Persons or organizations that have comments on the following may contact Edward Southon, Manager, Nursing Home Rates, Aging and Disability Services Administration, P.O. Box 45600, Olympia, WA 98504-5600, or southeh@dshs.wa.gov.

     To comply with 42 U.S.C. 1396a (a)(13)(A), the department of social and health services (hereafter, department) must for all material changes to the methodology for determining nursing facility medicaid payment rates and requiring a Title XIX state plan amendment submitted to and approved by the Centers for Medicare and Medicaid Services (CMS) publish the proposed new methodologies for determining the payment rates and the underlying justifications.

     In the February 2, 2010, WSR 10-04-088, the department published information about several bills before the Washington state legislature that would have modified the medicaid nursing facility payment system.

     On April 12, 2010, the legislature passed ESSB 6872 that made several material changes to Washington's nursing facility medicaid payment rate methodology. In addition, the supplemental operating budget (ESSB 6444) included several material changes to the medicaid nursing facility payment system.

     On May 4, 2010, the governor signed both bills into law. The governor vetoed section (6) of ESSB 6872. Section (6) would have changed the percent by which net invested funds are multiplied from 10 percent and 8.5 percent to 4 percent.

     The department publishes the following material changes to Washington's nursing facility medicaid payment rate methodology resulting from ESSB 6872 and ESSB 6444. All of the changes take effect on July 1, 2010, unless noted otherwise.

     Under RCW 74.46.421 (2)(b), the department must adjust the initial component rate allocations to assure that the statewide average payment rate of all nursing facilities is less than or equal to the statewide average payment rate specified in the Biennial Appropriations Act. The weighted average nursing facility payment rate shall not exceed $169.85 for state fiscal year (SFY) 2010 and shall not exceed $166.24 for SFY 2011 which includes the $1.57 low wage worker rate add-on.

     There will be no adjustments for economic trends and conditions (vendor rate increases) in state fiscal years 2010 and 2011.

     Definitions (RCW 74.46.020) are removed that are no longer necessary to implement chapter 74.46 RCW and the following definitions are added:

     •     "Large nonessential community providers" means nonessential community providers with more than sixty licensed beds regardless of how many beds are set up or in use.

     •     "Small nonessential community providers" means nonessential community providers with sixty or fewer licensed beds regardless of how many beds are set up or in use.

     For purposes of calculating minimum occupancy, licensed beds include any beds banked. Minimum facility occupancy of licensed beds, regardless of how many beds are set up or in use, for operations, property, and financing allowance component rate allocations shall be:

     •     Essential community providers - Eighty-five percent

     •     Small nonessential community providers - Ninety percent

     •     Large nonessential community providers - Ninety-two percent

     Minimum facility occupancy of licensed beds, regardless of how many beds are set up or in use, for all nursing facilities for therapy and support services component rate allocations shall be eighty-five percent.

     Effective July 1, 2009, through June 30, 2012, the direct care, therapy care, support services, and operations component rate allocations shall be rebased using adjusted cost report data for calendar year 2007.

     Beginning July 1, 2012, direct care, therapy care, support services, and operations component rate allocations shall be rebased biennially during every even numbered year thereafter using adjusted cost report data from two years prior to the rebase period, so adjusted cost report data for calendar year 2010 is used for July 1, 2012, through June 30, 2014, and so forth.

     Effective July 1, 2010, there shall be no rate:

     •     Adjustments for facilities with banked beds under chapter 70.38 RCW; and

     •     Add-ons to payment rates for capital improvements not requiring a certificate of need and a certificate of capital authorization for fiscal year 2011.

     For calendar year 2009, the department shall calculate split settlements covering two periods January 1, 2009, through June 30, 2009, and July 1, 2009, through December 31, 2009. For the second period beginning July 1, 2009, the department may partially or totally waive settlements only in specific cases where a nursing home can demonstrate significant decreases in costs from the first period.

     For, July 1, 2010, the variable return component rate allocation for each facility shall be thirty percent of the facility's June 30, 2006, variable return component rate allocation. Effective July 1, 2011, the variable return component rate is repealed.

     In the case of leased facilities where the net invested funds are unknown or the contractor is unable to provide necessary information to determine net invested funds, the department shall have the authority to determine an amount for net invested funds based on an appraisal conducted according to department rule.

     For a facility that was leased by a contractor as of January 1, 1980, in an arm's-length agreement, which continues to be leased under the same lease agreement, the financing allowance rate will be the greater of the rate existing on June 30, 2010, or the rate calculated under RCW 74.46.437.

     The department shall determine and update semiannually for each nursing facility serving medicaid residents a facility-specific per-resident day direct care component rate allocation, to be effective on the first day of each six-month period. The medicaid average case mix index used to update or recalibrate a nursing facility's direct care component rate semiannually shall be from the calendar six-month period commencing nine months prior to and ending three months prior to the effective date of the semiannual rate. For example, July 1, 2010, through December 31, 2010, direct care component rates shall utilize case mix averages from the October 1, 2009, through March 31, 2010, calendar quarters, and so forth.

     The department must identify for all semiannual rate settings following the date of MDS 3.0 implementation a previously established semiannual case mix adjustment established for the semiannual rate settings that will be used for semiannual case mix calculations in direct care until minimum data set 3.0 is fully implemented. After the department has fully implemented minimum data set 3.0, it must adjust any semiannual rate setting in which it used the previously established case mix adjustment using the new minimum data set 3.0 data.

     In determining the number of days a resident is classified into a particular case mix group, the department shall determine a start date for calculating case mix grouping periods as specified by rule.

     Each case mix classification group shall be assigned a case mix weight. The case mix weight for each resident of a nursing facility for each calendar quarter or six-month period during a calendar year shall be based on data from resident assessment instruments completed for the resident and weighted by the number of days the resident was in each case mix classification group.

     Effective July 1, 2010, the .06 percent add-on established in 2001, by the legislature to "increase the median price per case-mix unit" is eliminated. Since 2001, a regular rebase has been enacted in statute which takes into account actual changes in case mix, the costs therein, and makes funding adjustments accordingly.

     Direct care component rates at the AIDS pilot facility shall be based on direct care reported costs at the pilot facility, utilizing the same rate-setting cycle prescribed for other nursing facilities, and as supported by a staffing benchmark based upon a department-approved acuity measurement system.

     There will be a direct care rate add-on for any nursing facility specializing in the care of residents with traumatic brain injuries where more than fifty percent of residents are classified with this condition based upon the federal minimum data set assessment.

     The department shall establish, by rule, the procedures, principles, and conditions for a pay-for-performance supplemental payment structure that provides payment add-ons for high performing facilities. To the extent that funds are appropriated for this purpose, the pay-for-performance structure will include a one percent reduction in payments to facilities with exceptionally high direct care staff turnover, and a method by which the funding that is not paid to these facilities is then used to provide a supplemental payment to facilities with lower direct care staff turnover.

     To simplify the medicaid nursing facility payment system, the following acts or parts of acts are each repealed. The department will codify in WAC any portions of the repealed statutes that it determines are necessary to implement or support the medicaid nursing facility payment system.

     (1) RCW 74.46.030 (Principles of reporting requirements) and 1980 c 177 s 3;

     (2) RCW 74.46.040 (Due dates for cost reports) and 1998 c 322 s 3, 1985 c 361 s 4, 1983 1st ex.s. c 67 s 1, and 1980 c 177 s 4;

     (3) RCW 74.46.050 (Improperly completed or late cost report -- Fines -- Adverse rate actions -- Rules) and 1998 c 322 s 4, 1985 c 361 s 5, and 1980 c 177 s 5;

     (4) RCW 74.46.060 (Completing cost reports and maintaining records) and 1998 c 322 s 5, 1985 c 361 s 6, 1983 1st ex.s. c 67 s 2, and 1980 c 177 s 6;

     (5) RCW 74.46.080 (Requirements for retention of records by the contractor) and 1998 c 322 s 6, 1985 c 361 s 7, 1983 1st ex.s. c 67 s 3, and 1980 c 177 s 8;

     (6) RCW 74.46.090 (Retention of cost reports and resident assessment information by the department) and 1998 c 322 s 7, 1985 c 361 s 8, and 1980 c 177 s 9;

     (7) RCW 74.46.100 (Purposes of department audits--Examination--Incomplete or incorrect reports--Contractor's duties--Access to facility--Fines--Adverse rate actions) and 1998 c 322 s 8, 1985 c 361 s 9, 1983 1st ex.s. c 67 s 4, and 1980 c 177 s 10;

     (8) RCW 74.46.155 (Reconciliation of medicaid resident days to billed days and medicaid payments--Payments due--Accrued interest--Withholding funds) and 1998 c 322 s 9;

     (9) RCW 74.46.165 (Proposed settlement report--Payment refunds--Overpayments--Determination of unused rate funds--Total and component payment rates) and 2001 1st sp.s. c 8 s 2 and 1998 c 322 s 10;

     (10) RCW 74.46.190 (Principles of allowable costs) and 1998 c 322 s 11, 1995 1st sp.s. c 18 s 96, 1983 1st ex.s. c 67 s 12, and 1980 c 177 s 19;

     (11) RCW 74.46.200 (Offset of miscellaneous revenues) and 1980 c 177 s 20;

     (12) RCW 74.46.220 (Payments to related organizations--Limits--Documentation) and 1998 c 322 s 12 and 1980 c 177 s 22;

     (13) RCW 74.46.230 (Initial cost of operation) and 1998 c 322 s 13, 1993 sp.s. c 13 s 3, and 1980 c 177 s 23;

     (14) RCW 74.46.240 (Education and training) and 1980 c 177 s 24;

     (15) RCW 74.46.250 (Owner or relative--Compensation) and 1980 c 177 s 25;

     (16) RCW 74.46.270 (Disclosure and approval or rejection of cost allocation) and 1998 c 322 s 14, 1983 1st ex.s. c 67 s 13, and 1980 c 177 s 27;

     (17) RCW 74.46.280 (Management fees, agreements--Limitation on scope of services) and 1998 c 322 s 15, 1993 sp.s. c 13 s 4, and 1980 c 177 s 28;

     (18) RCW 74.46.290 (Expense for construction interest) and 1980 c 177 s 29;

     (19) RCW 74.46.300 (Operating leases of office equipment--Rules) and 1998 c 322 s 16 and 1980 c 177 s 30;

     (20) RCW 74.46.310 (Capitalization) and 1983 1st ex.s. c 67 s 16 and 1980 c 177 s 31;

     (21) RCW 74.46.320 (Depreciation expense) and 1980 c 177 s 32;

     (22) RCW 74.46.330 (Depreciable assets) and 1980 c 177 s 33;

     (23) RCW 74.46.340 (Land, improvements--Depreciation) and 1980 c 177 s 34;

     (24) RCW 74.46.350 (Methods of depreciation) and 1999 c 353 s 13 and 1980 c 177 s 35;

     (25) RCW 74.46.360 (Cost basis of land and depreciation base of depreciable assets) and 1999 c 353 s 2, 1997 c 277 s 1, 1991 sp.s. c 8 s 18, and 1989 c 372 s 14;

     (26) RCW 74.46.370 (Lives of assets) and 1999 c 353 s 14, 1997 c 277 s 2, and 1980 c 177 s 37;

     (27) RCW 74.46.380 (Depreciable assets) and 1993 sp.s. c 13 s 5, 1991 sp.s. c 8 s 12, and 1980 c 177 s 38;

     (28) RCW 74.46.390 (Gains and losses upon replacement of depreciable assets) and 1980 c 177 s 39;

     (29) RCW 74.46.410 (Unallowable costs) and 2007 c 508 s 1, 2001 1st sp.s. c 8 s 3, 1998 c 322 s 17, 1995 1st sp.s. c 18 s 97, 1993 sp.s. c 13 s 6, 1991 sp.s. c 8 s 15, 1989 c 372 s 2, 1986 c 175 s 3, 1983 1st ex.s. c 67 s 17, and 1980 c 177 s 41;

     (30) RCW 74.46.433 (Variable return component rate allocation) and 2006 c 258 s 3, 2001 1st sp.s. c 8 s 6, and 1999 c 353 s 9; (for, July 1, 2010, the variable return component rate allocation for each facility shall be thirty percent of the facility's June 30, 2006, variable return component rate allocation. Effective July 1, 2011, the variable return component rate is repealed.)

     (31) RCW 74.46.445 (Contractors--Rate adjustments) and 1999 c 353 s 15;

     (32) RCW 74.46.533 (Combined and estimated rebased rates--Determination--Hold harmless provision) and 2007 c 508 s 6;

     (33) RCW 74.46.600 (Billing period) and 1980 c 177 s 60;

     (34) RCW 74.46.610 (Billing procedure--Rules) and 1998 c 322 s 32, 1983 1st ex.s. c 67 s 33, and 1980 c 177 s 61;

     (35) RCW 74.46.620 (Payment) and 1998 c 322 s 33 and 1980 c 177 s 62;

     (36) RCW 74.46.625 (Supplemental payments) and 1999 c 392 s 1;

     (37) RCW 74.46.630 (Charges to patients) and 1998 c 322 s 34 and 1980 c 177 s 63;

     (38) RCW 74.46.640 (Suspension of payments) and 1998 c 322 s 35, 1995 1st sp.s. c 18 s 112, 1983 1st ex.s. c 67 s 34, and 1980 c 177 s 64;

     (39) RCW 74.46.650 (Termination of payments) and 1998 c 322 s 36 and 1980 c 177 s 65;

     (40) RCW 74.46.660 (Conditions of participation) and 1998 c 322 s 37, 1992 c 215 s 1, 1991 sp.s. c 8 s 13, and 1980 c 177 s 66;

     (41) RCW 74.46.680 (Change of ownership--Assignment of department's contract) and 1998 c 322 s 38, 1985 c 361 s 2, and 1980 c 177 s 68;

     (42) RCW 74.46.690 (Change of ownership--Final reports -- Settlement) and 1998 c 322 s 39, 1995 1st sp.s. c 18 s 113, 1985 c 361 s 3, 1983 1st ex.s. c 67 s 36, and 1980 c 177 s 69;

     (43) RCW 74.46.700 (Resident personal funds -- Records -- Rules) and 1991 sp.s. c 8 s 19 and 1980 c 177 s 70;

     (44) RCW 74.46.711 (Resident personal funds--Conveyance upon death of resident) and 2001 1st sp.s. c 8 s 14 and 1995 1st sp.s. c 18 s 69;

     (45) RCW 74.46.770 (Contractor appeals--Challenges of laws, rules, or contract provisions--Challenge based on federal law) and 1998 c 322 s 40, 1995 1st sp.s. c 18 s 114, 1983 1st ex.s. c 67 s 39, and 1980 c 177 s 77;

     (46) RCW 74.46.780 (Appeals or exception procedure) and 1998 c 322 s 41, 1995 1st sp.s. c 18 s 115, 1989 c 175 s 159, 1983 1st ex.s. c 67 s 40, and 1980 c 177 s 78;

     (47) RCW 74.46.790 (Denial, suspension, or revocation of license or provisional license--Penalties) and 1980 c 177 s 79;

     (48) RCW 74.46.820 (Public disclosure) and 2005 c 274 s 356, 1998 c 322 s 43, 1985 c 361 s 14, 1983 1st ex.s. c 67 s 41, and 1980 c 177 s 82;

     (49) RCW 74.46.900 (Severability--1980 c 177) and 1980 c 177 s 93;

     (50) RCW 74.46.901 (Effective dates--1983 1st ex.s. c 67; 1980 c 177) and 1983 1st ex.s. c 67 s 49, 1981 1st ex.s. c 2 s 10, and 1980 c 177 s 94;

     (51) RCW 74.46.902 (Section captions--1980 c 177) and 1980 c 177 s 89;

     (52) RCW 74.46.905 (Severability--1983 1st ex.s. c 67) and 1983 1st ex.s. c 67 s 43; and

     (53) RCW 74.46.906 (Effective date--1998 c 322 §§ 1-37, 40-49, and 52-54) and 1998 c 322 s 55.

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