Montana Administrative Register Notice 37-537 No. 14   07/28/2011    
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BEFORE THE Department of Public

health and human services of the



In the matter of the amendment of ARM 37.40.307, 37.40.325, 37.40.330, and 37.40.361 pertaining to nursing facility reimbursement







TO:  All Concerned Persons


1.  On May 26, 2011, the Department of Public Health and Human Services published MAR Notice No. 37-537 pertaining to the public hearing on the proposed amendment of the above-stated rules at page 835 of the 2011 Montana Administrative Register, Issue Number 10.


2.  The department has amended the above-stated rules as proposed.


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


COMMENT #1:  Several commenters stated that these rules implement a 2% provider rate cut.  The cost of caring for residents is increasing but instead of an inflationary increase to account for these costs, the rates are being cut.  The department's consultant determined that for FY 2010, the cost of caring for a Medicaid beneficiary was $179.96 per day.  The department is now setting rates two years later, at an average of $161.96 per day.  If one considers minimal inflation of 2.5% per year, the cost of a day of care will be $189.07 during the period for which these rates are being set.  On average, the state will be paying only 85% of actual costs of care.

 In the statement of reasonable necessity, the department indicated that the final rates set will be dependent on the funding levels authorized by the 62nd Legislature, as well as other factors.  The commenter asks the department to clarify what other factors were considered in determining that rates should be cut 2%.  What factors, other than the legislative appropriation, would support the reasonableness of cutting rates by 2% when costs of health insurance, food, transportation, and other costs are increasing?  Please provide any data developed by the department to determine that a 2% cut was necessary and appropriate.

 The decrease in reimbursement rates will make it nearly impossible to make improvements to the facility to provide a home-like environment for residents or purchase necessary equipment to provide safe quality care.  A small rural facility is not fortunate enough to have other payer sources to cost-shift the burden of lower reimbursement.  Over the long run the rural facility will likely not survive these cuts and why should they continue to burden private pays residents and families to shoulder the revenue obligation of the state and federal government?

 Many facilities have not provided base increases to salaries for the past four years due to the uncertainty of Medicaid reimbursement.  As a result, they have experienced increased turnover accompanied by low morale.  The continued push towards culture change, resident centered care, and electronic records are examples of the high cost of providing health care to the elderly.

 The commenters strongly consider not taking long-term Medicaid referrals for admission to their facility as it would increase the deficit budgeted for Medicaid.  Most facilities will not survive these cuts.  Residents will be forced to go to facilities outside of their community causing their mental health to suffer, and add a hardship to the family still residing in the home, due to the distance needed to visit.  The community and potential residents would be devastated if facilities are unable to accept a Medicaid referral due to lowered reimbursement rate.

 The department also indicates that it considered the impact of rate changes on efficacy, economy, quality of care, and access to Medicaid services, and concluded that the rates are still sufficient to meet the requirements of 42 USC 1396(a)(3)(A).  The commenters requested the department to provide evidence that these factors were considered, how they were considered, and the results of that consideration.  It seems incomprehensible that the department would believe that cutting rates when cost of care is increasing will not result in a decline in quality of care.

 The statement of reasonable necessity also discusses the persons and entities affected.  However, there is no mention of the nursing facility residents who pay for their own care, nor the taxpayers in counties that pass levies to make up the difference that Medicaid doesn't pay.  Did the department consider shifting the costs from Medicaid to nursing facility residents who pay privately for their care?  Or to county taxpayers whose property taxes are increased to support their county nursing facility because Medicaid doesn't pay the cost of care?

 RESPONSE #1:  Federal laws or regulations do not mandate that established Medicaid rates must cover all of the actual costs incurred by nursing facility providers.  This is not a standard by which the legal adequacy of rates has been measured in the past, nor is it the standard that will be utilized in the future.

 The department has developed rates which are reasonable, adequate, and in compliance with all requirements.  The price is reflective of many factors that impact the ways that nursing facilities do business and is set at a level that is fair when considering all of those factors together.

 The statewide price is determined through a public process.  Factors that are considered in the establishment of this price include the cost of providing nursing facility services, Medicaid recipient's access to nursing facility services, the quality of nursing facility care as well as budgetary or funding levels.  The price-based rate reflects a rate commensurate with the services that are required to be provided by nursing facility providers when meeting federal and state requirements.  Predictability of the reimbursement calculation is one of the required features of the price-based reimbursement approach, as is the recognition of the changes in acuity of the residents in a facility over time.

 Montana contracts with Myers and Stauffer, LC, to prepare an annual analysis for each nursing facility's cost of providing nursing facility services to Medicaid recipients, and each facility's reimbursement rate.  The analysis provides the department with an evaluation tool as to the adequacy of the statewide pricing for Montana nursing facilities and has done so since 2002.  The annual rate to cost analysis that is performed for the rate-setting process indicates for state fiscal year 2010 that Montana's Medicaid day-weighted average total rate that includes all supplemental payments (Intergovernmental Fund Transfer (IGT) and direct care wages) was $170.49 compared to the Medicaid inflated cost of $177.96, or that on average Medicaid is covering approximately 96% of cost through the various forms of reimbursement to nursing facility providers.  This rate comparison supports the determination as to the adequacy of the Medicaid reimbursement rates for nursing facilities.

 Montana nursing facilities received additional funding from the (IGT) program in fiscal year (FY) 2011, made possible by taking advantage of the ability to match existing county funds with enhanced federal funds up to the higher Medicaid Upper Payment Limit (UPL), thus providing an enhanced IGT payment to Montana nursing facilities in 2011.  County nursing facilities received total combined funding from Medicaid reimbursement, to the UPL or at a minimum a net gain of $12.35 per day, while noncounty facilities received IGT funding of almost $5.54 per day in addition to their reimbursement rates and direct care wage funds to support their Medicaid residents in FY 2011.

 Providers will continue to participate and benefit from the IGT program that provides supplemental payments in addition to the Medicaid payment rate set through the reimbursement methodology during FY 2012.  The IGT program provides funding separately to both county and noncounty facilities.

 In FY 2012, Montana nursing facilities will continue to receive increases from direct care wage (DCW) funding through an appropriation that is separate and in addition to the provider rate funding provided through the price-based methodology.  The DCW program provides funding separately from the reimbursement rate calculation, to help facilities provide wage increases to its direct care workforce and will provide over $3.8 million dollars in ongoing funding during this fiscal year that can only be used to provide for lump-sum bonus' or to sustain or increase wage payments to direct care and ancillary workers in nursing facilities.  This is approximately $3.63 per Medicaid day that will be passed on to facilities to provide for wage or bonus increases for direct care and ancillary workers.  This funding should serve to mitigate some of the concerns related to providing wages and bonuses to facility workers during the next fiscal year.

 The current statewide nursing facility occupancy level is at 70% with several facilities operating at occupancy levels of under 50%.  With these levels of occupancy there are open and available beds for those individuals that seek to access nursing facility placements.  While some facilities are operating at a much fuller occupancy level there is capacity in many of Montana's nursing facilities to place individuals that require this level of service.  We believe that there will be facilities that will admit residents and provide Medicaid-funded nursing facility services.

 COMMENT #2:  Several commenters believe funding is available to avoid cuts because the total amount of funding appropriated by the Legislature for nursing homes is sufficient to fund higher rates, given a trend of declining utilization.  Current utilization and trends indicate that utilization will be significantly below the 1,056,477 bed days being used in the department's calculations.  In addition, the Legislature specifically reduced funding for 100 individuals – or 36,500 bed days.  If decreasing utilization were properly included in the rate calculation, funding could be restored to current levels.

 RESPONSE #2:  The department has utilized the funding that was appropriated in House Bill (HB) 2 by Montana's 62nd Legislature in its calculation of the bed days to be utilized in the calculation of the Medicaid rates.  Adjustments were made to account for increased caseload projected in the February 2011 caseload estimates which subsequently increased the funding for nursing facilities by approximately $882,000 in total funds for fiscal year 2012.  The corresponding bed days were added to the rate sheet based on this additional funding provided by the Legislature to cover this increased caseload estimate.  The day estimates were adjusted downward to account for the 100 waiver slots that are designated for nursing facility transition placements or approximately 36,500 bed days were reduced in the calculation of bed days used in the rate spreadsheet.  The department has reviewed paid claims data from April, May, and June of 2011 to estimate the number of days of care that will be provided in fiscal year 2011 in order to determine if there is any flexibility to reduce the Medicaid days used in the 2012 rate calculation based on current utilization patterns.  Our projections do not indicate that the days utilized in the rate spreadsheet are overstated or should be adjusted at this time.  We continue to monitor utilization and expenditures during the next fiscal year and will be able to assess if any future change is warranted, either upward or downward, as the fiscal year progresses.

 Additionally, we have looked at current trends in patient contribution from paid claims data to determine what level of patient contribution will be available for the 2012 rate calculation.  Current patient contribution levels are not growing at rates that they historically grew.  Patient contribution typically increases on January 1 of each calendar year when the Social Security Administration (SSA) provides a cost of living adjustment (COLA).  The COLA usually increases anywhere from 2% to 5% depending on the economy.  A more significant increase of approximately 7% was provided in calendar year 2009 resulting in no increase on January 2011 in the COLA.  It is not yet certain if there will be a COLA increase or what level of increase retirement plans will have that may impact the patient contribution provided by nursing facility residents under Medicaid for rate year 2012.  The department has estimated a modest increase of 2% in the patient contribution which is being passed on to nursing facility providers rather than being used to offset the amount that Medicaid will reimburse, thus providing an additional amount to nursing facilities in the total computed rate when the patient contribution is added to the state and federal share when calculating the total Medicaid rate paid to facilities.

 The department will continue to monitor this rate and whether or not it increases at the estimated levels, and will assess if any future adjustment is warranted to the rate either upward or downward as the fiscal year progresses.

COMMENT #3:  Several commenters support the lump-sum distributions appropriated by the Legislature and the methodology outlined for distribution of these funds.  However, they believe the language throughout ARM 37.40.361 should be changed to acknowledge that the funding may be used to either increase wages, benefits, or lump-sum payments to workers, or to sustain wage increases previously given with the current biennium one-time-only (OTO) funding for this purpose.  When the Legislature discussed this funding, it was discussed in terms of maintaining the current compensation/lump-sum distributions to these workers.  Of course, the funding is less than the current funding allocated for this purpose, so it is insufficient to fully sustain current payments but should be used to sustain current payments to the extent possible.  The continuation of the direct care wage payment is appreciated.

 RESPONSE #3:  The department will continue to provide the funding available in the Direct Care Wage (DCW) appropriation in 2012 in the same manner that these funds were distributed in FY 2011.  The Legislature appropriated this funding under HB2 to be used to specifically raise provider rates for Medicaid services to allow for wage increases or lump-sum payments to workers who provide direct care and ancillary services.  This funding must be used to raise direct care worker wages and related benefits or to provide lump-sum payments in the form of bonuses or stipends to workers who provide direct care and ancillary services.  Medicaid providers in the Senior and Long Term Care Division's programs are providers that have consistently received targeted funding appropriated by the Legislature directed at increasing direct care workers wages.  The department also recognizes the importance of these funds to provide for wage increases and lump-sum bonuses to direct care workers in communities across Montana.  The department does not believe that it is necessary to change the language in ARM 37.40.361 to provide the specific direction that was proposed by the commenter.  The department's cover letter, in addition to the instructions on the form that will be filled out by providers in order to receive the direct care worker wage funding, will outline that these funds can also be used, to the extent that the provider can provide the supporting documentation, to sustain wage compensation that was provided with previous direct care wage distributions.  The department will also specify that these funds continue to be one-time-only (OTO) and providers should keep this in mind in determining the best way to distribute these funds.

COMMENT #4:  One commenter stated that patient acuity levels have steadily risen in the past ten years.  Because residents are requiring higher and higher levels of care, the commenter stated more funding is needed to meet growing needs.

 RESPONSE #4: Currently, nursing facilities are reimbursed under a case-mix price-based system of reimbursement.

 Each nursing facility receives the same operating per diem rate, which is 80% of the statewide price.  The remaining 20% of the statewide price represents the direct resident care component of the rate and is acuity adjusted.  Each facility's direct resident care component rate is specific to that facility and is based on the acuity of Medicaid residents served in that facility.  As acuity changes in each facility based on the level of complexity of the residents being served relative to the statewide acuity, facility rates adjust upward or downward to account for this change in acuity.  This was a component that was considered necessary when the price-based system of reimbursement was first adopted to account for and reflect the level of complexity of residents being served and adjust accordingly to account for this change in acuity in each facility.  In order to minimize the volatility of the rates from year to year, which was a negative feature of the previous reimbursement system, only 20% of the overall price is adjusted for these changes in acuity.

 With no increases in the overall funding in the system of reimbursement, facility rates will adjust upward or downward based on the acuity of their residents, especially if the acuity level is significantly higher or lower than the acuity of the prior year for that facility.  This is one feature that providers believed was important in a rate system, the recognition of changes in the level of acuity of residents in each facility.  The department will not make the changes to the reimbursement system to provide additional reimbursement for the recognition of acuity in the rate calculation, as this is recognized in the current rate calculation methodology.

 COMMENT #5:  Several commenters strongly opposed receiving a decrease in the Medicaid reimbursement rate.  A small rural nursing facility already operates at a loss mainly due to DPHHS, Office of Public Assistance (OPA) taking up to six months to determine eligibility for Medicaid residents with nothing in return sometimes longer.  They constantly have to wonder if they can actually pay their bills.  They are fortunate that all they charge is interest (usually 15-18%).  Most of the time it seems like all we are doing is exchanging money.  Like any business that operates in today's world it takes money to make money.

 RESPONSE #5:  While Medicaid eligibility is not the subject of this rule notice, the department believes that most, if not all, of the issues related to eligibility can be resolved by working with the local office of public assistance.  If there are specific cases that are taking longer than providers believe they should, they could also forward this information to the Human and Community Services Division in Helena for a review.  As providers are aware, long-term care/nursing facility eligibility is a complicated process and requires a substantially greater amount of information and review on the part of the eligibility workers to verify appropriate eligibility.  Information that may make the process easier to understand and work through is posted on the Senior and Long Term Care Division web site under the Medicaid link at the following address. http://www.dphhs.mt.gov/sltc/programs/Medicaid/IndexMedicaid.shtml



/s/ John Koch                                     /s/ Mary E. Dalton for                                   

Rule Reviewer                                   Anna Whiting Sorrell, Director

                                                            Public Health and Human Services



            Certified to the Secretary of State July 18, 2011.


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