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S1074.................................................by HEALTH AND WELFARE
CARE FACILITIES - Amends and repeals existing law to establish the method
of prospective payment for services provided by skilled care and
intermediate care facilities and intermediate care facilities for the
mentally retarded.
01/29 Senate intro - 1st rdg - to printing
02/01 Rpt prt - to Health/Wel
02/15 Rpt out - rec d/p - to 2nd rdg
02/16 2nd rdg - to 3rd rdg
02/18 3rd rdg - PASSED - 34-0-1
AYES--Andreason, Boatright, Bunderson, Burtenshaw, Cameron, Crow,
Danielson, Darrington, Davis, Deide, Dunklin, Frasure, Geddes,
Hawkins, Ingram, Ipsen, Keough, King, Lee, McLaughlin, Noh, Parry,
Richardson, Riggs, Risch, Sandy, Schroeder, Sorensen, Stegner,
Stennett, Thorne, Twiggs, Wheeler, Whitworth
NAYS--None
Absent and excused--Branch
Floor Sponsor - King
Title apvd - to House
02/19 House intro - 1st rdg - to Health/Wel
03/09 Rpt out - rec d/p - to 2nd rdg
03/10 2nd rdg - to 3rd rdg
03/11 3rd rdg - PASSED - 60-0-10
AYES -- Barraclough(Barraclough), Barrett, Bell, Bieter, Black, Boe,
Bruneel, Callister, Campbell, Chase, Clark, Crow, Cuddy, Deal,
Denney, Field(13), Field(20), Gagner, Geddes, Gould, Hadley,
Hansen(23), Hansen(29), Henbest, Hornbeck, Jaquet, Judd, Kellogg,
Kempton, Kendell, Kunz, Lake, Limbaugh, Linford, Loertscher, Marley,
McKague, Montgomery, Mortensen, Moyle, Pischner, Pomeroy, Reynolds,
Ridinger, Ringo, Robison, Sali, Schaefer, Sellman, Smith, Smylie,
Stoicheff, Stone, Taylor, Tilman, Trail, Watson, Williams, Wood,
Zimmermann
NAYS -- None
Absent and excused -- Alltus, Ellsworth, Hammond, Jones, Mader,
Meyer, Stevenson, Tippets, Wheeler, Mr Speaker
Floor Sponsor - Loertscher
Title apvd - to Senate
03/12 To enrol
03/15 Rpt enrol - Pres signed
03/16 Sp signed - to Governor
03/18 Governor signed
Session Law Chapter 82
Effective: 07/01/99
S1074|||| LEGISLATURE OF THE STATE OF IDAHO |||| Fifty-fifth Legislature First Regular Session - 1999IN THE SENATE SENATE BILL NO. 1074 BY HEALTH AND WELFARE COMMITTEE 1 AN ACT 2 RELATING TO PAYMENT FOR SERVICES PROVIDED BY SKILLED CARE AND INTERMEDIATE 3 CARE FACILITIES AND INTERMEDIATE CARE FACILITIES FOR THE MENTALLY 4 RETARDED; AMENDING SECTION 56-101, IDAHO CODE, TO FURTHER DEFINE TERMS AND 5 TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION 56-102, IDAHO CODE, TO 6 SPECIFY PRINCIPLES WHICH GOVERN RATES AND PAYMENTS; AMENDING SECTION 7 56-108, IDAHO CODE, TO STRIKE OBSOLETE PROVISIONS AND TO MAKE TECHNICAL 8 CORRECTIONS; AMENDING SECTION 56-113, IDAHO CODE, TO STRIKE OBSOLETE PRO- 9 VISIONS; AMENDING SECTION 56-114, IDAHO CODE, TO GOVERN APPLICATION TO 10 FREESTANDING SPECIAL CARE FACILITIES AND TO MAKE TECHNICAL CORRECTIONS; 11 AMENDING SECTION 56-117, IDAHO CODE, TO GOVERN PAYMENT OF SPECIAL RATES 12 AND TO MAKE A TECHNICAL CORRECTION; AMENDING SECTION 56-120, IDAHO CODE, 13 TO GOVERN APPLICATION TO PROPERTY REIMBURSEMENT APPLIED TO HOSPITAL-BASED 14 SKILLED NURSING FACILITIES; AMENDING SECTION 56-131, IDAHO CODE, TO PRO- 15 VIDE CORRECT TERMINOLOGY AND TO MAKE TECHNICAL CORRECTIONS; AND REPEALING 16 SECTIONS 56-103, 56-105, 56-106, 56-107, 56-109, 56-110, 56-111, 56-112, 17 56-115, 56-118, 56-121 AND 56-130, IDAHO CODE. 18 Be It Enacted by the Legislature of the State of Idaho: 19 SECTION 1. That Section 56-101, Idaho Code, be, and the same is hereby 20 amended to read as follows: 21 56-101. DEFINITIONS. Unless the context clearly requires otherwise, the 22 definitions in this section apply throughout this chapter and shall have the 23 following meanings: 24 (1) "Appraisal" means the method of determining the value of the property 25 as determined by a nM.A.I.appraisal conducted 26 by a member of the appraisal institute (MAI), or successor organization 27 . The appraisal must specifically identify the values of land, building, 28 equipment, and goodwill. 29 (2) "Assets" mean s economic resources of the contractor, 30 recognized and measured in conformity with generally accepted accounting prin- 31 ciples. 32 (3) "Bed-weighted median" is determined by arraying the average per 33 diem cost per bed of all facilities from high to low and identifying the bed 34 at the point in the array at which half of the beds have equal or higher per 35 diem costs and half have equal or lower per diem costs. The identified bed is 36 the median bed. The per diem cost of the median bed is the bed-weighted 37 median. 38 (4) "Case mix index" is a numeric score assigned to each facility resi- 39 dent, based on the resident's physical and mental condition, which projects 40 the amount of relative resources needed to provide care to the resident. 41 42 (5) "Depreciation" means the systematic distribution of the 43 cost or other basis of tangible assets, less salvage, over the estimated use- 2 1 ful life of the assets. 2 (6) "Direct care costs" consists of the following costs directly 3 assigned to the nursing facility or allocated to the nursing facility through 4 medicare cost finding principles: 5 (a) Direct nursing salaries which include the salaries of registered 6 nurses, licensed professional nurses, certificated nurse's aides, and unit 7 clerks; and 8 (b) Routine nursing supplies; and 9 (c) Nursing administration; and 10 (d) Direct portion of medicaid related ancillary services; and 11 (e) Social services; and 12 (f) Raw food; and 13 (g) Employee benefits associated with the direct salaries. 14 (47 ) "Director" means the director of the 15 department of health and welfare orhisthe director's 16 designee. 17 (58 ) "Equity" means the new book value of all 18 tangible and intangible assets less the recorded value of all liabilities, as 19 recognized and measured in conformity with generally accepted accounting prin- 20 ciples. 21 (69 ) "Facility" means an entity which contracts 22 with the director to provide services to recipients in a structure owned, con- 23 trolled, or otherwise operated by such entity, and which entity is responsible 24 for operational decisions. In conjunction with the use of the term "facility": 251.(a) "Free-standing intermediate care" means 26 an intermediate care facility, as defined in and licensed under chapter 27 13, title 39, Idaho Code, which is not owned, managed, or operated by, nor 28 is otherwise a part of a hospital, as defined in section 39-1301(a), Idaho 29 Code; and 302.(b) "Free-standing skilled care" means a 31 skilled nursing facility, as defined in and licensed under chapter 13, 32 title 39, Idaho Code, which is not owned, managed, or operated by, nor is 33 otherwise a part of a hospital, as defined in section 39-1301(a), Idaho 34 Code;(or)and 353.(c) "Free-standing special care" means a 36 facility that provides either intermediate care, or skilled care, or 37 intermediate care for the mentally retarded, or any combination of either, 38 which is not owned, managed, or operated by, nor is otherwise a part of a 39 hospital, as defined in section 39-1301(a), Idaho Code;or40 and 414.(d) "Hospital-based" means a skilled nursing 42 or intermediate care facility, as defined in and licensed under chapter 43 13, title 39, Idaho Code, which is owned, managed, or operated by, or is 44 otherwise a part of a hospital, as defined in section 39-1301(a), Idaho 45 Code. 46 (710 ) "Forced sale" is a sale required by a 47 bankruptcy, foreclosure, the provisions of a will or estate settlement pursu- 48 ant to the death of an owner, physical or mental incapacity of an owner which 49 requires ownership transfer to existing partner or partners, or a sale 50 required by the ruling of a federal agency or by a court order. 51 (811 ) "Goodwill" means the amount paid by the 52 purchaser that exceeds the net tangible assets received. The value of goodwill 53 is derived from the economic benefits that a going concern may enjoy, as com- 54 pared with a new one, from established relations in the related markets, with 55 government departments and other noncommercial bodies and with personal rela- 3 1 tionships. These intangible assets cannot be separated from the business and 2 sold as can plant and equipment. Under the theory that the excess payment 3 would be made only if expected future earnings justified it, goodwill is often 4 described as the price paid for excess future earnings. The amortization of 5 goodwill is nonallowable, nonreimbursable expense. 6 (912 ) "Historical cost" means the actual cost 7 incurred in acquiring and preparing an asset for use, including feasibility 8 studies, architect's fees, and engineering studies. 9 (13) "Indirect care costs" consists of the following costs either 10 directly coded to the nursing facility or allocated to the nursing facility 11 through the medicare step-down process: 12 (a) Administrative and general care cost; and 13 (b) Activities; and 14 (c) Central services and supplies; and 15 (d) Laundry and linen; and 16 (e) Dietary (non-"raw food" costs); and 17 (f) Plant operation and maintenance (excluding utilities); and 18 (g) Medical records; and 19 (h) Employee benefits associated with the indirect salaries; and 20 (i) Housekeeping; and 21 (j) Other costs not included in direct care costs or costs exempt from 22 cost limits. 23 (104 ) "Interest rate limitation" means that the 24 interest rate allowed for working capital loans and for loans for major mov- 25 able equipment for intermediate care facilities for the mentally retarded 26 shall be the prime rate asestablished by the Bank of America Corpora-27tion, San Francisco, Californiapublished in the western edition 28 of the Wall Street Journal or successor publication , plus one percent 29 (1%) at the date the loan is made. All interest expense greater than the 30 amount derived by using the limitation above shall be nonreimbursable; pro- 31 vided, however, that this interest rate limitationsshall not be 32 imposed against loans or leases which were made prior to July 1, 1984. Said 33 loans or leases shall beingsubject to the tests of 34 reasonableness, relationship to patient care and necessity. 35 (115 ) "Intermediate care facility for the men- 36 tally retarded" means an habilitative facility designed and operated to meet 37 the educational, training, habilitative and intermittent medical needs of the 38 developmentally disabled. 39 (126 ) "Major movable equipment" means such items 40 as accounting machines, beds, wheelchairs, desks, furniture, vehicles, etc. 41 The general characteristics of this equipment are: 421.(a) A relatively fixed location in the build- 43 ing; 442.(b) Capable of being moved, as distinguished 45 from building equipment; 463.(c) A unit cost sufficient to justify ledger 47 control; 484.(d) Sufficient size and identity to make con- 49 trol feasible by means of identification tags; and 505.(e) A minimum life of approximately three (3) 51 years. 52 (137 ) "Medicaid" means the 1965 amendments to 53 the social security act (P.L. 89-97), as amended. 54 (148 ) "Minor movable equipment" includes such 55 items as wastebaskets, bedpans, syringes, catheters, silverware, mops, buck- 4 1 ets, etc. The general characteristics of this equipment are: 21.(a) In general, no fixed location and subject 3 to use by various departments of the provider's facility; 42.(b) Comparatively small in size and unit 5 cost; 63.(c) Subject to inventory control; 74.(d) Fairly large quantity in use; and 85.(e) Generally, a useful life of approximately 9 three (3) years or less. 10 (159 ) "Net book value" means the historical cost 11 of an asset, less accumulated depreciation. 12 (20) "Normalized per diem costs" refers to direct care costs that 13 have been adjusted based on the facility's case mix index for purposes of mak- 14 ing the per diem costs comparable among facilities. Normalized per diem costs 15 are calculated by dividing the facility's direct care per diem costs by its 16 facility-wide case mix index, and multiplying the result by the statewide 17 average case mix index. 18 (21) "Nursing facility inflation rate" means the most specific skilled 19 nursing facility inflation rate applicable to Idaho established by data 20 resources, inc., or its successor. If a state or regional index has not been 21 implemented, the national index shall be used. 22 (1622 ) "Patient-day" means a calendar day of 23 care which will include the day of admission and exclude the day of discharge 24 unless discharge occurs after 3:00 p.m. or it is the date of death, except 25 that, when admission and discharge occur on the same day, one (1) day of care 26 shall be deemed to exist. 27 (1723 ) "Property costs" means the total of 28 allowable interest expense, plus depreciation, property insurance, real estate 29 taxes, amortization, and allowable lease/rental expense. The department may 30 require and utilize an appraisal to establish those components of property 31 costs which are identified as an integral part of an appraisal. 32 (24) "Raw food" means food used to meet the nutritional needs of the 33 residents of a facility, including liquid dietary supplements, liquid thick- 34 eners, and tube feeding solutions. 35 (1825 ) "Reasonable property insurance" means 36 that the consideration given is an amount that would ordinarily be paid by a 37 cost-conscious buyer for comparable insurance in an arm's length transaction. 38 Property insurance per licensed bed in excess of two (2) standard deviations 39 above the mean of the most recently reported property insurance costs per 40 licensed bed of all facilities in the reimbursement class as of the end of a 41 facility's fiscal year shall not be considered reasonable. 42 (1926 ) "Recipient" means an individual deter- 43 mined eligible by the director for the services provided in the state plan for 44 medicaid. 45 (27) "Rural hospital-based nursing facilities" are those hospital- 46 based nursing facilities not located within a metropolitan statistical area 47 (MSA) as defined by the United States bureau of the census. 48 (28) "Urban hospital-based nursing facilities" are those hospital-based 49 nursing facilities located within a metropolitan statistical area (MSA) as 50 defined by the United States bureau of the census. 51 (209 ) "Utilities"shallmean s 52 all expenses for heat, electricity, water and sewer.Utilities53shall be exempt from the percentile cap.54 SECTION 2. That Section 56-102, Idaho Code, be, and the same is hereby 5 1 amended to read as follows: 2 56-102. PRINCIPLES OF PROSPECTIVE RATES AND PAYMENT. The following prin- 3 ciplesare inherent in this chaptershall apply to the 4 reimbursement of freestanding skilled care and hospital-based skilled care 5 facilities : 6 (1)Base rates shall be set by the director prospectively, on an7annual basis by class of facilities, and shall be fixed for each class as8determined in the manner established by this chapterPayments to 9 facilities shall be through a prospective cost-based system which includes 10 facility-specific case mix adjustments. Details of the methodology shall be 11 set forth in rules based on negotiations between the department, the state 12 association(s) representing freestanding skilled care facilities, and the 13 state associations(s) representing hospital-based skilled care facilities. In 14 no event shall reimbursement to any facility exceed the usual and customary 15 charges made to private pay patients ; and 16 (2)Prospective base rates shall be established by class not lower17than the level which is determined to be adequate to reimburse the nonproperty18costs of each facility which is economically and efficiently operated and to19provide care which meets the needs of each recipient, in compliance with20applicable standardsEach skilled care facility's case mix index 21 shall be calculated quarterly and rates shall be adjusted based on the case 22 mix of that facility's medicaid residents as of a certain date during the pre- 23 ceding quarter specified in rule ; and 24 (3)Prospective payment rates established pursuant to this chapter25shall take into account economic conditions and trends during the period to be26covered by such ratesIn state fiscal year 2000, the total amount 27 paid to skilled care facilities shall approximate the same amount in medicaid 28 expenditures as would have been paid using the methodology in effect in state 29 fiscal year 1999, and the percentages of medicaid funds projected to be paid 30 to freestanding skilled care facilities and hospital-based skilled care facil- 31 ities shall be the same percentages that are projected to be paid using the 32 methodology in effect during state fiscal year 1999; and 33 (4) The cost limits used for the direct care and indirect care costs of 34 rural hospital-based skilled care facilities shall be higher than the cost 35 limits used for the direct care and indirect care costs of freestanding 36 skilled care and urban hospital-based skilled care facilities; and 37 (5) In computing the direct care per diem rate neither medicaid-related 38 ancillary services nor raw food shall be case-mix adjusted; and 39 (6) Property costs shall not be subject to a cost limitation or incen- 40 tive. Property costs of freestanding skilled care facilities shall be reim- 41 bursed as described in section 56-108, Idaho Code, and property costs of urban 42 and rural hospital-based skilled care facilities shall be reimbursed as 43 described in section 56-120, Idaho Code; and 44 (7) Cost limits shall apply to direct care costs and indirect care costs. 45 The cost limits shall be based on percentages above the bed-weighted median of 46 the combined costs of both freestanding skilled care and hospital-based 47 skilled care facilities; and 48 (8) Costs exempt from cost limits are property taxes, property insurance, 49 utilities and costs related to new legal mandates as defined by rule; and 50 (9) An incentive payment shall be paid to those facilities with indirect 51 per diem costs that are less than the established indirect care cost limit. 52 The incentive payment is calculated by taking the difference between the cost 53 limits and the provider's per diem indirect care cost times the incentive per- 54 centage. Freestanding skilled care and hospital-based skilled care facilities 6 1 shall receive the same percentage incentive payments for indirect care costs 2 but no incentive payment for direct care costs. The percentage at which the 3 incentive payment will be set shall be based on negotiations between the 4 department, the state association(s) representing freestanding skilled care 5 facilities, and the state association(s) representing hospital-based skilled 6 care facilities; and 7 (10) A newly constructed facility shall be reimbursed at the median rate 8 for skilled care facilities of that type (freestanding or hospital-based) for 9 the first three (3) full years of operation; and 10 (11) A facility adding new beds will have its rates for the three (3) full 11 years following the addition of the beds subjected to an additional reimburse- 12 ment limitation. This limitation will apply beginning with the first rate set- 13 ting period which uses a cost report that includes the date when the beds were 14 added. The facility's rate will be limited to the bed-weighted average of two 15 (2) rates: the facility's rate in effect immediately prior to the rate first 16 subject to the limitation and the median rate for skilled care facilities of 17 that type (freestanding or hospital-based) at the time the beds were added; 18 and 19 (12) A facility acquired prior to the end of that facility's fiscal year 20 will be reimbursed at the rate then in effect for that facility until the next 21 cost report can be used for rate setting. If the department determines that 22 the facility is operationally or financially unstable, the department may 23 negotiate a reimbursement rate different than the rate then in effect for that 24 facility; and 25 (13) If the department determines that a facility is located in an under- 26 served area, or addresses an underserved need, the department may negotiate a 27 reimbursement rate different than the rate then in effect for that facility; 28 and 29 (14) From July 1, 1999, through June 30, 2002, the nursing facility infla- 30 tion rate plus one percent (1%) per year shall be added to the costs reported 31 in a facility's cost report for purposes of setting that facility's rate. The 32 inflation rate to be used effective July 1, 2002, and the period of its use 33 will be based on negotiations between the department, the state association(s) 34 representing freestanding skilled care facilities, and the state 35 association(s) representing hospital-based skilled care facilities; and 36 (15) To control the growth in the cost limits, the increase in the cost 37 limits shall not exceed the skilled nursing facility inflation rate estab- 38 lished by data resources, inc., or its successor, plus two percent (2%) per 39 year for the period from July 1, 1999, through June 30, 2002. The maximum rate 40 of growth in the cost limits to be used effective July 1, 2002, and the period 41 of its use will be based on negotiations between the department, the state 42 association(s) representing freestanding skilled care facilities, and the 43 state association(s) representing hospital-based skilled care facilities; and 44 (16) To control declines in the cost limits, the cost limits for the 45 period from July 1, 1999, through June 30, 2002, shall not be lower than the 46 respective cost limits effective July 1, 1999. The minimum cost limits to be 47 used effective July 1, 2002, and the period of its use will be based on nego- 48 tiations between the department, the state association(s) representing 49 freestanding skilled care facilities, and the state association(s) represent- 50 ing hospital-based skilled care facilities; and 51 (17) Rates shall be rebased annually. Rate setting shall be prospective 52 with new rates effective July 1 of each year, using the principles applying to 53 skilled care facilities set forth in this chapter and the rules promulgated 54 pursuant to this chapter. There will be no settlement between actual costs 55 incurred during the rate year and the rate itself. Rates will be established 7 1 using the most recent audited cost report trended forward to the rate year. 2 Rates for skilled care facilities with unaudited cost reports will be interim 3 rates established by the department until a rate is calculated based on an 4 audited cost report. The draft audit of a cost report submitted by a facility 5 shall be issued by the department no later than five (5) months from the date 6 all information required for completion of the audit is filed with the depart- 7 ment; and 8 (18) Changes of more than fifty cents (50[) per patient day in allowable 9 costs resulting from federal or state law or rule changes shall be treated as 10 costs separate from the cost limitations until such time as they become part 11 of the data used for calculating the cost limits and in cost reports used for 12 rate setting; and 13 (19) If a review of the data submitted by a facility reveals errors that 14 result in an incorrect case mix index, the department may retroactively adjust 15 the facility's rate and pay the facility any amount by which the facility was 16 underpaid or recoup from the facility any amount by which the facility was 17 overpaid; and 18 (20) The rates established under the principles set forth in this section 19 shall be phased in using a combination of the reimbursement methodology in 20 effect as of state fiscal year 1999 and the principles set forth in this sec- 21 tion and in rules based on negotiations between the department, the state 22 association(s) representing freestanding skilled care facilities, and the 23 state association(s) representing hospital-based skilled care facilities. 24 Effective July 1, 2001, the phase-in provisions will no longer apply and the 25 department shall pay rates solely based on the principles set forth in this 26 section and the applicable rules . 27 SECTION 3. That Section 56-108, Idaho Code, be, and the same is hereby 28 amended to read as follows: 29 56-108. PROPERTY REIMBURSEMENT -- FACILITIES WILL BE PAID A PROPERTY 30 RENTAL RATE, PROPERTY TAXES AND REASONABLE PROPERTY INSURANCE. The provisions 31 of this section shall not apply to hospital-based facilities which are subject 32 to the provisions of section 56-120, Idaho Code, or to intermediate care 33 facilities for the mentally retarded which are subject to the provisions of 34 section 56-113, Idaho Code. The provisions of this section are applicable to 35 all other facilities. The property rental rate includes compensation for major 36 movable equipment but not for minor movable equipment. The property rental 37 rate is paid in lieu of payment for amortization, depreciation, and interest 38 for financing the cost of land and depreciable assets. Prior to final audit, 39 the director shall determine an interim rate that approximates the property 40 rental rate. The property rental rate shall be determined as follows: 41 (1) Except as determined pursuant to this section :and42as modified by section 56-109, Idaho Code:43 Property rental rate = ("Property base") x ("Change in building costs") x 44 (40 - "Age of facility") 45 40 46 where: 47 (a) "Property base" = $9.24 for all facilities. 48 (b) "Change in building costs" = 1.0 from April 1, 1985, through December 49 31, 1985. Thereafter "Change in building costs" will be adjusted for each 50 calendar year to reflect the reported annual change in the building cost 51 index for a class D building in the western region, as of September of the 52 prior year, published by the Marshall Swift Valuation Service. However, 53 forfree-standingfreestanding skilled care 8 1 facilities "change in building costs" = 1.145 from July 1, 1991, through 2 December 31, 1991. Thereafter, change in building costs forfree-3standingfreestanding skilled care facilities will be 4 adjusted each calendar year to reflect the reported annual change in the 5 building cost index for a class D building in the western region, as of 6 September of the prior year as published by the Marshall Swift Valuation 7 Service or the consumer price index for renter's costs available in Sep- 8 tember of the prior year, whichever is greater. 9 (c) "Age of facility" = the director shall determine the effective age, 10 in years, of the facility by subtracting the year in which the facility, 11 or portion thereof, was constructed from the year in which the rate is to 12 be applied. No facility or portion thereof shall be assigned an age of 13 more than thirty (30) years. However, beginning July 1, 1991, for14free-standingfreestanding skilled care facilities, 15 "age of facility" will be a revised age which is the lesser of the age 16 established under other provisions of this section or the age which most 17 closely yields the rate allowable to existing facilities as of June 30, 18 1991, under subsection (1) of this section. This revised age shall not 19 increase over time. 20 (i) If adequate information is not submitted by the facility to 21 document that the facility, or portion thereof, is newer than thirty 22 (30) years, the director shall set the effective age at thirty (30) 23 years. Adequate documentation shall include, but not be limited to, 24 such documents as copies of building permits, tax assessors' records, 25 receipts, invoices, building contracts, and original notes of indebt- 26 edness. The director shall compute an appropriate age for facilities 27 when documentation is provided to reflect expenditures for building 28 expansion or remodeling prior to the effective date of this section. 29 The computation shall decrease the age of a facility by an amount 30 consistent with the expenditure and the square footage impacted and 31 shall be calculated as follows: 32 1. Determine, according to indexes published by the Marshall 33 Swift Valuation Service, the construction cost per square foot 34 of an average class D convalescent hospital in the western 35 region for the year in which the expansion or renovation was 36 completed. 37 2. Multiply the total square footage of the building following 38 the expansion or renovation by the cost per square foot to 39 establish the estimated replacement cost of the building at that 40 time. 41 3. The age of the building at the time of construction shall be 42 multiplied by the quotient of total actual renovation or remod- 43 eling costs divided by replacement cost. If this number is equal 44 to or greater than 2.0, the age of the building in years will be 45 reduced by this number, rounded to the nearest whole number. In 46 no case will the age be less than zero. 47 (ii) The director shall adjust the effective age of a facility when 48 major repairs, replacement, remodeling or renovation initiated after 49 April 1, 1985, would result in a change in age of at least one (1) 50 year. Such changes shall not increase the allowable property rental 51 rate by more than three-fourths (3/4) of the difference between the 52 adjusted property base determined in subsections (1)(a) and (1)(b) of 53 this section and the rental rate paid to the facility at the time of 54 completion of such changes but before the change component has been 55 added to said rate. The adjusted effective age of the facility will 9 1 be used in future age determinations, unless modified by provisions 2 of this chapter. 3 (iii) The director shall allow for future adjustments to the effec- 4 tive age of a facility or its rate to reimburse an appropriate amount 5 for property expenditures resulting from new requirements imposed by 6 state or federal agencies. The director shall, within twelve (12) 7 months of verification of expenditure, reimburse the medicaid share 8 of the entire cost of such new requirements as a one-time payment if 9 the incurred cost for a facility is less than one hundred dollars 10 ($100) per bed. 11 (d) At no time shall the property rental rate, established under subsec- 12 tion (1) of this section, be less than that allowed in subsection 13 (1)(c)(ii), with the rate in effect December 31, 1988 being the base. How- 14 ever, subsequent to the application of this paragraph, before any rate 15 increase may be paid, it must first be offset by any rate decrease that 16 would have been realized if the provisions of this paragraph had not been 17 in effect. 18 (2) A "grandfathered rate" for existing facilities will be determined by 19 dividing the audited allowable annual property costs, exclusive of taxes and 20 insurance, for assets on hand as of January 1, 1985 by the total patient days 21 in the period July 1, 1984 through June 30, 1985. The property rental rate 22 will be the greater of the amount determined pursuant to subsection (1) of 23 this section, or the grandfathered rate. The director shall adjust the 24 grandfathered rate of a facility to compensate the owner for the cost of major 25 repairs, replacement, expansion, remodeling and renovation initiated prior to 26 April 1, 1985, and completed after January 1, 1985, but completed no later 27 than December 31, 1985.[The director shall adjust the grandfathered28rate of a facility to compensate the owner for the cost of major repairs,29replacement, expansion, remodeling and renovation initiated prior to April 1,301985, and completed after January 1, 1985, but completed no later than Decem-31ber 31, 1985.]For facilities receiving a grandfathered rate making 32 major repairs, replacement, expansion, remodeling or renovation, initiated 33 after January 1, 1986, the director shall compare the grandfathered rate of 34 the facility to the actual depreciation, amortization, and interest for the 35 current audit period plus the per diem of the recognized cost of major 36 repairs, replacement, expansion, remodeling or renovation, amortized over the 37 American hospital association guideline component useful life. The greater of 38 the two (2) numbers will be allowed as the grandfathered rate. Such changes 39 shall not increase the allowable grandfathered rate by more than three-fourths 40 (3/4) of the difference between the current grandfathered rate and the 41 adjusted property base determined in subsections (1)(a) and (1)(b) of this 42 section. 43 (3) The property rental rate per day of care paid to facilities with 44 leases signed prior to March 30, 1981, will be the sum of the annualized 45 allowed lease costs and the other annualized property costs for assets on hand 46 as of January 1, 1985, exclusive of taxes and insurance when paid separately, 47 divided by total patient days in the period June 30, 1983 through July 1, 48 1984. Effective July 1, 1989, the director shall adjust the property rental 49 rate of a leased skilled facility under this paragraph to compensate for the 50 cost of major repairs, replacement, expansion, remodeling and renovation ini- 51 tiated after January 1, 1985, by adding the per diem of the recognized cost of 52 such expenditures amortized over the American hospital association guideline 53 component useful life. Such addition shall not increase the allowable property 54 rental rate by more than three-fourths (3/4) of the difference between the 55 current property rental rate and the adjusted property base as determined in 10 1 paragraphs (a) and (b) of subsection (1) of this section. Where such leases 2 contain provisions that bind the lessee to accept an increased rate, reim- 3 bursement shall be at a rate per day of care which reflects the increase in 4 the lease rate. Where such leases bind the lessee to the lease and allow the 5 rate to be renegotiated, reimbursement shall be at a rate per day of care 6 which reflects an annual increase in the lease rate not to exceed the increase 7 in the consumer price index for renters costs. After the effective date of 8 this subsection, if such a lease is terminated or if the lease allows the les- 9 see the option to terminate other than by purchase of the facility, the prop- 10 erty rental rate shall become the amount determined by the formula in subsec- 11 tion (1) of this section as of the date on which the lease is or could be ter- 12 minated. 13 (4) (a) In the event of a sale, the buyer shall receive the property 14 rental rate as provided in subsection (1) of this section, except under 15 the conditions of paragraph (b) of this subsection or except in the event 16 of the first sale for afree-standingfreestanding 17 skilled care facility receiving a grandfathered rate after June 30, 18 1991, whereupon the new owner shall receive the same rate that the seller 19 would have received at any given point in time. 20 (b) In the event of a forced sale of a facility where the seller has been 21 receiving a grandfathered rate, the buyer will receive a rate based upon 22 his incurred property costs, exclusive of taxes and insurance, for the 23 twelve (12) months following the sale, divided by the facility's total 24 patient days for that period, or the property rental rate,not modi-25fied by section 56-109, Idaho Code,whichever is higher, but not 26 exceeding the rate that would be due the seller. 27 SECTION 4. That Section 56-113, Idaho Code, be, and the same is hereby 28 amended to read as follows: 29 56-113. INTERMEDIATE CARE FACILITIES FOR THE MENTALLY RETARDED. (a301 ) Services provided by intermediate care facilities for 31 the mentally retarded, with the exception of state operated facilities, shall 32 be paid in accordance with the provisions of this section, and not as provided 33 in any other section of this chapter, unless otherwise provided in this sec- 34 tion. State operated facilities shall be reimbursed costs based on medicare 35 reasonable cost provisions. 36 (b2 ) Except as otherwise provided in this sec- 37 tion, intermediate care facilities for the mentally retarded shall be reim- 38 bursed based on a prospective rate system without retrospective settlement 39 effective October 1, 1996. In no event, shall payments to this class of facil- 40 ity exceed, in the aggregate, the amount which would be reimbursed using medi- 41 care cost reimbursement methods as defined in the medicare provider reimburse- 42 ment manual (HCFA - pub. 15). 43 (c3 ) The prospective rate shall consist of the 44 following components: 45 (1a ) A component for reasonable property costs 46 which shall be computed using the property rental rate methodology set 47 forth in section 56-108, Idaho Code, with the exceptions that the base 48 rate shall exclude major moveable equipment and grandfathered rates will 49 not apply. The initial base rate shall be eight dollars and ninety-four 50 cents ($8.94) for facilities that accommodate residents in wheelchairs and 51 five dollars and eighty-one cents ($5.81) for facilities that cannot 52 accommodate residents in wheelchairs. The rates shall be adjusted annually 53 as provided in section 56-108, Idaho Code; and 11 1 (2b ) A component for forecasted reasonable day 2 treatment costs which shall be subject to a per patient day limit as pro- 3 vided in rule; and 4 (3c ) A component for all other allowable costs 5 as determined in accordance with department rules which shall be subject 6 to a limitation based on a percentage of the forecasted median for such 7 costs of intermediate care facilities for the mentally retarded, excluding 8 state operated facilities; and 9 (4d ) A component that provides an efficiency 10 increment payment of twenty cents ($.20) for each one dollar ($1.00) per 11 patient day that the facility is under the limit described in subsection 12 (c3 )(3c ) of this sec- 13 tion up to a maximum payment of three dollars ($3.00) per patient day. 14(d) In the event that the prospective payment system authorized by15this section does not receive required federal approval and the department and16providers are unable to negotiate an acceptable reimbursement methodology,17services provided by intermediate care facilities for the mentally retarded18shall be reimbursed in the same manner as specified in section 56-110, Idaho19Code, with property reimbursed as described in subsection (c)(1) of this sec-20tion.21 (e4 ) The director may require retrospective 22 settlement as provided by rule in limited circumstances including, but not 23 limited to: 24 (1a ) The facility fails to meet quality of care 25 standards; or 26 (2b ) The facility is new or operated by a new 27 provider, until such time as a prospective rate is set; or 28 (3c ) The prospective rate resulted from fraud, 29 abuse or error. 30 (f5 ) The director shall have authority to pro- 31 vide by rule, exceptions to the limitations described in subsection (c323 ) of this section. 33 (g6 ) The director shall promulgate the rules 34 necessary to carry out the provisions of this section. 35 SECTION 5. That Section 56-114, Idaho Code, be, and the same is hereby 36 amended to read as follows: 37 56-114.NEW FREE-STANDINGFREESTANDING SPECIAL 38 CARE FACILITIES. Forthe first fiscal year ofafree-39standingfreestanding special care facilityestab-40lished on or after January 1, 1989,which seeks to contract for the 41 first time to provide medicaid services to recipients, the director shall 42 determine payment for such facilityin the same manneras speci- 43 fied insection 56-111, Idaho Code. Thereafter, such determination for44such facility shall be done in substantially the manner required in sections4556-110, 56-112 and 56-113, Idaho Coderule . 46 SECTION 6. That Section 56-117, Idaho Code, be, and the same is hereby 47 amended to read as follows: 48 56-117. PAYMENT OF SPECIAL RATES. The director shall have authority to 49 pay facilities at special rates for care given to patients who have long 50 - term care needsbeyond the normal scope of facility services.51Patients with such needs may include, but are not limited to, ventilator12 1assisted patients, certain pediatric patients, certain comatose patients, and2certain patients requiring nasogastric or intravenous feeding devices3 not adequately reflected in the rates calculated pursuant to the princi- 4 ples set forth in section 56-102, Idaho Code . The payment for such spe- 5 cialized care will be in addition to any payments made in accordance with 6 other provisions of this chapter. The incremental cost to a 7 facility that exceeds the rate for services provided pursuant to 8 the provisions ofthissection 56-102, Idaho Code, 9 will be excluded from the computation of payments or rates under other provi- 10 sions of this chapter. Until the facility applies for a special rate, 11 patients with such needs will be included in the computation of the facility's 12 rates following the principles described in section 56-102, Idaho Code. 13 SECTION 7. That Section 56-120, Idaho Code, be, and the same is hereby 14 amended to read as follows: 15 56-120.EXISTINGPROPERTY REIMBURSEMENT FOR 16 HOSPITAL-BASED SKILLED NURSING FACILITIES.(a) Not later17than January 1, 1982, and prior to the beginning of each fiscal year thereaf-18ter, the director shall determine the maximum base payment rate for all19hospital-based facilities that were under medicaid contract on or before such20effective date as a class, using the following method:2122(1) First, using worksheet B of the most recent cost report, or the23most recent audited medicare cost report, if available, submitted to the24director by each hospital-based facility, the director shall subtract such25facility's total direct costs (excluding property and utility costs) from26the sum of total general, ancillary and routine service costs (excluding27property and utility costs) of both the facility and the hospital;2829(2) Next, again using worksheet B of the same medicare cost report30submitted by such facility, the director shall determine a percentage by31dividing the sum of the total indirect costs of the hospital and the32facility into the total indirect costs of the facility;3334(3) Next, the director shall multiply the total direct general ser-35vice costs (excluding property and utility costs), as used in paragraph36(1) of this subsection, by the percentage derived from paragraph (2) of37this subsection;3839(4) Next, the director shall add to the total direct costs of the40facility, as used in paragraph (1) of this subsection, the sum derived41from paragraph (3) of this subsection and total costs attributable to cen-42tral service, oxygen, and physical therapy services, taken from worksheet43C of the facility's medicare cost report;4445(5) Next, the director shall divide the sum derived from paragraph46(4) of this subsection by the facility's total number of patient-days in47the fiscal year covered by that facility's medicare cost report;4849(6) Next, the director shall multiply the cost of care per patient-50day obtained from paragraph (5) of this subsection by the percentage rep-51resenting the annual combined inflator index for the period in which the52base rate is to be effective, as determined and agreed upon pursuant to53section 56-130, Idaho Code;13 12(7) Next, the director shall combine the results from each3hospital-based facility, as obtained from paragraph (6) of this subsec-4tion, to establish the range of costs of care per patient-day for all such5facilities in the class; and67(8) Next, the director shall calculate the mean cost of care per8patient-day for the class and the standard deviation from such mean, which9shall be used to determine the base rate for the class, as specified in10section 56-103(a), Idaho Code.11The cost per patient-day resulting from paragraph (8) of this subsection shall12constitute the basic payment for the cost of care per patient-day in each13hospital-based facility in the class, and the director shall notify each such14facility of such rate not later than sixty (60) days prior to the beginning15date of the fiscal year in which it is to be effective. For purposes of this16subsection, "medicare cost report" means form 2551, form 2552, or any similar17successor form promulgated by the United States department of health and human18services or its successor agency for the purpose of determining allowable,19reimbursable costs for delivery of care or services under titles V, XVIII, or20XIX of the social security amendments of 1965, as amended.2122(b)In addition to the basic payment per patient-day of 23 care, each hospital-based skilled care facility shall be paid on 24 a prospective basis:2526(1) Ii ts actual property and utility costs per 27 patient-day, to be determined by dividing its total projected property and 28 utility costs,subject to the interest rate limitation, for its29upcoming fiscal year, as submitted by each such facility to the director30not later than ninety (90) days prior to the beginning date of such fiscal31year, by the total number of patient-days estimated by such facility; and3233(2) A monthly incentive payment equal to the computed difference34between the facility's actual payment per patient-day and the base rate35established for the class pursuant to section 56-103(a), Idaho Code, and36this part. This computed difference shall be:37381. One-half (1/2) of the difference, where the one hundredth39percentile applies to such facility's class;40412. One-third (1/3) of the difference, where the ninetieth42percentile applies to such facility's class;43443. One-fourth (1/4) of the difference, where the eightieth45percentile applies to such facility's class; or46474. One-sixth (1/6) of the difference, where the seventy-fifth48percentile applies to such facility's class;49provided, that in no event shall the computed difference exceed one dollar50and fifty cents ($1.50) per patient-day.5152(c) Actual payments made by the director to each hospital-based53facility pursuant to sections 56-103 and 56-105, Idaho Code, and this section,54shall be subject to audit and settlement under section 56-107, Idaho Code. In55no event shall reimbursement to any facility exceed the usual and customary14 1charges made to private pay patientsas calculated from the cost 2 report selected for rate setting, by the total number of patient-days from the 3 same cost reporting period . 4 SECTION 8. That Section 56-131, Idaho Code, be, and the same is hereby 5 amended to read as follows: 6 56-131. MULTIPLE-USE PLANS. The director shall promulgate such rules, as 7 t he director deems advisable to enable and encourage 8 facilities to adopt plans for offering additional services or programs within 9 their institutions which will promote appropriate levels of care for recipi- 10 ents residing in their service areas and, as a result, achieve cost savings 11 for the medicaid program. In developing such rules, the director shall con- 12 sult with representatives offree-standingfreestanding 13 skilled care,free-standingfreestanding 14 intermediate care,free standingfreestanding spe- 15 cial care, and hospital-based facilities. 16 SECTION 9. That Sections 56-103, 56-105, 56-106, 56-107, 56-109, 56-110, 17 56-111, 56-112, 56-115, 56-118, 56-121 and 56-130, Idaho Code, be, and the 18 same are hereby repealed.
STATEMENT OF PURPOSE
RS 08745
Amends Title 56 of the Idaho Code to provide for a prospective,
acuity based, reimbursement methodology for skilled nursing
facilities in Idaho, to remove redundant language and references
to repealed sections from the provisions governing reimbursement
for intermediated care facilities for the mentally retarded, and
to provide for reimbursement of free-standing special care
facilities by rule.
FISCAL NOTE
The proposed legislation provides that the prospective, acuity
based, reimbursement methodology for skilled care facilities
will be budget neutral in State fiscal year 2000.
CONTACT: Scott Spears
Idaho Health Care Association
208-343-9735
STATEMENT OF PURPOSE/ FISCAL NOTE S1074