S 2073

S‑2073.1 _____________________________________________

SUBSTITUTE SENATE BILL 5630

_____________________________________________

State of Washington 57th Legislature 2001 Regular Session

By Senate Committee on Health & Long‑Term Care (originally sponsored by Senators Costa, Thibaudeau, Deccio, Winsley, Rasmussen and Kohl‑Welles)

READ FIRST TIME 03/05/01.

_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

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_1 appropriations act for facilities whose direct care component rate

_2 is set equal to their adjusted June 30, ((~~1998~~)) 2000, rate, as

_3 provided in RCW 74.46.506(5)(k).

_4 (5)(a) Therapy care component rate allocations shall be

_5 established using adjusted cost report data covering at least six

_6 months. Adjusted cost report data from 1996 will be used for

_7 October 1, 1998, through June 30, 2001, therapy care component

_8 rate allocations; adjusted cost report data from 1999 will be used

_9 for July 1, 2001, through June 30, 2004, therapy care component

10 rate allocations.

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

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

13 defined in the biennial appropriations act.

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

15 established using adjusted cost report data covering at least six

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

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

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

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

20 component rate allocations.

21 (b) Support services component rate allocations shall be

22 adjusted annually for economic trends and conditions by a factor

23 or factors defined in the biennial appropriations act.

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

25 established using adjusted cost report data covering at least six

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

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

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

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

30 allocations.

31 (b) Operations component rate allocations shall be adjusted

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

33 defined in the biennial appropriations act.

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

35 property and return on investment component rates shall be the

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

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

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_1 June 30, 1999, a facility's property and return on investment

_2 component rates shall be rebased utilizing 1997 adjusted cost

_3 report data covering at least six months of data.

_4 (9) Total payment rates under the nursing facility medicaid

_5 payment system shall not exceed facility rates charged to the

_6 general public for comparable services.

_7 (10) Medicaid contractors shall pay to all facility staff a

_8 minimum wage of the greater of five dollars and fifteen cents per

_9 hour or the federal minimum wage.

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

11 principles, and conditions for determining component rate

12 allocations for facilities in circumstances not directly addressed

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

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

15 facilities, existing facilities entering the medicaid program for

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

17 existing facilities with expanded new bed capacity, existing

18 medicaid facilities following a change of ownership of the nursing

19 facility business, facilities banking beds or converting beds back

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

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

22 contractor prior to rate setting, and other circumstances.

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

24 principles, and conditions, including necessary threshold costs,

25 for adjusting rates to reflect capital improvements or new

26 requirements imposed by the department or the federal government.

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

28 74.46.421.

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

30 each reenacted and amended to read as follows:

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

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

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

34 services and supplies, which correspond to the therapy care

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

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_1 includes elements of case mix determined consistent with the

_2 principles of this section and other applicable provisions of this

_3 chapter.

_4 (2) Beginning October 1, 1998, the department shall determine

_5 and update quarterly for each nursing facility serving medicaid

_6 residents a facility-specific per-resident day direct care

_7 component rate allocation, to be effective on the first day of

_8 each calendar quarter. In determining direct care component rates

_9 the department shall utilize, as specified in this section,

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

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

12 department in the resident assessment instrument format approved

13 by federal authorities for use in this state.

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

15 for any resident and utilize corrected or substitute information,

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

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

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

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

20 and data transmission requirements and to ensure accuracy.

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

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

23 in RCW 74.46.431(4)(a).

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

25 nursing facility's direct care component rate allocation as

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

27 allocation for economic trends and conditions as described in RCW

28 74.46.431, and update its medicaid average case mix index,

29 consistent with the following:

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

31 facility for the applicable cost report period specified in RCW

32 74.46.431(4)(a) to reflect any department adjustments, and to

33 eliminate reported resident therapy costs and adjustments, in

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

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

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

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

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_1 is, the greater of actual or imputed occupancy at eighty-five

_2 percent of licensed beds, to derive the facility's allowable

_3 direct care cost per resident day;

_4 (c) Adjust the facility's per resident day direct care cost by

_5 the applicable factor specified in RCW 74.46.431(4) (b) and (c) to

_6 derive its adjusted allowable direct care cost per resident day;

_7 (d) Divide each facility's adjusted allowable direct care cost

_8 per resident day by the facility average case mix index for the

_9 applicable quarters specified by RCW 74.46.501(7)(b) to derive the

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

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

12 located in metropolitan statistical areas as determined and

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

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

15 those not located in a metropolitan statistical area;

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

17 mix unit for all metropolitan statistical area and for all

18 nonmetropolitan statistical area facilities, and determine the

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

20 group;

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

22 1, 1998, through June 30, 2000, determine each facility's

23 quarterly direct care component rate as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

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_1 allocation equal to the facility's assigned cost per case mix unit

_2 multiplied by that facility's medicaid average case mix index from

_3 the applicable quarter specified in RCW 74.46.501(7)(c);

_4 (iii) Any facility whose allowable cost per case mix unit is

_5 between eighty-five and one hundred fifteen percent of the peer

_6 group median established under (f) of this subsection shall have a

_7 direct care component rate allocation equal to the facility's

_8 allowable cost per case mix unit multiplied by that facility's

_9 medicaid average case mix index from the applicable quarter

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

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

12 2000, through June 30, ((~~2002~~)) 2003, determine each facility's

13 quarterly direct care component rate as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

35 medicaid average case mix index from the applicable quarter

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

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_1 (i) From July 1, ((~~2002~~)) 2003, through June 30, 2004,

_2 determine each facility's quarterly direct care component rate as

_3 follows:

_4 (i) Any facility whose allowable cost per case mix unit is less

_5 than ninety-five percent of the facility's peer group median

_6 established under (f) of this subsection shall be assigned a cost

_7 per case mix unit equal to ninety-five percent of the facility's

_8 peer group median, and shall have a direct care component rate

_9 allocation equal to the facility's assigned cost per case mix unit

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

25 medicaid average case mix index from the applicable quarter

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

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

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

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

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

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

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

33 department shall compare each facility's direct care component

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

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

36 30, 1998, less therapy costs, plus any exceptional care offsets as

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_1 reported on the cost report, adjusted for economic trends and

_2 conditions as provided in RCW 74.46.431. A facility shall receive

_3 the higher of the two rates;

_4 (ii) Between July 1, 2000, and June 30, ((~~2002~~)) 2003, the

_5 department shall compare each facility's direct care component

_6 rate allocation calculated under (h) of this subsection with the

_7 facility's direct care component rate in effect on June 30, 2000,

_8 adjusted for economic trends and conditions as provided in RCW

_9 74.46.431. A facility shall receive the higher of the two rates.

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

11 accordance with this section shall be adjusted to the extent

12 necessary to comply with RCW 74.46.421.

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

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

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

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

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

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

19 and other purposes deemed appropriate by the department.

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

21 RCW to read as follows:

22 (1) The joint legislative task force on the nursing home

23 reimbursement system is hereby created. Membership of the task

24 force must consist of eight legislators. Four members of the senate

25 including two members from the majority party and two members from

26 the minority party will be appointed by the president of the

27 senate. Four legislative members from the house of representatives

28 including two members from each party will be appointed by the co-

29 speakers of the house of representatives. Each body shall select

30 representatives from the committees with jurisdiction over health

31 and long-term care and fiscal matters. The task force may invite

32 the participation of stakeholder groups.

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

34 which the reimbursement rates relate to the level of acuity and

35 needs of the patients served, encourage nursing home providers to

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_1 staff appropriately to those demonstrated needs, and allow

_2 providers to both recruit and retain staff necessary to providing

_3 high quality patient care in a cost-effective manner.

_4 (3) The task force shall complete its review and submit its

_5 recommendations in the form of a report to the legislature by

_6 December 1, 2001.

_7 NEW SECTION. Sec. 5. This act is necessary for the immediate

_8 preservation of the public peace, health, or safety, or support of

_9 the state government and its existing public institutions, and

10 takes effect immediately.

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