WSR 06-11-186



[ Filed May 24, 2006, 12:48 p.m. ]



The 2006 state legislature has passed changes to the method for determining facility-specific, per resident day Medicaid payment rates for nursing facility care in Washington. Unless otherwise indicated the changes are effective July 1, 2006. This notice includes a justification, description, and estimated rate impact of the changes.

Please address any comments or questions concerning the changes to Edward H. Southon, Department of Social and Health Services, Aging and Disability Services Administration, P.O. Box 45600, Olympia, WA 98504-5600, phone (360) 725-2472, fax (360) 493-9484. Comments should be submitted within fourteen days after appearance of this notice.


The changes are mandated by the 2006 Washington state legislature in chapter 258, Laws of 2006, and in section 206, chapter 372, Laws of 2006, the state Operating Budget Appropriations Act.


In combination with a variety of other factors, including changes in the allowed costs of care, the methodological changes are estimated to result in a statewide average nursing facility Medicaid payment rate of $147.57 per resident day, at a maximum, for state fiscal year 2006, running from July 1, 2005, to June 30, 2006, and $156.41 for state fiscal year 2007, running from July 1, 2006, to June 30, 2007.

Chapter 258, Laws of 2006, makes several changes in the Medicaid nursing facility rate methodology, including:

(1) A "rebasing" of costs used to calculate the direct care and operations component rates to the 2003 cost report;

(2) Elimination of the minimum occupancy assumption in the calculation of the direct care component;

(3) Elimination of the minimum occupancy assumption in the calculation of the direct care component rate for nursing facilities returning previously "banked" beds to active status;

(4) A "freezing" of the variable return rate component for all facilities at the June 30, 2006, variable return rate allocation;

(5) Revision of case mix weights whenever direct care component rates are cost-rebased under RCW 74.46.431(4);

(6) Use of the 90% threshold for calculation of the quarterly case mix index; use of the facility average case mix index throughout the cost-rebasing period; and use of the average facility average case mix index from the four calendar quarters of the cost rebase year;

(7) A rise in the "lid" for the cost per case mix unit used in the calculation of the direct care component rate, from 110% to 112% of the peer group median; and elimination of the "floor" for the cost per case mix unit used in the calculation of the direct care component rate;

(8) Clarification that the 90% minimum occupancy threshold is to be used in calculation of the operations component median "lid";

(9) Creation of a new category of nursing facility to be known as a "vital local provider," defined as a nursing facility reporting a home office address located in Washington state, where the sum of Medicaid days for all Washington facilities reporting that address as their home office was greater than 215,000 in 2003; and

(10) Granting a "hold harmless" provision to vital local providers. For a vital local provider, the sum of the facility's direct care and operations component rates calculated as of July 1, 2006 (the effective date of chapter 258, Laws of 2006) will be compared to the sum of those same two component rates as of June 30, 2006 (the last day under chapter 74.46 RCW as it existed before the new law). If the sum as of July 1, 2006, is lower than the sum as of June 30, 2006, then the vital local provider will continue to receive the direct care and operations component rate allocations calculated as of June 30, 2006. In setting economic trends and conditions adjustment factors (sometimes called vendor rate increases) for the direct care and operations components rate allocations, the legislature may define different adjustment factors for vital local providers whose rates are set equal to their June 30, 2006, rates.

Washington State Code Reviser's Office