H 0542

H‑0542.1 _____________________________________________

HOUSE BILL 1159

_____________________________________________

State of Washington 57th Legislature 2001 Regular Session

By Representatives Schual‑Berke, Campbell, Cody, Skinner, Ruderman, Pennington, Conway, D. Schmidt, Linville, Kenney, Wood, Benson, Edmonds, Ogden, Keiser, Lovick, Esser and Haigh

Read first time 01/18/2001. Referred to Committee on Health Care.

_1 AN ACT Relating to reimbursing nursing homes for direct care

_2 costs; amending RCW 74.46.431; reenacting and amending RCW

_3 74.46.506; adding a new section to chapter 74.46 RCW; creating a

_4 new section; and declaring an emergency.

_5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

_6 NEW SECTION. Sec. 1. The legislature finds that absent changes

_7 to the nursing home case mix reimbursement system for direct care

_8 costs, unintended consequences of the system scheduled to be

_9 implemented in the 2001-2003 biennium could negatively impact the

10 quality of care required by nursing home residents. In order to

11 assure that unanticipated rate reductions resulting in lowered

12 staffing levels do not occur, the legislature finds that a delay

13 in further implementation is warranted while the legislature

14 examines these issues and makes necessary corrections to the

15 system.

16 Sec. 2. RCW 74.46.431 and 1999 c 353 s 4 are each amended to read

17 as follows:

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_1 (1) Effective July 1, 1999, nursing facility medicaid payment

_2 rate allocations shall be facility-specific and shall have seven

_3 components: Direct care, therapy care, support services,

_4 operations, property, financing allowance, and variable return.

_5 The department shall establish and adjust each of these

_6 components, as provided in this section and elsewhere in this

_7 chapter, for each medicaid nursing facility in this state.

_8 (2) All component rate allocations shall be based upon a

_9 minimum facility occupancy of eighty-five percent of licensed

10 beds, regardless of how many beds are set up or in use.

11 (3) Information and data sources used in determining medicaid

12 payment rate allocations, including formulas, procedures, cost

13 report periods, resident assessment instrument formats, resident

14 assessment methodologies, and resident classification and case mix

15 weighting methodologies, may be substituted or altered from time

16 to time as determined by the department.

17 (4)(a) Direct care component rate allocations shall be

18 established using adjusted cost report data covering at least six

19 months. Adjusted cost report data from 1996 will be used for

20 October 1, 1998, through June 30, 2001, direct care component rate

21 allocations; adjusted cost report data from 1999 will be used for

22 July 1, 2001, through June 30, 2004, direct care component rate

23 allocations.

24 (b) Direct care component rate allocations based on 1996 cost

25 report data shall be adjusted annually for economic trends and

26 conditions by a factor or factors defined in the biennial

27 appropriations act. A different economic trends and conditions

28 adjustment factor or factors may be defined in the biennial

29 appropriations act for facilities whose direct care component rate

30 is set equal to their adjusted June 30, 1998, rate, as provided in

31 RCW 74.46.506(5)(k).

32 (c) Direct care component rate allocations based on 1999 cost

33 report data shall be adjusted annually for economic trends and

34 conditions by a factor or factors defined in the biennial

35 appropriations act. A different economic trends and conditions

36 adjustment factor or factors may be defined in the biennial

37 appropriations act for facilities whose direct care component rate

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_1 is set equal to their adjusted June 30, ((~~1998~~)) 2000, rate, as

_2 provided in RCW 74.46.506(5)(k).

_3 (5)(a) Therapy care component rate allocations shall be

_4 established using adjusted cost report data covering at least six

_5 months. Adjusted cost report data from 1996 will be used for

_6 October 1, 1998, through June 30, 2001, therapy care component

_7 rate allocations; adjusted cost report data from 1999 will be used

_8 for July 1, 2001, through June 30, 2004, therapy care component

_9 rate allocations.

10 (b) Therapy care component rate allocations shall be adjusted

11 annually for economic trends and conditions by a factor or factors

12 defined in the biennial appropriations act.

13 (6)(a) Support services component rate allocations shall be

14 established using adjusted cost report data covering at least six

15 months. Adjusted cost report data from 1996 shall be used for

16 October 1, 1998, through June 30, 2001, support services component

17 rate allocations; adjusted cost report data from 1999 shall be

18 used for July 1, 2001, through June 30, 2004, support services

19 component rate allocations.

20 (b) Support services component rate allocations shall be

21 adjusted annually for economic trends and conditions by a factor

22 or factors defined in the biennial appropriations act.

23 (7)(a) Operations component rate allocations shall be

24 established using adjusted cost report data covering at least six

25 months. Adjusted cost report data from 1996 shall be used for

26 October 1, 1998, through June 30, 2001, operations component rate

27 allocations; adjusted cost report data from 1999 shall be used for

28 July 1, 2001, through June 30, 2004, operations component rate

29 allocations.

30 (b) Operations component rate allocations shall be adjusted

31 annually for economic trends and conditions by a factor or factors

32 defined in the biennial appropriations act.

33 (8) For July 1, 1998, through September 30, 1998, a facility's

34 property and return on investment component rates shall be the

35 facility's June 30, 1998, property and return on investment

36 component rates, without increase. For October 1, 1998, through

37 June 30, 1999, a facility's property and return on investment

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_1 component rates shall be rebased utilizing 1997 adjusted cost

_2 report data covering at least six months of data.

_3 (9) Total payment rates under the nursing facility medicaid

_4 payment system shall not exceed facility rates charged to the

_5 general public for comparable services.

_6 (10) Medicaid contractors shall pay to all facility staff a

_7 minimum wage of the greater of five dollars and fifteen cents per

_8 hour or the federal minimum wage.

_9 (11) The department shall establish in rule procedures,

10 principles, and conditions for determining component rate

11 allocations for facilities in circumstances not directly addressed

12 by this chapter, including but not limited to: The need to prorate

13 inflation for partial-period cost report data, newly constructed

14 facilities, existing facilities entering the medicaid program for

15 the first time or after a period of absence from the program,

16 existing facilities with expanded new bed capacity, existing

17 medicaid facilities following a change of ownership of the nursing

18 facility business, facilities banking beds or converting beds back

19 into service, facilities having less than six months of either

20 resident assessment, cost report data, or both, under the current

21 contractor prior to rate setting, and other circumstances.

22 (12) The department shall establish in rule procedures,

23 principles, and conditions, including necessary threshold costs,

24 for adjusting rates to reflect capital improvements or new

25 requirements imposed by the department or the federal government.

26 Any such rate adjustments are subject to the provisions of RCW

27 74.46.421.

28 Sec. 3. RCW 74.46.506 and 1999 c 353 s 5 and 1999 c 181 s 1 are

29 each reenacted and amended to read as follows:

30 (1) The direct care component rate allocation corresponds to

31 the provision of nursing care for one resident of a nursing

32 facility for one day, including direct care supplies. Therapy

33 services and supplies, which correspond to the therapy care

34 component rate, shall be excluded. The direct care component rate

35 includes elements of case mix determined consistent with the

36 principles of this section and other applicable provisions of this

37 chapter.

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_1 (2) Beginning October 1, 1998, the department shall determine

_2 and update quarterly for each nursing facility serving medicaid

_3 residents a facility-specific per-resident day direct care

_4 component rate allocation, to be effective on the first day of

_5 each calendar quarter. In determining direct care component rates

_6 the department shall utilize, as specified in this section,

_7 minimum data set resident assessment data for each resident of the

_8 facility, as transmitted to, and if necessary corrected by, the

_9 department in the resident assessment instrument format approved

10 by federal authorities for use in this state.

11 (3) The department may question the accuracy of assessment data

12 for any resident and utilize corrected or substitute information,

13 however derived, in determining direct care component rates. The

14 department is authorized to impose civil fines and to take adverse

15 rate actions against a contractor, as specified by the department

16 in rule, in order to obtain compliance with resident assessment

17 and data transmission requirements and to ensure accuracy.

18 (4) Cost report data used in setting direct care component rate

19 allocations shall be 1996 and 1999, for rate periods as specified

20 in RCW 74.46.431(4)(a).

21 (5) Beginning October 1, 1998, the department shall rebase each

22 nursing facility's direct care component rate allocation as

23 described in RCW 74.46.431, adjust its direct care component rate

24 allocation for economic trends and conditions as described in RCW

25 74.46.431, and update its medicaid average case mix index,

26 consistent with the following:

27 (a) Reduce total direct care costs reported by each nursing

28 facility for the applicable cost report period specified in RCW

29 74.46.431(4)(a) to reflect any department adjustments, and to

30 eliminate reported resident therapy costs and adjustments, in

31 order to derive the facility's total allowable direct care cost;

32 (b) Divide each facility's total allowable direct care cost by

33 its adjusted resident days for the same report period, increased

34 if necessary to a minimum occupancy of eighty-five percent; that

35 is, the greater of actual or imputed occupancy at eighty-five

36 percent of licensed beds, to derive the facility's allowable

37 direct care cost per resident day;

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_1 (c) Adjust the facility's per resident day direct care cost by

_2 the applicable factor specified in RCW 74.46.431(4) (b) and (c) to

_3 derive its adjusted allowable direct care cost per resident day;

_4 (d) Divide each facility's adjusted allowable direct care cost

_5 per resident day by the facility average case mix index for the

_6 applicable quarters specified by RCW 74.46.501(7)(b) to derive the

_7 facility's allowable direct care cost per case mix unit;

_8 (e) Divide nursing facilities into two peer groups: Those

_9 located in metropolitan statistical areas as determined and

10 defined by the United States office of management and budget or

11 other appropriate agency or office of the federal government, and

12 those not located in a metropolitan statistical area;

13 (f) Array separately the allowable direct care cost per case

14 mix unit for all metropolitan statistical area and for all

15 nonmetropolitan statistical area facilities, and determine the

16 median allowable direct care cost per case mix unit for each peer

17 group;

18 (g) Except as provided in (k) of this subsection, from October

19 1, 1998, through June 30, 2000, determine each facility's

20 quarterly direct care component rate as follows:

21 (i) Any facility whose allowable cost per case mix unit is less

22 than eighty-five percent of the facility's peer group median

23 established under (f) of this subsection shall be assigned a cost

24 per case mix unit equal to eighty-five percent of the facility's

25 peer group median, and shall have a direct care component rate

26 allocation equal to the facility's assigned cost per case mix unit

27 multiplied by that facility's medicaid average case mix index from

28 the applicable quarter specified in RCW 74.46.501(7)(c);

29 (ii) Any facility whose allowable cost per case mix unit is

30 greater than one hundred fifteen percent of the peer group median

31 established under (f) of this subsection shall be assigned a cost

32 per case mix unit equal to one hundred fifteen percent of the peer

33 group median, and shall have a direct care component rate

34 allocation equal to the facility's assigned cost per case mix unit

35 multiplied by that facility's medicaid average case mix index from

36 the applicable quarter specified in RCW 74.46.501(7)(c);

37 (iii) Any facility whose allowable cost per case mix unit is

38 between eighty-five and one hundred fifteen percent of the peer

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_1 group median established under (f) of this subsection shall have a

_2 direct care component rate allocation equal to the facility's

_3 allowable cost per case mix unit multiplied by that facility's

_4 medicaid average case mix index from the applicable quarter

_5 specified in RCW 74.46.501(7)(c);

_6 (h) Except as provided in (k) of this subsection, from July 1,

_7 2000, through June 30, ((~~2002~~)) 2003, determine each facility's

_8 quarterly direct care component rate as follows:

_9 (i) Any facility whose allowable cost per case mix unit is less

10 than ninety percent of the facility's peer group median

11 established under (f) of this subsection shall be assigned a cost

12 per case mix unit equal to ninety percent of the facility's peer

13 group median, and shall have a direct care component rate

14 allocation equal to the facility's assigned cost per case mix unit

15 multiplied by that facility's medicaid average case mix index from

16 the applicable quarter specified in RCW 74.46.501(7)(c);

17 (ii) Any facility whose allowable cost per case mix unit is

18 greater than one hundred ten percent of the peer group median

19 established under (f) of this subsection shall be assigned a cost

20 per case mix unit equal to one hundred ten percent of the peer

21 group median, and shall have a direct care component rate

22 allocation equal to the facility's assigned cost per case mix unit

23 multiplied by that facility's medicaid average case mix index from

24 the applicable quarter specified in RCW 74.46.501(7)(c);

25 (iii) Any facility whose allowable cost per case mix unit is

26 between ninety and one hundred ten percent of the peer group

27 median established under (f) of this subsection shall have a

28 direct care component rate allocation equal to the facility's

29 allowable cost per case mix unit multiplied by that facility's

30 medicaid average case mix index from the applicable quarter

31 specified in RCW 74.46.501(7)(c);

32 (i) From July 1, ((~~2002~~)) 2003, through June 30, 2004,

33 determine each facility's quarterly direct care component rate as

34 follows:

35 (i) Any facility whose allowable cost per case mix unit is less

36 than ninety-five percent of the facility's peer group median

37 established under (f) of this subsection shall be assigned a cost

38 per case mix unit equal to ninety-five percent of the facility's

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_1 peer group median, and shall have a direct care component rate

_2 allocation equal to the facility's assigned cost per case mix unit

_3 multiplied by that facility's medicaid average case mix index from

_4 the applicable quarter specified in RCW 74.46.501(7)(c);

_5 (ii) Any facility whose allowable cost per case mix unit is

_6 greater than one hundred five percent of the peer group median

_7 established under (f) of this subsection shall be assigned a cost

_8 per case mix unit equal to one hundred five percent of the peer

_9 group median, and shall have a direct care component rate

10 allocation equal to the facility's assigned cost per case mix unit

11 multiplied by that facility's medicaid average case mix index from

12 the applicable quarter specified in RCW 74.46.501(7)(c);

13 (iii) Any facility whose allowable cost per case mix unit is

14 between ninety-five and one hundred five percent of the peer group

15 median established under (f) of this subsection shall have a

16 direct care component rate allocation equal to the facility's

17 allowable cost per case mix unit multiplied by that facility's

18 medicaid average case mix index from the applicable quarter

19 specified in RCW 74.46.501(7)(c);

20 (j) Beginning July 1, 2004, determine each facility's quarterly

21 direct care component rate by multiplying the facility's peer

22 group median allowable direct care cost per case mix unit by that

23 facility's medicaid average case mix index from the applicable

24 quarter as specified in RCW 74.46.501(7)(c).

25 (k)(i) Between October 1, 1998, and June 30, 2000, the

26 department shall compare each facility's direct care component

27 rate allocation calculated under (g) of this subsection with the

28 facility's nursing services component rate in effect on September

29 30, 1998, less therapy costs, plus any exceptional care offsets as

30 reported on the cost report, adjusted for economic trends and

31 conditions as provided in RCW 74.46.431. A facility shall receive

32 the higher of the two rates;

33 (ii) Between July 1, 2000, and June 30, ((~~2002~~)) 2003, the

34 department shall compare each facility's direct care component

35 rate allocation calculated under (h) of this subsection with the

36 facility's direct care component rate in effect on June 30, 2000,

37 adjusted for economic trends and conditions as provided in RCW

38 74.46.431. A facility shall receive the higher of the two rates.

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_1 (6) The direct care component rate allocations calculated in

_2 accordance with this section shall be adjusted to the extent

_3 necessary to comply with RCW 74.46.421.

_4 (7) Payments resulting from increases in direct care component

_5 rates, granted under authority of RCW 74.46.508(1) for a

_6 facility's exceptional care residents, shall be offset against the

_7 facility's examined, allowable direct care costs, for each report

_8 year or partial period such increases are paid. Such reductions in

_9 allowable direct care costs shall be for rate setting, settlement,

10 and other purposes deemed appropriate by the department.

11 NEW SECTION. Sec. 4. A new section is added to chapter 74.46

12 RCW to read as follows:

13 (1) The joint legislative task force on the direct care

14 component of the nursing home reimbursement system is hereby

15 created. Membership of the task force must consist of eight

16 legislators. Four members of the senate including two members from

17 the majority party and two members from the minority party will be

18 appointed by the president of the senate. Four legislative members

19 from the house of representatives including two members from each

20 party will be appointed by the co-speakers of the house of

21 representatives. Each body shall select representatives from the

22 committees with jurisdiction over health and long-term care and

23 fiscal matters. The task force may invite the participation of

24 stakeholder groups.

25 (2) The task force is charged with reviewing the extent to

26 which the direct care reimbursement rates relate to the level of

27 acuity and needs of the patients served, encourage nursing home

28 providers to staff appropriately to those demonstrated needs, and

29 allow providers to both recruit and retain staff necessary to

30 providing high quality patient care in a cost-effective manner.

31 (3) The task force shall complete its review and submit its

32 recommendations in the form of a report to the legislature by

33 December 1, 2001.

34 NEW SECTION. Sec. 5. This act is necessary for the immediate

35 preservation of the public peace, health, or safety, or support of

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_1 the state government and its existing public institutions, and

_2 takes effect immediately.

‑‑‑ END ‑‑‑

HB 1159 p. 10