BILL REQ. #:  S-2708.2 

     AN ACT Relating to the nursing facility medicaid payment system; amending RCW 74.46.421 and 74.46.800; adding a new section to chapter 74.46 RCW; creating a new section; repealing RCW 74.46.431, 74.46.433, 74.46.435, 74.46.437, 74.46.439, 74.46.485, 74.46.496, 74.46.501, 74.46.506, 74.46.508, 74.46.511, 74.46.515, 74.46.521, and 74.46.533; providing an effective date; and declaring an emergency.

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

NEW SECTION.  Sec. 1   (1) The legislature intends that the nursing facility medicaid payment system be structured to promote quality care and quality of life for residents. The legislature also intends that the nursing facility medicaid payment system is efficient to administer, accountable to the public and to the legislature, and transparent to taxpayers and providers. The legislature finds that the current statute governing the nursing facility medicaid payment system is overly complex in contrast to Washington state's statutes governing reimbursement systems for hospitals, physicians, boarding homes, and other vendors, and that this complexity has made it difficult to focus on systemic improvements in the nursing facility medicaid payment system and in other long-term care policies.
     (2) The legislature intends to simplify the existing nursing facility medicaid payment system so that it is fair and predictable. The legislature further intends that, effective July 1, 2009, the essential structure of this simplified nursing facility medicaid payment system must be described in statute, and the details of the system must be described in rules adopted by the department of social and health services.

NEW SECTION.  Sec. 2   A new section is added to chapter 74.46 RCW to read as follows:
     The nursing facility medicaid payment system shall have the following structure:
     (1) Nursing facility medicaid payment rate allocations must be cost-based and facility-specific and have at least four components: Direct care, including therapy; support services; indirect care; and capital costs. Additional noncapital components may be considered if the entire nursing facility medicaid payment system is budget-neutral in comparison to the statewide weighted average payment rate that would have been calculated as of July 1, 2009, using the nursing facility medicaid payment system in place before that date.
     (2) The direct care component shall use a case mix system.
     (3) Noncapital components shall be subject to limits based upon a determination of the median of facilities' costs with respect to a particular component.
     (4) Noncapital rates must be determined from annual cost reports filed by facilities, with costs rebased every two years. The capital rate component shall be determined July 1st of each year, based on cost reports filed by facilities for the preceding year.
     (5) Facilities must be separated into peer groups, based on location.
     (6) Payments must be subject to a settlement procedure that compares costs to rates received and recovers unspent moneys as appropriate.
     (7) An occupancy adjustment must be applied to the indirect and capital cost centers.
     (8) A statewide weighted average payment rate and adjustments to medicaid rate components for economic trends and conditions shall be specified in the biennial appropriations act and may adjust payments if necessary to ensure compliance. Any economic trends and conditions factor or factors defined in any earlier biennial appropriations act shall not be applied solely nor compounded to the medicaid rate components.
     (9) The department of social and health services must ensure that nursing facility medicaid payment rates, in the aggregate for all participating nursing facilities, comply with the biennial appropriations act.
     (10) Capital spending on nursing facilities subject to the requirement of a certificate of capital authorization must be limited by annual authorization amounts specified by the legislature pursuant to RCW 74.46.807.
     (11) The department is authorized within funds appropriated in the biennial appropriations act to establish payments linked to performance measures.

Sec. 3   RCW 74.46.421 and 2008 c 263 s 1 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 and in rules adopted by the department 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 weighted average payment rate to nursing facilities is less than or equal to the statewide weighted average payment rate specified in the biennial appropriations act.
     (((3))) (2) 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 weighted average payment rate to exceed the statewide weighted average payment rate specified in the biennial appropriations act.
     (((4))) (3)(a) The statewide weighted average payment rate for any state fiscal year under the nursing facility medicaid 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 for the current fiscal year shall only be made prospectively, not retrospectively, and shall be applied proportionately to each component rate allocation for each facility.
     (c) If any final order or final judgment, including a final order or final judgment resulting from an adjudicative proceeding or judicial review permitted by chapter 34.05 RCW, would result in an increase to a nursing facility's payment rate for a prior fiscal year or years, the department shall consider whether the increased rate for that facility would result in the statewide weighted average payment rate for all facilities for such fiscal year or years to be exceeded. If the increased rate would result in the statewide weighted average payment rate for such year or years being exceeded, the department shall increase that nursing facility's payment rate to meet the final order or judgment only to the extent that it does not result in an increase to the statewide weighted average payment rate for all facilities.

Sec. 4   RCW 74.46.800 and 1998 c 322 s 42 are each amended to read as follows:
     (1) Consistent with the principles and provisions described in section 2 of this act, the department shall have authority to adopt, amend, and rescind such administrative rules and definitions as it deems necessary to carry out the policies and purposes of this chapter, to administer the nursing facility medicaid payment system, to audit nursing facilities, and to resolve issues and develop procedures that it deems necessary to implement, update, and improve the case mix elements of the nursing facility medicaid payment system. In adopting rules, the department may consider the potential impact of the payment system on the level and quality of services received by nursing facility residents; the anticipated impact of the system on private pay clients and on populations in other parts of the long-term care system; and the special circumstances presented by changes of ownership of nursing facilities, bed banking, exceptional care needs of residents, addition or deletion of licensed beds, facilities located in nonurban areas, closure of facilities, and facilities with low-occupancy levels, as well as other concerns.
     (2) Nothing in this chapter shall be construed to require the department to adopt or employ any calculations, steps, tests, methodologies, alternate methodologies, indexes, formulas, mathematical or statistical models, concepts, or procedures for medicaid rate setting or payment that are not expressly called for in this chapter.
     (3) The department shall adopt comprehensive rules to describe and administer the nursing facility medicaid payment system, to be effective July 1, 2009. The system described in such rules must be budget-neutral in comparison to the statewide weighted average payment rate that would have been calculated as of July 1, 2009, using the nursing facility medicaid payment system in place before that date.

NEW SECTION.  Sec. 5   The following acts or parts of acts, as now existing or hereafter amended, are each repealed:
     (1) RCW 74.46.431 (Nursing facility medicaid payment rate allocations -- Components -- Minimum wage -- Rules) and 2008 c 263 s 2, 2007 c 508 s 2, 2006 c 258 s 2, 2005 c 518 s 944, 2004 c 276 s 913, 2001 1st sp.s. c 8 s 5, 1999 c 353 s 4, & 1998 c 322 s 19;
     (2) RCW 74.46.433 (Variable return component rate allocation) and 2006 c 258 s 3, 2001 1st sp.s. c 8 s 6, & 1999 c 353 s 9;
     (3) RCW 74.46.435 (Property component rate allocation) and 2001 1st sp.s. c 8 s 7, 1999 c 353 s 10, & 1998 c 322 s 29;
     (4) RCW 74.46.437 (Financing allowance component rate allocation) and 2001 1st sp.s. c 8 s 8 & 1999 c 353 s 11;
     (5) RCW 74.46.439 (Facilities leased in arm's-length agreements--Recomputation of financing allowance -- Reimbursement for annualized lease payments -- Rate adjustment) and 1999 c 353 s 12;
     (6) RCW 74.46.485 (Case mix classification methodology) and 1998 c 322 s 22;
     (7) RCW 74.46.496 (Case mix weights -- Determination -- Revisions) and 2006 c 258 s 4 & 1998 c 322 s 23;
     (8) RCW 74.46.501 (Average case mix indexes determined quarterly--Facility average case mix index -- Medicaid average case mix index) and 2006 c 258 s 5, 2001 1st sp.s. c 8 s 9, & 1998 c 322 s 24;
     (9) RCW 74.46.506 (Direct care component rate allocations--Determination -- Quarterly updates -- Fines) and 2007 c 508 s 3, 2006 c 258 s 6, & 2001 1st sp.s. c 8 s 10;
     (10) RCW 74.46.508 (Direct care component rate allocation--Increases -- Rules) and 2003 1st sp.s. c 6 s 1 & 1999 c 181 s 2;
     (11) RCW 74.46.511 (Therapy care component rate allocation--Determination) and 2008 c 263 s 3, 2007 c 508 s 4, & 2001 1st sp.s. c 8 s 11;
     (12) RCW 74.46.515 (Support services component rate allocation--Determination -- Emergency situations) and 2008 c 263 s 4, 2001 1st sp.s. c 8 s 12, 1999 c 353 s 7, & 1998 c 322 s 27;
     (13) RCW 74.46.521 (Operations component rate allocation--Determination) and 2007 c 508 s 5, 2006 c 258 s 7, 2001 1st sp.s. c 8 s 13, 1999 c 353 s 8, & 1998 c 322 s 28; and
     (14) RCW 74.46.533 (Combined and estimated rebased rates--Determination -- Hold harmless provision) and 2007 c 508 s 6.

NEW SECTION.  Sec. 6   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, 2009.