Leading age spring conference May 15, 2014 casper , wy by: Tammy Martin

1. Leading age spring conferenceMay 15, 2014casper, wyby: Tammy Martin

2. Contact information Tammy Martin, Member Myers and Stauffer LC 800.336.7721 Tammym@mslc.com

3. Discussions for today • SEA 82 Goals & Workgroup Process • Current rate structure • Alternative rate options • Group decision! • General modeling assumptions • Cost categories • Cost data sources & periods used • Case Mix Indexes • Provider tips • Models

4. 1. Sea 82 (2013 session) – goals & Workgroup Process

5. Senate file 60 goals for nf Rates Section 1(a)(ii) • Redesign of nursing facility reimbursement to reflect: • Patient acuity – Done through case mix • % of Medicaid occupancy – Needs consideration • Regional economic factors – Discussions about equalizing rates between rural hospital-based & freestanding NFs

6. Work group makeup • State Medicaid • House of Representatives • Small, med & large provider organizations • Hospital-based and freestanding NF providers • NF Associations (LeadingAge & WHCA) • Clinical & financial people • Myers and Stauffer

7. Work group Members

8. Work group processes • 1 – 2 conference calls / month – Oct to current • Defined pros and cons of different reimbursement methods • Selected cost center classifications for each cost category on a cost report • Decided which cost centers should be acuity or case mix adjusted • 3/18/14 – Met in person for an all day session of rate modeling

9. 2. Current rate structure

10. Current nf rate structure • Rates frozen at rates in effect on 10/01/09. • Upper payment limit (UPL) program to supplement reimbursement losses.

11. Current rate structure – cont. • 10/1/09 rates • Based on 2008 audited cost report • Cost categorized into 3 pools: • Property • Operating • Healthcare

12. Property – current system Reimbursement • Lesser of audited cost or property cap • Cap – published rate per licensed bed Provider challenge (workgroup opportunity) • Cost is limited to historical cost (federal & state rule) • Originalowner cost + cost of improvements made by new owner(s) • 10/1/12 Proforma rates (25% limited to cap)

13. Operating – current system Reimbursement • Lesser of audited cost or cap • Cap = 105% of median facility rate Provider challenge (workgroup opportunity) • 10/1/12 Proforma Rate Analysis • 58% Limited to the cap

14. Healthcare cost – current system Reimbursement • Lesser of audited cost or cap • Cap = 125% of median facility rate Provider challenge (workgroup opportunity) • 10/1/12 Proforma Rate Analysis • 31% Limited to the cap

15. Min / max & Private Pay limitations • Sum of allowed property, operating, and healthcare (after subjecting to each cap) • Compared to: Min / Max (rate in effect at last base period (7/1/06) inflated to current rate year. • Allowed = Lesser of 1 or 2 is allowed • Lesser of Step 3 result or private pay rate = ALLOWED RATE Min / Max -Eliminated in modeling

16. 3. Alternative rate options

17. Big picture ideas • Cost based • Price based –selected • Acuity based (case mix) – selected • Corridor Approach

18. Cost based system

19. Price based system

20. Acuity based (case mix) • Pays based on acuity level of residents, rather than straight cost divided by days. • Acuity is measured using the Minimum Data Set (MDS) providers are already required to submit to CMS • Rate is adjusted up or down to match acuity level of Medicaid residents as measured at a point in time.

21. Acuity based – cont. 7. Rate change timing: • monthly • quarterly – Selected by group • semi-annually • annually • etc.

23. Acuity systems – cont.

24. Corridor approach • Includes both cost and price based features

25. Property options

26. 4. Group decision

27. System decisions

28. 5. General modeling assumptions

29. Limits & prices • All limits, caps, prices, were entirely developed by M&S. • State provided no guidance or thresholds. • Many times they were literally a “guess”. • Considered as a “starting point” for modeling and not the “law of the land.”

30. Medicaid budget increases • Prices were set using estimated Medicaid budget increases. • The estimates included in the modeling were entirely made up by M&S • Budget increases have not been approved by the legislature. • Providers should not rely on these estimates to assume the increases are promised.

31. 6. Cost categories

32. property Fixed capital (Line A01 of Medicare cost report) + Major moveable equipment (Line A02 c/r) • Asset depreciation • Asset interest • Lease expense

33. Operating • A&G • Plant operations • Laundry • Housekeeping • Cafeteria • Employee benefits assoc with operating wages

34. Healthcare – Case Mix Adjusted • Medical records • Social services • SNF/NF Nursing wages • SNF/NF Contracted nursing wages • Employee benefits associated with HC wages

35. Healthcare – no case mix adj • Activities • Routine supplies • Employee benefits associated with HC wages • Medical director • Dietary • Nursing admin • Central services • Pharmacy consultant • Non legend drugs (OTC)

36. Exempt pass through costs

37. 7. Data sources for modeling

38. Cost data sources – Cost report • 2012 Audited Medicaid Cost Reports • 2012 Medicare Cost Report • Entered adjustments from MCD cost report to MCR cost report to have Medicare reporting consistent with Medicaid reporting.

39. costcategories • Each provider’s trial balance used to prepare the Medicare cost report was reviewed for cost categories. • Trial balance detail used to group costs by cost category using categories finalized in group’s 1/14/14 meeting.

40. Cost category assumptions • Data was not re-audited for modeling • Split cost into cost categories using account title detail from trial balances. • Relied on the account name descriptions for modeling. • I.e.: If a provider had no “activity” accounts, we did not contact them to split this out from another cost center.

41. 8. Case mix indices

42. Case mix index details • MDS 3.0 • RUG IV Groups • 48 Grouper (most commonly used for Medicaid)

43. Case mix periods • Collected MDS for the following quarters: • 1/1/11 – 10/1/13 • This captures the scores to cover the following periods: • Each provider’s cost report year • Any future rate quarter through 10/31/13

44. Rate period • Normal rate year is 10/1 – 9/30 • For modeling purposes only we wanted to use the 4 most current quarters of data available. • We assumed a rate year of 1/1/13 – 12/31/13 to use the most current rate data.

45. Picture date • We try to set quarterly rates using the most current MDS data available to match the quarter for the rate being set. • It’s impossible to get totally timely information. • We use a “picture date” for each quarter. • The quarter preceding the rate quarter. • Rate quarter 4/1 would use 1/1 MDS

46. 9. Provider takeaways / tips

47. Private pay rate • Start Now! I really mean now! • Evaluate your private room rate. • Ensure it’s higher than a potential MCD rate increase • If the legislature funds this change, your rate may increase. • If you are limited to your private room rate, you WON’T get your total increased rate. • Ancillary charges are included in priv room rate calc.

48. Private pay rate - Ancillary charge tracking • Critical that providers track ancillary charge utilization by payer source and between the NF and the hospital. • 18 of 36 providers tracked in 2012 • If you don’t track ancillary charges, it won’t be included in your private pay rate.

49. Track exempt costs in general ledger! • Start NOW! I really mean now – you want to be prepared to report this if the legislature funds program. • Property taxes & property insurance • Utilities • Nurse aid training • Only 3 providers in 2012 reported nurse aid training on the Nurse Aid Training of your 2012 cost report – oops!

50. 10. Property model