BILL REQ. #:  H-0536.1 

Read first time 01/22/2003.   Referred to Committee on Appropriations.

     AN ACT Relating to a quality maintenance fee levied on nursing facilities; amending RCW 74.46.200 and 74.46.421; reenacting and amending RCW 43.84.092; adding new sections to chapter 74.46 RCW; adding new sections to chapter 43.131 RCW; adding a new chapter to Title 82 RCW; and declaring an emergency.

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

NEW SECTION.  Sec. 1   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Gross income" has the same meaning as the term is defined in RCW 82.04.080.
     (2) "Patient days" shall not include medicare patient days.
     (3) "Multiplier" means the fixed dollar amount used to calculate the quality maintenance fee.
     (4) "Nursing facility" has the same meaning as the term is defined in RCW 74.46.020.

NEW SECTION.  Sec. 2   (1) Without exemptions, there is levied and there shall be collected a quality maintenance fee on nursing facilities to be calculated in accordance with subsection (2) of this section.
     (2)(a) The quality maintenance fee shall be an amount determined each quarter by multiplying the patient days as reported by each nursing facility for each day of the quarter by the multiplier.
     (b) Each multiplier shall be calculated by the department to produce an aggregate annual quality maintenance fee payment equal to six percent of the aggregate annual gross income for all nursing facilities. The multiplier shall be subject to prospective adjustment as necessary so that the annual aggregate quality maintenance payments do not exceed six percent of the aggregate annual gross income for all nursing facilities.
     (3)(a) Between the effective date of this act and June 30, 2004, the multiplier shall be nine dollars and twenty-five cents.
     (b) Beginning July 1, 2004, and annually thereafter, the multiplier shall be determined using the patient days and gross income reported to the department under section 3 of this act. The department shall use at least six months of data from each nursing facility that shall then be annualized.

NEW SECTION.  Sec. 3   Each nursing facility shall file a report with the department listing the patient days and gross income for the immediately preceding calendar year. The report shall be filed with the department by April 30th of each year beginning April 30, 2004. The quality maintenance fee, determined by the department in accordance with section 2 of this act, shall be due and payable in accordance with RCW 82.32.045(1). The department has authority to impose penalties in accordance with RCW 82.32.050.

NEW SECTION.  Sec. 4   The quality maintenance fee assessed and collected under this act, and any penalties imposed and collected pursuant to RCW 82.32.050, shall be deposited in the nursing facility medicaid trust fund account created in section 6 of this act.

NEW SECTION.  Sec. 5   The department may adopt rules, in accordance with chapter 34.05 RCW, if necessary to implement this chapter.

NEW SECTION.  Sec. 6   (1) The nursing facility medicaid trust fund account is created in the state treasury. All receipts from the assessed and collected quality maintenance fees, any penalties imposed and collected, and the federal financial participation amounts derived from the assessed fees paid by the nursing facilities must be deposited in the account. Money in the account may be spent only after appropriation. Expenditures from the account may only be used for the purposes of this section.
     (2) The nursing facility medicaid trust fund account shall be: (a) Separate and distinct from the state's general fund; (b) supplementary to the base level of the Washington state medicaid program funds appropriated by the legislature to maintain the state's nursing facility medicaid program. To determine the base level of the nursing facility medicaid program funds, the amount appropriated for nursing facilities in the 2001-03 biennial appropriations act shall be used and will establish the base level amount. The base level amount shall be adjusted annually by an inflation factor that shall be equal to the inflation factor used to annually update the medicare skilled nursing facility payment rates; (c) exempt from budgetary cuts, reductions, or eliminations caused by general revenue shortfalls; and (d) supplementary to any increases in state general funds resulting from any increase in the federal financial participation percentage amounts.
     (3)(a) The nursing facility medicaid trust fund account shall be used only to prospectively pay, under section 8 of this act, each nursing facility the medicaid proportionate amount of the quality maintenance fee paid under this act, to the extent permitted under section 1903(w) of the social security act and to fund:
     (i) The nursing facility medicaid payment method improvements made by the fifty-eighth legislature; or
     (ii) The nursing facility rate stabilization component created in section 7 of this act.
     (b) Should the state fail to appropriate funds in an amount that is sufficient to maintain the base level funding for nursing facilities, including the annual inflation adjustment amounts, as described in subsection (2) of this section, all funds collected and held in the nursing facility medicaid trust fund account shall be distributed to the nursing facility rate stabilization component established in section 7 of this act.
     (4) The funds in the nursing facility medicaid trust fund account shall not be used for any purpose other than that expressly allowed under this section.
     (5) All funds collected and maintained in the nursing facility medicaid trust fund account shall accrue interest. The accrued interest amounts shall be available and expended in accordance with this act.
     (6) If the operation of the nursing facility medicaid trust fund account is terminated for any reason, any and all amounts remaining in the nursing facility medicaid trust fund account shall be immediately disbursed to each contractor in an amount that is representative of the contractor's percentage of the total annual assessed fee amount.
     (7) No nursing facility is guaranteed, expressly or otherwise, that any additional money paid to the nursing facility will equal or exceed the amount of its quality maintenance fee.

NEW SECTION.  Sec. 7   (1) Effective July 1, 2003, and consistent with the provisions of section 6 of this act, a new nursing facility rate component shall be created and referred to as the nursing facility rate stabilization component.
     (2)(a) As long as the base level funding adjusted for inflation has been maintained by the state under section 6 of this act, the nursing facility rate stabilization component shall include quality maintenance fee amounts that may remain in the nursing facility medicaid trust fund account after the nursing facility medicaid payment method improvements as enacted by the fifty-eighth legislature have been funded.
      (b) If the state has not maintained its base level funding adjusted for inflation under section 6 of this act, then the nursing facility rate stabilization component shall consist of all funds collected and held in the nursing facility medicaid trust fund account.
     (3) By June 1st of each year, the department shall determine whether the state will maintain its base level funding, adjusted for inflation, under section 6 of this act.
     (a) If the department determines that the state will meet its base level funding adjusted for inflation, then by the first day of the third quarter of each rate year, the department will estimate, based on census and medicaid payments made to date, whether any funds will remain in the nursing facility medicaid trust fund account by June 30th of each rate year after meeting the funding obligations of the nursing facility medicaid payment method improvements. If the department determines that funds will be remaining in the nursing facility medicaid trust fund account as of June 30th of the applicable rate year, the department shall divide the total amount of the anticipated unexpended funds by the total number of medicaid patient days. The result shall be a per patient day rate amount that shall be added to the total medicaid rate that shall be paid beginning on the first day of the third quarter of the applicable rate year until the nursing facility medicaid trust fund account is fully expended.
     (b) If the department determines that the state will not meet its base level funding adjusted for inflation, then the department shall divide the total amount of the funds held in the nursing facility medicaid trust fund account by the total number of medicaid patient days. The result shall be a per patient day rate amount that shall be added to each nursing facility's total medicaid rate that shall be paid beginning on July 1st of each applicable rate year until the nursing facility medicaid trust fund account is fully expended.
     (4) The nursing facility rate stabilization component is not subject to minimum occupancy requirements, medians, lids, or any other limitations contained in the rate setting part of chapter 74.46 RCW, Part E.

NEW SECTION.  Sec. 8   (1) Beginning July 1, 2003, there shall be a new rate allocation component that shall correspond to the quality maintenance fee amounts paid by a nursing facility.
     (2) By July 1, 2003, and by each subsequent July 1st, the department shall determine each medicaid nursing facility's quality maintenance fee amount that will be paid to the department of revenue. In making this determination, the department shall consult with department of revenue staff and calculate the quality maintenance fee amounts for each medicaid nursing facility using the method described in section 2 of this act.
     (3) Based on the amount of the quality maintenance fee amount that each medicaid nursing facility is required to pay, the department shall then determine the per resident day amount that is proportionate to the nursing facility's medicaid resident days to total actual days during the applicable reporting period. This per medicaid resident day amount shall be the quality maintenance fee component rate allocation that shall be paid to each medicaid nursing facility on a prospective basis.

Sec. 9   RCW 43.84.092 and 2002 c 242 s 2, 2002 c 114 s 24, and 2002 c 56 s 402 are each reenacted and amended to read as follows:
     (1) All earnings of investments of surplus balances in the state treasury shall be deposited to the treasury income account, which account is hereby established in the state treasury.
     (2) The treasury income account shall be utilized to pay or receive funds associated with federal programs as required by the federal cash management improvement act of 1990. The treasury income account is subject in all respects to chapter 43.88 RCW, but no appropriation is required for refunds or allocations of interest earnings required by the cash management improvement act. Refunds of interest to the federal treasury required under the cash management improvement act fall under RCW 43.88.180 and shall not require appropriation. The office of financial management shall determine the amounts due to or from the federal government pursuant to the cash management improvement act. The office of financial management may direct transfers of funds between accounts as deemed necessary to implement the provisions of the cash management improvement act, and this subsection. Refunds or allocations shall occur prior to the distributions of earnings set forth in subsection (4) of this section.
     (3) Except for the provisions of RCW 43.84.160, the treasury income account may be utilized for the payment of purchased banking services on behalf of treasury funds including, but not limited to, depository, safekeeping, and disbursement functions for the state treasury and affected state agencies. The treasury income account is subject in all respects to chapter 43.88 RCW, but no appropriation is required for payments to financial institutions. Payments shall occur prior to distribution of earnings set forth in subsection (4) of this section.
     (4) Monthly, the state treasurer shall distribute the earnings credited to the treasury income account. The state treasurer shall credit the general fund with all the earnings credited to the treasury income account except:
     (a) The following accounts and funds shall receive their proportionate share of earnings based upon each account's and fund's average daily balance for the period: The capitol building construction account, the Cedar River channel construction and operation account, the Central Washington University capital projects account, the charitable, educational, penal and reformatory institutions account, the common school construction fund, the county criminal justice assistance account, the county sales and use tax equalization account, the data processing building construction account, the deferred compensation administrative account, the deferred compensation principal account, the department of retirement systems expense account, the drinking water assistance account, the drinking water assistance administrative account, the drinking water assistance repayment account, the Eastern Washington University capital projects account, the education construction fund, the emergency reserve fund, the federal forest revolving account, the health services account, the public health services account, the health system capacity account, the personal health services account, the state higher education construction account, the higher education construction account, the highway infrastructure account, the industrial insurance premium refund account, the judges' retirement account, the judicial retirement administrative account, the judicial retirement principal account, the local leasehold excise tax account, the local real estate excise tax account, the local sales and use tax account, the medical aid account, the mobile home park relocation fund, the multimodal transportation account, the municipal criminal justice assistance account, the municipal sales and use tax equalization account, the natural resources deposit account, the nursing facility medicaid trust fund account, the oyster reserve land account, the perpetual surveillance and maintenance account, the public employees' retirement system plan 1 account, the public employees' retirement system combined plan 2 and plan 3 account, the public facilities construction loan revolving account beginning July 1, 2004, the public health supplemental account, the Puyallup tribal settlement account, the regional transportation investment district account, the resource management cost account, the site closure account, the special wildlife account, the state employees' insurance account, the state employees' insurance reserve account, the state investment board expense account, the state investment board commingled trust fund accounts, the supplemental pension account, the Tacoma Narrows toll bridge account, the teachers' retirement system plan 1 account, the teachers' retirement system combined plan 2 and plan 3 account, the tobacco prevention and control account, the tobacco settlement account, the transportation infrastructure account, the tuition recovery trust fund, the University of Washington bond retirement fund, the University of Washington building account, the volunteer fire fighters' and reserve officers' relief and pension principal fund, the volunteer fire fighters' and reserve officers' administrative fund, the Washington fruit express account, the Washington judicial retirement system account, the Washington law enforcement officers' and fire fighters' system plan 1 retirement account, the Washington law enforcement officers' and fire fighters' system plan 2 retirement account, the Washington school employees' retirement system combined plan 2 and 3 account, the Washington state health insurance pool account, the Washington state patrol retirement account, the Washington State University building account, the Washington State University bond retirement fund, the water pollution control revolving fund, and the Western Washington University capital projects account. Earnings derived from investing balances of the agricultural permanent fund, the normal school permanent fund, the permanent common school fund, the scientific permanent fund, and the state university permanent fund shall be allocated to their respective beneficiary accounts. All earnings to be distributed under this subsection (4)(a) shall first be reduced by the allocation to the state treasurer's service fund pursuant to RCW 43.08.190.
     (b) The following accounts and funds shall receive eighty percent of their proportionate share of earnings based upon each account's or fund's average daily balance for the period: The aeronautics account, the aircraft search and rescue account, the county arterial preservation account, the department of licensing services account, the essential rail assistance account, the ferry bond retirement fund, the grade crossing protective fund, the high capacity transportation account, the highway bond retirement fund, the highway safety account, the motor vehicle fund, the motorcycle safety education account, the pilotage account, the public transportation systems account, the Puget Sound capital construction account, the Puget Sound ferry operations account, the recreational vehicle account, the rural arterial trust account, the safety and education account, the special category C account, the state patrol highway account, the transportation equipment fund, the transportation fund, the transportation improvement account, the transportation improvement board bond retirement account, and the urban arterial trust account.
     (5) In conformance with Article II, section 37 of the state Constitution, no treasury accounts or funds shall be allocated earnings without the specific affirmative directive of this section.

Sec. 10   RCW 74.46.200 and 1980 c 177 s 20 are each amended to read as follows:
     (1) Allowable costs shall be reduced by the contractor whenever the item, service, or activity covered by such costs generates revenue or financial benefits other than through the contractor's normal billing for care services; except that, unrestricted grants, gifts, and endowments, and interest therefrom, will not be deducted from the allowable costs of a nonprofit facility.
     (2) Where goods or services are sold, the amount of the reduction shall be the actual cost relating to the item, service, or activity. In the absence of adequate documentation of cost, it shall be the full amount of the revenue received. Where financial benefits such as purchase discounts or rebates are received, the amount of the reduction shall be the amount of the discount or rebate.
     (3) This section does not apply to the nursing facility rate stabilization component under section 7 of this act.

Sec. 11   RCW 74.46.421 and 2001 1st sp.s. c 8 s 4 are each amended to read as follows:
     (1) The purpose of part E of this chapter is to determine nursing facility medicaid payment rates that, in the aggregate for all participating nursing facilities, are in accordance with the biennial appropriations act.
     (2)(a) The department shall use the nursing facility medicaid payment rate methodologies described in this chapter to determine initial component rate allocations for each medicaid nursing facility.
     (b) The initial component rate allocations shall be subject to adjustment as provided in this section in order to assure that the statewide average payment rate to nursing facilities is less than or equal to the statewide average payment rate specified in the biennial appropriations act.
     (3) Nothing in this chapter shall be construed as creating a legal right or entitlement to any payment that (a) has not been adjusted under this section or (b) would cause the statewide average payment rate to exceed the statewide average payment rate specified in the biennial appropriations act.
     (4)(a) The statewide average payment rate for any state fiscal year under the nursing facility payment system, weighted by patient days, shall not exceed the annual statewide weighted average nursing facility payment rate identified for that fiscal year in the biennial appropriations act.
     (b) If the department determines that the weighted average nursing facility payment rate calculated in accordance with this chapter is likely to exceed the weighted average nursing facility payment rate identified in the biennial appropriations act, then the department shall adjust all nursing facility payment rates proportional to the amount by which the weighted average rate allocations would otherwise exceed the budgeted rate amount. Any such adjustments shall only be made prospectively, not retrospectively, and shall be applied proportionately to each component rate allocation for each facility.
     (5) The quality maintenance fee component rate allocation calculated under section 8 of this act is not subject to adjustment under this section.

NEW SECTION.  Sec. 12   A new section is added to chapter 43.131 RCW to read as follows:
     The nursing facility medicaid trust fund account shall be terminated on June 30, 2005, as provided in section 13 of this act.

NEW SECTION.  Sec. 13   A new section is added to chapter 43.131 RCW to read as follows:
     The following acts or parts of acts, as now existing or hereafter amended, are each repealed, effective June 30, 2006:
     (1) Section 1 of this act;
     (2) Section 2 of this act;
     (3) Section 3 of this act;
     (4) Section 4 of this act;
     (5) Section 5 of this act;
     (6) Section 6 of this act;
     (7) Section 7 of this act;
     (8) Section 8 of this act;
     (9) Section 9 of this act;
     (10) Section 10 of this act; and
     (11) Section 11 of this act.

NEW SECTION.  Sec. 14   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 15   (1) Sections 1 through 5 of this act constitute a new chapter in Title 82 RCW.
     (2) Sections 6 through 8 of this act are each added to chapter 74.46 RCW and codified with the subchapter heading of "nursing facility medicaid trust fund account."

NEW SECTION.  Sec. 16   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 takes effect immediately.