BILL REQ. #:  S-1827.1 

READ FIRST TIME 02/24/03.   

     AN ACT Relating to a quality maintenance fee levied on nursing facilities; amending RCW 74.46.200; reenacting and amending RCW 43.84.092; adding new sections to chapter 74.46 RCW; adding a new chapter to Title 82 RCW; repealing RCW 74.46.421; providing an effective date; providing a contingent expiration date; 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) "Annualize" means the number of reported patient days, divided by the number of days in the report period, the sum of which is multiplied by the number of days in the current calendar year.
     (2) "Gross taxable income" means all revenue, without deduction, that is derived from the performance of nursing services, otherwise known as routine daily care revenue. "Gross taxable income" does not include other patient revenue, other operating revenue, or nonoperating revenue.
     (3) "Other patient revenues" means income from sales of medical supplies for patient care and from performing other than routine services for patient care.
     (4) "Other operating revenues" means income from nonpatient care services to patients, as well as sales and activities to persons other than patients. It is derived in the course of operating the facility, such as providing personal laundry service for patients, or from other sources such as meals, telephones, gift shops, and vending machine commissions.
     (5) "Nonoperating revenue" means income from activities not relating directly to the day-to-day operations of an organization. Nonoperating revenue includes such items as gains on disposal of a facility's assets, dividends, and interest from security investments, gifts, grants, and endowments.
     (6) "Patient days" means a calendar day of care provided to a nursing facility resident, excluding a medicare patient day, 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.
     (7) "Medicare patient day" means a patient day for medicare beneficiaries on a medicare Part A stay and a patient day for persons who have opted for managed care coverage using their medicare benefit.
     (8) "Multiplier" means the fixed dollar amount used to calculate the quality maintenance fee.
     (9) "Nursing facility" has the same meaning as the term is defined in RCW 18.51.010, except that nursing homes certified as institutions for mental diseases and residential habilitation centers operating under chapter 71A.20 RCW are not included in the term "nursing facility."
     (10) "Nursing facility operator" means a person who engages in the business of operating a nursing facility or facilities within this state.

NEW SECTION.  Sec. 2   (1) In addition to any other tax, a quality maintenance fee is imposed on every nursing facility operator in this state, to be calculated in accordance with subsection (2) of this section.
     (2)(a) A nursing facility operator's quality maintenance fee is determined each quarter by multiplying the patient days of each nursing facility operated by that person, as reported under (b) of this subsection by the multiplier.
     (b) Each nursing facility operator shall file a return with the department on a quarterly basis. The return is due within thirty days after the end of each calendar year quarter. The return must include the following:
     (i) The number of patient days for nursing facilities operated by that person in that quarter; and
     (ii) Remittance of the nursing facility operator's quality maintenance fee for that quarter.
     (3) For the fiscal year beginning July 1, 2004, the department shall calculate the multiplier to produce an aggregate annual quality maintenance fee payment equal to six percent of the aggregate annual gross taxable income for all nursing facilities in the prior calendar year.
     (a) The department shall determine six percent of the aggregate annual gross taxable income of all nursing facility operators in the prior calendar year, as reported under section 3 of this act, and divide that number by the total number of patient days for all nursing facilities, as reported under section 3 of this act. The resulting quotient is the multiplier for that fiscal year. The department shall announce the multiplier to all nursing facility operators by June 1st of each year.
     (b) If necessary, the department shall prospectively adjust the multiplier during the fiscal year so that the annual aggregate quality maintenance fee payments do not exceed six percent of the aggregate annual gross taxable income for all nursing facilities in the prior calendar year. In making any such adjustment, the department shall annualize the patient days reported by nursing facilities under subsection (2)(b) of this section, total those annualized patient days, and divide that sum into the aggregate annual gross taxable income used under (a) of this subsection. The department shall announce any change in the multiplier to all nursing facilities as soon as it is determined. The adjusted multiplier shall apply to the quarter in which it is announced and any remaining quarters in that fiscal year.
     (4) Between the effective date of this act and June 30, 2004, the multiplier shall be nine dollars and twenty-five cents.

NEW SECTION.  Sec. 3   Each nursing facility operator shall file a report with the department listing the patient days and gross taxable income for the immediately preceding calendar year. The nursing facility operator shall not report this information for any nursing facility that operated for less than six months of the calendar year. If a nursing facility operated for more than six months, but less than the entire calendar year, the nursing facility operator shall annualize the reported data for that facility. The report shall be filed with the department by April 30th of each year beginning April 30, 2004. If a nursing facility operator's report is not provided to the department by April 30th, the department may impose a penalty on the nursing facility operator of one hundred dollars for each day thereafter until the report is provided to the department.

NEW SECTION.  Sec. 4   The quality maintenance fee assessed and collected under this act, and any interest or penalties thereon imposed and collected pursuant to chapter 82.32 RCW, shall be deposited in the nursing facility medicaid trust fund account created in section 6 of this act.

NEW SECTION.  Sec. 5   All of chapter 82.32 RCW, except RCW 82.32.045 and 82.32.270, applies to the fee imposed by this chapter, in addition to any other provisions of law for the payment and enforcement of the fee imposed by this chapter. The department may adopt rules, in accordance with chapter 34.05 RCW, as necessary to provide for the effective administration of 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 for each fiscal year. 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. The department shall monitor quality maintenance fee collections and shall notify the department of revenue if it appears that an adjustment to the multiplier is necessary under 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.

NEW SECTION.  Sec. 11   By July 1, 2003, the department shall submit, for approval, an amendment to the state plan to include the quality maintenance fee, to the federal centers for medicare and medicaid services. The department shall, with due diligence, respond to any questions from the centers for medicare and medicaid services so that the approval process is not unnecessarily delayed.

NEW SECTION.  Sec. 12   (1) As used in this section, "expiration date" means the earliest of:
     (a) The effective date that federal medicaid matching funds for the purposes specified in section 6 of this act become unavailable or are substantially reduced, as such date is certified by the secretary of social and health services;
     (b) The effective date that federal medicaid matching funds for the purposes specified in section 6 of this act become unavailable or are substantially reduced, as determined by a permanent injunction, court order, or final court decision;
     (c) The effective date of a permanent injunction, court order, or final court decision that prohibits in whole or in part the collection of the quality maintenance fee under section 2 of this act; or
     (d) July 1, 2005.
     (2) Sections 1 through 7 of this act expire on the expiration date determined under this section.
     (3) The expiration of sections 1 through 7 of this act shall not be construed as affecting any existing right acquired or liability or obligation incurred under those sections or under any rule or order adopted under those sections, nor as affecting any proceeding instituted under those sections.

NEW SECTION.  Sec. 13   RCW 74.46.421 (Purpose of part E -- Nursing facility medicaid payment rates) and 2001 1st sp.s. c 8 s 4, 1999 c 353 s 3, & 1998 c 322 s 18 are each repealed.

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 and 12 of this act constitute a new chapter in Title 82 RCW.
     (2) Sections 6 through 8 and 11 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 July 1, 2003, except for section 11 of this act which takes effect immediately.