new rate for July 1 of the first fiscal year of each
biennium, regardless of whether the adjustments are contested or subject to
pending administrative or judicial review. Median costs for peer groups shall
be recalculated as provided in this chapter on the basis of the most recent
adjusted cost information available to the department on October 31 of the
first fiscal year of each biennium, and shall apply retroactively to the prior
July 1 rate, regardless of whether the adjustments are contested or subject to
pending administrative or judicial review. Median costs shall not be adjusted
to reflect subsequent administrative or judicial rulings, whether final or not.
NEW SECTION. Sec. 15. A
new section is added to chapter 74.46 RCW to read as follows:
(1) The operational cost center shall include
for cost reporting purposes all allowable costs of the daily operation of the
facility not included in nursing services and related care, food,
administrative, or property costs, whether such costs are facility on-site or
allocated in accordance with a department-approved joint-cost allocation
methodology.
(2) Every two years when rates are set at the
beginning of each new biennium, the department shall divide into two peer
groups nursing facilities located in the state of Washington providing services
to medicaid residents: (a) Those facilities located within a metropolitan
statistical area as defined and determined by the United States office of
management and budget or other applicable federal office and (b) those not
located in such an area. The facilities in each peer group shall then be
arrayed from lowest to highest by magnitude of per patient day adjusted
operational cost from the prior report year, regardless of whether any such
adjustments are contested by the nursing facility, and the median or fiftieth
percentile cost for each peer group shall be determined. Operational rates for
facilities within each peer group for the first year of the biennium shall be
set at the lower of the facility's adjusted per patient day operational cost
from the prior report period or the median cost for the facility's peer group
plus twenty-five percent. This rate shall be reduced or inflated as authorized
by RCW 74.46.420.
(3) A nursing facility's operational rate for
the second year of each biennium shall be that facility's rate as of July 1 of
the first year of that biennium reduced or inflated as authorized by RCW
74.46.420. The alternating procedures prescribed in this section for a
facility's two July 1 operational rates occurring within each biennium shall be
followed in the same order for each succeeding biennium.
(4) Median costs for peer groups shall be
calculated initially as provided in this chapter on the basis of the most
recent adjusted cost information available to the department prior to the
calculation of the new rate for July 1 of the first fiscal year of each
biennium, regardless of whether the adjustments are contested or subject to
pending administrative or judicial review. Median costs for peer groups shall
be recalculated as provided in this chapter on the basis of the most recent
adjusted cost information available to the department on October 31 of the
first fiscal year of each biennium, and shall apply retroactively to the prior
July 1 rate, regardless of whether the adjustments are contested or subject to
pending administrative or judicial review. Median costs shall not be adjusted
to reflect subsequent administrative or judicial rulings, whether final or not.
Sec. 16.
RCW 74.46.510 and 1980 c 177 s 51 are each amended to read as follows:
(1) The property cost center rate for
each facility shall be determined by dividing the sum of the reported allowable
prior period actual depreciation ((costs)), subject to RCW 74.46.310
through 74.46.380, adjusted for any capitalized additions or replacements
approved by the department, and the retained savings from such cost center, as
provided in RCW 74.46.180, by the total patient days for the facility in the
prior period. If a capitalized addition or retirement of an asset will result
in a different licensed bed capacity during the ensuing period, the prior
period total patient days used in computing the property cost center rate shall
be adjusted to anticipated patient day level.
(2) A nursing facility's property rate shall
be rebased annually, effective July 1, in accordance with this section
regardless of whether the rate is for the first or second year of the biennium.
(3) When a certificate of need for a new
facility is requested, the department, in reaching its decision, shall take
into consideration per-bed land and building construction costs for the
facility which shall not exceed a maximum to be established by the secretary.
Sec. 17.
RCW 74.46.530 and 1991 sp.s. c 8 s 17 are each amended to read as follows:
(1) The department shall establish for ((individual
facilities)) each medicaid nursing facility a return on investment
((allowances)) rate composed of two parts: A financing allowance
and a variable return allowance. A facility's return on investment rate
shall be rebased annually, effective July 1, in accordance with this section,
regardless of whether the rate is for the first or second year of the biennium.
(a) The financing allowance shall be determined
by multiplying the net invested funds of each facility by .10, and dividing by
the contractor's total patient days from the most recent cost report period.
If a capitalized addition or retirement of an asset will result in a different
licensed bed capacity during the ensuing period, the prior period total patient
days used in computing the financing and variable return allowances shall be
adjusted to the anticipated patient day level.
(b) In computing the portion of net invested
funds representing the net book value of tangible fixed assets, the same
assets, depreciation bases, lives, and methods referred to in RCW 74.46.330,
74.46.350, 74.46.360, 74.46.370, and 74.46.380, including owned and leased
assets, shall be utilized, except that the capitalized cost of land upon which
the facility is located and such other contiguous land which is reasonable and
necessary for use in the regular course of providing patient care shall also be
included. Subject to provisions and limitations contained in this chapter, for
land purchased by owners or lessors before July 18, 1984, capitalized cost of
land shall be the buyer's capitalized cost. For all partial or whole rate
periods after July 17, 1984, if the land is purchased after July 17, 1984,
capitalized cost shall be that of the owner of record on July 17, 1984, or
buyer's capitalized cost, whichever is lower. In the case of leased facilities
where the net invested funds are unknown or the contractor is unable to provide
necessary information to determine net invested funds, the secretary shall have
the authority to determine an amount for net invested funds based on an
appraisal conducted according to RCW 74.46.360(1).
(c) In determining the variable return
allowance:
(i) Every two years at the start of each new
biennium, the department, without utilizing peer groups, will first
rank all facilities in numerical order from highest to lowest according to
their ((average per diem)) per patient day adjusted allowable
costs for ((the sum of the administration and operations and property cost
centers)) nursing services, food, administrative, and operational costs
combined for the previous cost report period.
(ii) The department shall then compute the
variable return allowance by multiplying the appropriate percentage amounts,
which shall not be less than one percent and not greater than four percent, by
the ((total prospective rate for each facility, as determined in RCW
74.46.450 through 74.46.510)) sum of the facility's nursing services, food,
administrative, and operational rate components. The percentage amounts
will be based on groupings of facilities according to the rankings ((as
established)) prescribed in (i) of this subsection (1)(c). The
percentages calculated and assigned will remain the same for the next variable
return allowance paid in the second year of the biennium. Those groups of
facilities with lower per diem costs shall receive higher percentage amounts
than those with higher per diem costs.
(d) The sum of the financing allowance and the
variable return allowance shall be the return on investment rate for
each facility, and shall be added to the prospective rates of each contractor
as determined in RCW 74.46.450 through 74.46.510.
(e) In the case of a facility which was leased
by the contractor as of January 1, 1980, in an arm's-length agreement, which
continues to be leased under the same lease agreement, and for which the
annualized lease payment, plus any interest and depreciation expenses
associated with contractor-owned assets, for the period covered by the
prospective rates, divided by the contractor's total patient days, minus the
property cost center determined according to RCW 74.46.510, is more than the
return on investment ((allowance)) rate determined according to
subsection (1)(d) of this section, the following shall apply:
(i) The financing allowance shall be recomputed
substituting the fair market value of the assets as of January 1, 1982, as
determined by the department of general administration through an appraisal
procedure, less accumulated depreciation on the lessor's assets since January
1, 1982, for the net book value of the assets in determining net invested funds
for the facility. A determination by the department of general administration
of fair market value shall be final unless the procedure used to make such
determination is shown to be arbitrary and capricious.
(ii) The sum of the financing allowance
computed under subsection (1)(e)(i) of this section and the variable allowance
shall be compared to the annualized lease payment, plus any interest and
depreciation ((expenses)) associated with contractor-owned assets, for
the period covered by the prospective rates, divided by the contractor's total
patient days, minus the property cost center rate determined according to RCW
74.46.510. The lesser of the two amounts shall be called the alternate return
on investment ((allowance)) rate.
(iii) The return on investment ((allowance))
rate determined according to subsection (1)(d) of this section or the
alternate return on investment ((allowance)) rate, whichever is
greater, shall be the return on investment ((allowance)) rate for
the facility and shall be added to the prospective rates of the contractor as
determined in RCW 74.46.450 through 74.46.510.
(f) In the case of a facility which was leased
by the contractor as of January 1, 1980, in an arm's-length agreement, if the
lease is renewed or extended pursuant to a provision of the lease, the treatment
provided in subsection (1)(e) of this section shall be applied except that in
the case of renewals or extensions made subsequent to April 1, 1985,
reimbursement for the annualized lease payment shall be no greater than the
reimbursement for the annualized lease payment for the last year prior to the
renewal or extension of the lease.
(2) ((In the event that the department of
health and human services disallows the application of the return on investment
allowances to nonprofit facilities, the department shall modify the
measurements of net invested funds used for computing individual facility
return on investment allowances as follows: Net invested funds for each
nonprofit facility shall be multiplied by one minus the ratio of equity funds
to the net invested funds of all nonprofit facilities.
(3)))
Each biennium, beginning in 1985, the secretary shall review the adequacy of
return on investment ((allowances)) rates in relation to
anticipated requirements for maintaining, reducing, or expanding nursing care
capacity. The secretary shall report the results of such review to the
legislature and make recommendations for adjustments in the return on
investment rates utilized in this section, if appropriate.
NEW SECTION. Sec. 18. By
November 15, 1994, the legislative budget committee shall complete a study of
the nursing home reimbursement system. The study shall include an assessment
of the financial stability of the nursing home industry, to the extent
sufficient information is available from the industry and other sources to make
such an assessment; an evaluation of the adequacy of the nursing home
reimbursement system for promoting cost-effective, quality care; and, if
appropriate, recommendations for improving the reimbursement system's capacity
to promote sufficient availability of efficient and quality care. In
conducting the study, the legislative budget committee shall consult with the
nursing home industry, consumer groups, health care professionals, and the department
of social and health services.
NEW SECTION. Sec. 19.
The following acts or parts of acts are each repealed:
(1) RCW 74.46.260 and 1980 c 177 s 26; and
(2) RCW 74.46.495 and 1983 1st ex.s. c 67 s 26.
NEW SECTION. Sec. 20.
The department of social and health services shall provide a prospective rate
enhancement for nursing homes meeting all of the following conditions: (1) The
nursing home entered into an arms-length agreement for a facility lease prior
to January 1, 1980; (2) the lessee purchased the leased facility after January
1, 1980; (3) the lessor defaulted on its loan or mortgage for the assets of the
facility; (4) the facility is located in a county with a 1989 population of less
than 45,000 and an area more than 5,000 square miles. The rate enhancement
increase shall be effective July 1, 1993. To the extent possible, the increase
shall recognize the 1982 fair market value of the nursing home's assets as
determined by an appraisal contracted by the department of general
administration. If necessary, the increase shall be granted from state funds
only. In no case shall the annual value of the rate increase exceed $50,000.
The rate adjustment in this section shall not be implemented if it jeopardizes
federal matching funds for qualifying facilities or the long-term care program
in general. Funds may be disbursed on a monthly basis.
NEW SECTION. Sec. 21.
This act is necessary for the immediate preservation of the public peace,
health, or safety, or support of the state government and its existing public
institutions, and shall take effect July 1, 1993.
