Montana Administrative Register Notice 37-635 No. 12   06/20/2013    
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In the matter of the amendment of ARM 37.40.307, 37.40.325, and 37.40.361 pertaining to nursing facility reimbursement







TO: All Concerned Persons


1. On April 25, 2013, the Department of Public Health and Human Services published MAR Notice No. 37-635 pertaining to the public hearing on the proposed amendment of the above-stated rules at page 616 of the 2013 Montana Administrative Register, Issue Number 8. On May 23, 2013, the Department of Public Health and Human Services published an Amended Notice of Public Hearing on Proposed Amendment at page 820 of the 2013 Montana Administrative Register, Issue Number 10.


2. The department has amended ARM 37.40.325 as proposed.


3. The department has amended the following rules as proposed, but with the following changes from the original proposal, new matter underlined, deleted matter interlined:


            37.40.307 NURSING FACILITY REIMBURSEMENT (1) remains as proposed.

.           (2) Effective July 1, 2001, and in subsequent rate years, nursing facilities will be reimbursed using a price-based reimbursement methodology. The rate for each facility will be determined using the operating component defined in (2)(a) and the direct resident care component defined in (2)(b):

            (a) through (c) remain as proposed.

            (d) The total payment rate available for the rate year period July 1, 2013 through June 30, 2014 will be the rate as computed in (2), plus any additional amount computed in ARM 37.40.311 and 37.40.361.

            (3) Providers who, as of July 1 of the rate year, have not filed with the department a cost report covering a period of at least six months participation in the Medicaid program in a newly constructed facility shall have a rate set at the statewide median price as computed on July 1, 2013. Following a change in provider as defined in ARM 37.40.325, the per diem rate for the new provider shall be set at the previous provider's rate, as if no change in provider had occurred.

            (4) through (12) remain as proposed.


AUTH: 53-2-201, 53-6-113, MCA

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


            37.40.361 DIRECT CARE AND ANCILLARY SERVICES WORKERS' WAGE REPORTING/ADDITIONAL PAYMENTS INCLUDING LUMP SUM PAYMENTS FOR DIRECT CARE AND ANCILLARY SERVICES WORKERS' WAGE AND BENEFIT INCREASES (1) Effective at for the beginning of the rate year period July 1, 2013 and for the six months thereafter, nursing facilities must report to the department actual hourly wage and benefit rates paid for all direct care and ancillary services workers or the lump sum payment amounts for all direct care and ancillary services workers that will receive the benefit of the increased funds. The reported data shall be used by the department for the purpose of comparing types and rates of payment for comparable services and tracking distribution of direct care wage funds to designated workers.

            (2) The department will pay Medicaid certified nursing care facilities located in Montana that submit an approved request to the department a lump sum payment in addition to the amount paid as provided in ARM 37.40.307 and 37.40.311 to their computed Medicaid payment rate to be used only for wage and benefit increases or lump sum payments for direct care or ancillary services workers in nursing facilities.

            (a) The department will determine the lump sum payments, twice a year with the first payment at the beginning of the rate year commencing July 1, 2013, and again in six months from that date as a pro rata share of appropriated funds allocated for increases in direct care and ancillary services workers' wages and benefits or lump sum payments to direct care and ancillary services workers.

            (b) through (3) remain as proposed.


AUTH: 53-2-201, 53-6-113, MCA

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


4. 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: The department received several comments about the increased costs that are being incurred by nursing facilities and the adequacy of the rate that is being proposed effective July 1, 2013. 

The commenters asked the department to reconsider the proposed rates to be effective July 1, 2013. This represents about a 2% rate increase following a period in which rates have been cut and frozen. Inflation over this period of time is in the 12% to 15% range, yet the department is proposing a 2% rate increase. In order to establish reasonable rates for this service the department should consider the factors outlined in 53 -6-113, MCA in addition to other pertinent factors including: 

The actual cost of services - the current cost to provide a day of nursing facility care is about $187.36 while the current rate is about $162.67. A 2% increase is insufficient to bridge that gap. 

The quality of services - facilities struggle to meet state and federal quality standards, and only a handful of facilities are in full compliance when they are surveyed annually. 

The professional knowledge and skills necessary for the delivery of services - increased acuity necessitates more professional knowledge and skills for those delivering care and the availability of services. 

The commenter stated that over the past year their facility has noticed an increase in the cost of medications and supplies to care for our population. Patients remain in the hospital for shorter periods of time and transfer to nursing facilities with higher care needs. This higher care needs equate to more staff required to safely care for the sicker case mix. The medications and supplies ordered for these acuity levels break the budget. A 2% rate increase will not even begin to touch the high costs associated with giving care. Without proper funding, the facility cannot adequately pay staff to do their tireless job.


It is positive that facilities receive an increase after so many years with no Medicaid rate increase but a mere 2% increase doesn't quite keep up with the continued rise in cost of provision of adequate care. The Medicaid rate remains far below the actual cost of care. Current daily cost of care year to date is over $200 per resident per day.  The projected Medicaid rate our facility will receive is $165.70. As you can see the Medicaid rate is still well below our daily cost of care. Since we serve about 120 residents and about 60% are Medicaid recipients, we are losing about $4,000 per day serving Medicaid recipients. Because of the continued shortfall in Medicaid reimbursement, we are forced to evaluate our services and likely cap admissions for those who are Medicaid recipients. It simply is not feasible from a business perspective to continue to serve a large percentage of Medicaid recipients at such a loss. It makes more fiscal sense to not provide services than to attempt to provide services at such a loss. The commenter said their mission was founded on enriching lives including those who had no means to help themselves. However, in order to carry out that mission the facility moves to the future, they are forced to make adjustments in their business plan to keep afloat financially.


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 and 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 member'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.


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.


Montana contracts with Myers and Stauffer LC to prepare an annual analysis of each nursing facility's cost of providing nursing facility services to Medicaid residents, 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 (SFY) 2012 that Montana's Medicaid day-weighted average total rate that includes all supplemental payments (IGT and direct care wages) was $181.35 compared to the Medicaid inflated cost of $187.36, or that on average Medicaid is covering approximately 96.79% 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) 2013. The department took the opportunity to increase the IGT reimbursement by taking advantage of the ability to match existing county funds with enhanced federal funds up to the higher Medicare Upper Payment Limit amount thus providing an enhanced IGT payment to Montana nursing facilities in 2013.  County nursing facilities will receive a total combined funding from Medicaid reimbursement, to the Upper Payment Limit (UPL) or at a minimum a net gain of $17.84 per day, while noncounty facilities will receive IGT funding of almost $8.48 per day in addition to their reimbursement rates set under the rate setting methodology. These amounts were significantly higher than expected and were passed on to Montana nursing facilities.


Providers will continue to participate and benefit from the Intergovernmental Fund Transfer (IGT) program that provides supplemental payments in addition to the Medicaid payment rate set through the reimbursement methodology during FY 2014.


Additionally nursing facility providers received direct care wage funds to support their direct care staffing in FY 2013. In FY 2014 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 $3.9 million dollars in ongoing funding during this FY 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.


Occupancy in Montana for nursing facility care has been declining for some time but has slowed in recent years. The current statewide 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. The department believes that there are enough facilities that will provide Medicaid funded nursing facility services to ensure adequate access.


COMMENT #2: The department received several comments about the increased costs that are being incurred by nursing facilities related to staffing and wages.


Given that staffing costs comprise almost 50% of our operating expenses, the impact of reimbursement reductions has greatly impacted staff and pay.  The commenters state concerns about merit pay increase needs, starting wage rates, and the ability to recruit and retain staff. Facilities depend in large part on Certified Nursing Assistants to deliver significant components of the care for residents and many of those staff are new in the field. Facilities provide training and certification courses for those interested in entering the field and that is the most common path for us to find new staff members. This is a demanding field of work, physically, emotionally and mentally and is greatly unappreciated by those unfamiliar with our care and work environment, but treasured rightly so by those who are impacted by their care. As relative funding has declined, and wage pressures have increased, we are finding it increasingly difficult to recruit dedicated caring and capable individuals into the field. This creates increasing pressure on our current staff that is often faced with difficult choices to make in giving more of their time to work or leaving their fellow staff and residents with less than ideal staffing.


If the current reimbursement issues remain unaddressed and funding is not adjusted to reflect the inflationary pressures we face in utility costs, food expense, cleaning and facility maintenance expenses as well as wage pressures, I fear that the continued shift of the future caregivers out of this field will result in significant impacts to our ability to provide the care for a vulnerable and desperate population who come to us in great need. Please consider the need to fund this program and the residents and staff who dedicate their lives to caring for some of our neediest and most vulnerable people. Their dedication and caring is often given in extraordinary ways and has lasting and profound impacts on those they serve and their loved ones. I do hope you will see that their efforts and care is recognized by providing inflationary increase in the funding for the care they provide.


RESPONSE #2: Nursing facility providers have benefited from additional funding that has been appropriated and targeted specifically at direct care wages for several years. This funding is in addition to the funding allocated through the reimbursement methodology. In FY 2014 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 $3.9 million dollars in ongoing funding during this FY 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 $3.95 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 FY.


COMMENT #3: The department received several comments regarding the additional 2% funding for provider rate increases that was appropriated by the Montana Legislature that was subsequently line item vetoed by the Governor in House Bill 2 (HB2).


RESPONSE #3: The department will utilize the appropriated level of funding that was included in HB2 that was signed into law by the Governor for FY 2014 rate setting. The Governor's administration proposed and supported a 2% provider rate increase for all Department of Public Health and Human Services (DPHHS) providers as part of the Governors 2014/2015 biennial budget.


COMMENT #4: A commenter stated that sequestration, starting in April 2013, is another cut to needed funding. The Multiple Procedure Payment Reduction (MPPR) starting in April 2013 is another hit to nursing facilities.


RESPONSE #4: This comment is applicable to Medicare reimbursement and does not apply to the subject of this rule which is Medicaid nursing facility reimbursement, and as such the department cannot comment on the application of the Multiple Procedure Payment Reductions. 

COMMENT #5: One commenter stated that ARM, 37.40.307 should continue to apply to a particular rate year, i.e., July 1, 2013 to June 30, 2014, rather than simply use the term "rate year." Our rationale is that rates are typically scheduled to change each FY and nursing homes should have an opportunity to comment on the rates being proposed. The commenter is concerned that the new language will mean that new rates can be adopted without going through the rulemaking process and affording an opportunity for comment by those affected. This comment applies to each proposed rule that includes a change to the term "rate year" instead of including the actual effective dates. 

RESPONSE #5: This change was proposed to eliminate the need to change the effective date each FY in the state plan amendment process, not to curtail or eliminate the ability to comment on rule and rate changes. Rate year is defined in ARM 37.40.302 as a 12-month period beginning July 1. The state did not feel that it was necessary to restate in ARM 37.40.307 the period July 1 - June 30 of the rate year as this was redundant. It would require us to continue to make changes in state plan pages and ARM pages each year at an additional cost to the state to make this amendment to just change the year tied to the July 1 through June 30 period.

 The department is required to comply with the public notice requirements in 42 CFR 47.205 in proposing significant changes to the methods and standards for setting payment rates for nursing facility services in the Federal State Plan. 

The department has procedures under which the data and methodology used in establishing payment rates are made available to the public (42 CFR 447.253(b) (1) (iii) (C)) and that this process complies with the requirements of Section 1902(a) (13) (A) of the Social Security Act. 

The department does not agree that the proposed change to remove the particular rate year and simply use the term "rate year" will result in the curtailment or elimination of the ability to have public hearings or to comment on rule and rate changes each SFY, as that is not the intent of this rule change. However, based on the comment that this would create a perception that the department is trying to limit comment or feedback on rate or rule changes, the department will agree to retain the rule in its previous format to identify the specific rate year in ARM 37.40.307 and 37.40.361. 

COMMENT #6: The department may need to begin entertaining modifications to the current case-mix adjusted per diem rate system. Among changes to consider are to award providers for providing access and meeting quality benchmarks. If quality improvements and other incentives can be provided to achieve cost savings it is possible for the department to use those savings to improve payment adequacy for nursing facilities. The department may need to consider an alternative to measuring payment adequacy based upon average costs. In its 2012 report to the department, Myers and Stauffer noted the limited value of basing payment adequacy analyses upon average costs. But in the same study, the firm concluded that Medicaid rates appeared adequate because just over one-half of the facilities could cover their costs. The department should require Myers and Stauffer to provide additional analysis to better differentiate the characteristics of those facilities that are able to cover their costs with Medicaid payments, compared to those who cannot. 

RESPONSE #6: The department will consider this comment and will discuss with Myers and Stauffer any new options or trends in analyzing and measuring payment adequacy for nursing facilities or new payment options such as pay for performance, etc. 

            5. These rule amendments are effective July 1, 2013.




/s/ Valerie A. Bashor                                    /s/ Richard H. Opper                                   

Valerie A. Bashor                                         Richard H. Opper, Director

Rule Reviewer                                              Public Health and Human Services


Certified to the Secretary of State June 10, 2013


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