Montana Administrative Register Notice 37-805 No. 23   12/08/2017    
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In the matter of the adoption of New Rule I pertaining to revising nursing facility reimbursement rates for state fiscal year 2018






TO: All Concerned Persons


1. On July 21, 2017, the Department of Public Health and Human Services published MAR Notice No. 37-805 pertaining to the public hearing on the proposed adoption of the above-stated rule at page 1133 of the 2017 Montana Administrative Register, Issue Number 14.


2. The department has adopted New Rule I (37.40.309) as proposed, but with the following changes from the original proposal, new matter underlined, deleted matter interlined:



(1) remains as proposed.

(2) Effective October 1, 2017 through June 30, 2018 January 1, 2018, the rate for nursing facilities will be reimbursed using a price-based reimbursement methodology. The rate for each facility will be determined using the component defined in ARM 37.40.307(2)(a) and (b).


AUTH: 53-2-201, 53-6-113, MCA

IMP: 53-2-201, 53-6-101, 53-6-111, 53-6-113, MCA


            3. The department has thoroughly considered the comments and testimony received. Many commenters made the same comments. A summary of the comments received and the department's responses are as follows:


Comment 1: The department received many comments opposing the 3.47% reduction in Medicaid provider rates.


Response 1: The department has lowered the rate reduction from 3.47% to 2.99%, which will be effective January 1, 2018. The lowered rate reduction was achieved by implementing legislatively mandated funding reductions in Senate Bill (SB) 261 §§ 12 and 21. SB 261 § 12 included a 0.5% reduction to Medicaid benefits of $1,423,827, which is part of the rate reduction. The SB 261 § 21 reduction for Health Resources Division of $3,500,000 is included in the calculation of the rate reduction. 


Comment 2: On July 26, 2017, the Legislative Children, Families, Health and Human Services Interim Committee (committee) notified the department that members of the committee objected to the proposed rule, pursuant to 2-4-305(9), MCA, although the committee did so without articulating any basis for its objection. On November 8, 2017, the committee adopted a formal written objection to the proposed rule, pursuant to 2-4-406(1), MCA, which set forth its reasons for objecting.


Response 2: As originally proposed, the effective date of the rate change would have been October 1, 2017. The department delayed the filing of its final notice in light of the committee’s objection pursuant to 2-4-305(9), MCA. The committee first set forth the bases for its objection in its formal objection adopted November 8, 2017, pursuant to 2-4-406(1), MCA. Pursuant to 2-4-406(2), MCA, the department is permitted to submit to the committee its response to the written objection, after which the committee may withdraw its objection.


Comment 3:  The department received comments that its interpretation of House Bill 2 of the regular session (HB 2) and SB 261 is contrary to legislative intent.


Response 3: The department decreased the rate reduction from the proposed 3.47% cut to a 2.99% cut. The department does not agree with the commenters that its interpretation of HB 2 or SB 261 is contrary to legislative intent.


Legislative Intent:


Section 17-7-138(1)(a), MCA, provides: "Expenditures by a state agency must be made in substantial compliance with the budget approved by the legislature. Substantial compliance may be determined by conformity to the conditions contained in the general appropriations act and to legislative intent as established in the narrative accompanying the general appropriations act." 


The department considered the following factors while calculating the 2.99% provider rate decrease:


a. Legislative intent as adopted in the legislative fiscal analyst narrative (Legislative Fiscal Report) located at http://leg.mt.gov/content/Publications/fiscal/Budget-Books/2019/fiscal-publications.asp;


b. Conditions contained in Senate Bill (SB) 261 (Note: In the special session the legislature amended and revised HB 2 by incorporating legislative changes from the 2017 regular session that were made by several bills, including SB 261. In doing so, the legislature intended the incorporated changes to reflect current law before the special session commencing November 14, 2017.); and


c. The amount of time available to achieve the required spending reductions.


The department's proposed provider rates were based on legislative appropriations:

The department calculated the 2.99% rate decrease based on the money the legislature appropriated to spend for the following programs: Medicaid provider services (MAR Notice No. 37-788); targeted case management services (MAR Notice No. 37-801); developmental disabilities program services that were available through the 1915c, 0208 and 0667 Home and Community Based Waiver programs (MAR Notice No. 37-802); and nursing facility reimbursement rates (MAR Notice No. 37-805).


SB 261


SB 261 revised Montana's state budgeting law. SB 261 reduced appropriations if actual state revenue was less than thresholds the legislature established in SB 261.


Section 21(1) of SB 261 provides as follows: If the amount of the certified unaudited state general fund revenue and transfers into the general fund received at the end of fiscal year 2017 is less than $2,192,000,000, as determined by the state treasurer on or before August 15, 2017, and if House Bill No. 2 is passed and approved, then the department of public health and human services general fund appropriation for "Health Resources Division" in House Bill No. 2 is reduced by $3,500,000 in fiscal year 2018 and $3,500,000 in fiscal year 2019.


Section 21(3) of SB 261 provides as follows: The legislature intends that the appropriation reduction in subsections (1) and (2) be used to reduce Medicaid provider rates over the 2019 biennium.


Section 21(4) of SB 261 provides as follows: The appropriation reductions in subsections (1) and (2) are in addition to the across-the-board reduction in general fund appropriations in [section 12].


Section 12(1) of SB 261 provides as follows: If the amount of the certified unaudited state general fund revenue and transfers into the general fund received at the end of fiscal year 2017 is less than $2,204,000,000, as determined by the state treasurer on or before August 15, 2017, and if House Bill No. 2 is passed and approved [section 11 of House Bill No. 2] must be amended as follows:


Section 11. Appropriations -- reduced appropriations for certain fiscal year 2019 general fund appropriations. (1) All general fund appropriations in this section for fiscal year 2019, excluding the appropriations for K-12 BASE Aid, Reimbursement Block Grants, State Tuition Payments, Transportation, Natural Resource Development K-12 School Facilities Payment, Special Education, and the Coal-Fired Generating Unit Closure Mitigation Block Grant are reduced by 0.5%.


The 2.99% decrease in provider rates is calculated as follows:


Appropriation reductions in SB 261


SB 261, Section 12, amends HB 2, §11 to reduce Medicaid

general fund appropriations by 0.5% or                                                  -$1,423,827


SB 261, Section 21, reduces the appropriation for

the Health Resources Division by                                                            -$3,500,000

Total reduction                                                                                         -$4,923,827


Total federal funds lost due to general fund

appropriation reduction                                                                            -$9,331,608


Total required cost reduction in SFY 2018                                             -$14,255,435


Projected expenditures for impacted Medicaid

provider types                                                                                         $954,922,507


Rate reduction required to achieve  

reduction in 12 months                                                                                           1.49%

Rate reduction required to achieve

reduction in 6 months                                                                                             2.99%


The earliest the department can implement the rate reductions is January 1, 2018. Therefore the rate reduction implemented in this rule, in accordance with legislative intent as previously described, is 2.99%.


Comment 4: Instead of cutting Medicaid rates, why doesn't the department cut employees, facilities, programs, and operating costs?


Response 4: The department has numerous cost reduction measures in place including staff reductions. The department’s total personal services budget was reduced by 6.3 % between the general appropriations act (HB 2) and SB 261. The department has limited its hiring to essential positions since April of 2017 to achieve this cost constraint. In addition, there is a 1.7% reduction in non-Medicaid general fund appropriations included in HB2. Cost constraints in operating costs, facilities, and other department programs have been implemented to achieve this requirement. These appropriation reductions and corresponding costs constraints are separate and distinct from the proposed Medicaid provider rate reduction discussed in this rule.


Comment 5: Several commenters expressed concern that the rate reduction may cause access issues due to the rate not covering costs.


Response 5: The department thanks the commenters for their concerns; however the department disagrees. MAR Notice No. 37-789 provides a rate increase greater than the rate reduction in this proposed rule, resulting in a net increase to providers over 2017. All licensed nursing facilities in Montana during state fiscal year (SFY) 2017 accepted Medicaid at a rate lower than what is in this proposed rule.


Comment 6:  Several commenters disagree with the statement that appears in the notice of public hearing on this proposed rule, MAR Notice No. 37-805, at page 1136, paragraph 10:  "With regard to the requirements of 2-4-111, MCA, the department has determined that the adoption of the above-referenced rule will not significantly and directly impact small businesses."


Response 6:  Paragraph 10 is not a proposed rule; it is the department's compliance with the requirements of 2-4-111, MCA. The department agrees that all rate reductions detrimentally impact providers, including small businesses; however the requirements of 2-4-111, MCA, are not triggered by the rate change. Section 2-4-111, MCA, requires state agencies to determine if a proposed rule will significantly and directly impact small businesses. For purposes of 2-4-111, MCA, a small business is defined as "a business entity, including its affiliates, that is independently owned and operated and that employs fewer than 50 full-time employees." Section 2-4-102(13), MCA. The Governor’s Office of Economic Development (GOED) has interpreted "small business" to mean privately owned, for-profit entities." (July 22, 2013, memorandum from GOED).


Although the proposed rate decreases do not significantly and directly impact small businesses, as defined in statute, the department included statements of the fiscal impact on providers in its notice of proposed amendment. Because the rate decrease is required by law there are no alternatives to identify.


Comment 7: The department received comments that the Legislature intended the provider cut in SB 261 to be 1%.


Response 7: The department does not agree that a 1% Medicaid provider rate reduction represents the entirety of legislative intent.  Section 21 of SB 261 requires a provider rate reduction evenly spread across applicable providers to achieve a $3,500,000 annual general fund cost reduction. If implemented over a 12-month period, the $3,500,000 reduction in Section 21 alone would result in an approximate 1% provider rate reduction. Section 21, however, is just one of several components of reductions in SB 261. In addition to Section 21, this rule also implements other reductions mandated by SB 261. See response to comment 1.


Comment 8: A commenter asked if the state’s revenue increases, can SB 261 reductions be repealed.


Response 8: SB 261 is legislation enacted into law.  The Montana Legislature would have to amend the legislation to change the current reductions.


Comment 9Several commenters stated HB 618 funds were only to be used for maintaining nursing facility rates.


Response 9The department thanks the commenters for their concerns.  Total funding for provider rates includes the legislatively appropriated state and federal funds and estimated patient contributions.


The department is not including the nursing home utilization fee in this reduction.


            4. This rule adoption is effective January 1, 2018.



/s/ Geralyn Driscoll                                      /s/ Sheila Hogan                                         

Geralyn Driscoll                                           Sheila Hogan, Director

Rule Reviewer                                             Public Health and Human Services


Certified to the Secretary of State November 27, 2017.

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