Ala. Admin. Code r. 560-X-22-.06
Current through Register Vol. 43, No. 1, October 31, 2024
Section 560-X-22-.06 - Reimbursement Methodology(1) All nursing facilities will be grouped into three (3) functional categories: (a) Nursing Facility (NF).(b) Nursing Facility/Institution for Mental Disease (NF/IMD).(c) Nursing Facility/Institution for the Developmentally Disabled (NF/IDD).(2) The following methodology shall apply: Cost reports, as submitted, will be desk audited for any unallowable costs, and those costs will be removed from the subsequent computations. The providers' reported allowable costs will be used as the basis for calculating the new per diem rates. All similar allowable costs will be categorized into one of the four (4) groups: operating costs, direct patient care cost, indirect patient care cost, and property cost. NF/IMD and NF/IDD facilities will be exempt from all ceilings. The following methodology will be used for determining the per diem rates for approved beds. Ceilings are to be limited to the previous year's ceiling increased by no more than four (4) percentage points over the DRI inflation index. Should the computed ceiling exceed that index, the lower amount will be used. For example: FY 96 ceiling | = $50.00 |
DRI index | = 3.5% |
Limit | = $50.00 + (.035 + .04)($50) |
| = $50.00 + $3.75 = $53.75 |
Computed Ceiling | = $54.50 |
FY 97 Ceiling | = $53.75 |
(a) Operating Cost Center. The allowable management and administrative costs (See Rule 560-X-22-.10), after inflation index is applied, for each facility will be divided by reported patient days. All nursing facilities will be grouped by the number of beds in the facility and the operating costs for each facility will be separated into two bed size groupings, 75 beds or less and 76 beds and over. Each grouping will be arrayed by the cost per patient day and the median plus 5% will be determined for each grouping and that will be the ceiling. This ceiling, or actual cost, whichever is less, will be used for each provider's rate computation.(b) Direct Patient Care Cost Center. Direct care costs, after inflation index is applied, consisting of nursing services, raw foods, medical director, nursing consultant, pharmacy consultant, and dental consultant for each facility will be divided by reported patient days. These costs per patient day will be arrayed and the ceiling for the direct patient care cost center will be the median cost per patient day plus 10%. The provider's actual allowable reported cost per patient day plus 10% not to exceed the established ceiling plus 10%, whichever is less, will be used for each provider's rate computation.(c) Indirect Patient Care Cost Center. Costs for plant operations, dietary (minus raw foods), laundry (less costs associated with patient personal laundry), activities, social services, housekeeping, beauty and barber (if provided free of charge by the facility), dietary consultant, social services consultant, and other allowable costs, after inflation index is applied, will be divided by reported patient days. These costs per patient day will be arrayed and a median cost per patient day will be determined. The ceiling for indirect patient care costs is the median cost per patient day plus 10%. The provider's actual allowable reported cost per patient day plus 50% of the difference between actual allowable cost and the established ceiling, up to the ceiling amount, will be used for each provider's rate computation.(d) Property Cost Center. In lieu of depreciation expense, lease expense, and a return on equity, a fair rental return (see Rule 560-X-22-.14 for detailed explanation) will be computed for each provider using the following procedure: 1. A current asset value per bed will be established. This current asset value will initially be set using the standard value of $25,000 per bed and reducing by 1% for each year of age, or fraction of 1% for partial years, not to exceed a 50% reduction or a minimum value of $12,500 which will be applied as a floor. In order to keep pace with rising construction costs, a rebasing system will be established. The mechanism for rebasing will be to index the current asset values each year. The Marshall-Swift Evaluation Service will be used for adjusting to inflation.2. A gross rental factor of 2.5% will be multiplied by the current asset value of the facility to determine the rental value of the facility.3. The "Rate of Return on Current Asset Values" will be computed in two parts. First, the current asset value of the facility, less the balance due on allowable notes incurred to purchase all land, buildings, and equipment, will be multiplied by the "current yield on 30 year U. S. Treasury Bonds" as of June 30th each year. Second, the current asset value will be multiplied by a "risk premium of 1.5% for ownership." The two products will then be added together.4. Interest expense related to allowable notes incurred to purchase land, buildings, and equipment will be determined.5. Property taxes and property insurance costs will be determined.6. The rental value, rate of return, allowable interest, property taxes, and property insurance costs, less laundry adjustment from Fair Rental, will be totaled and that total will be divided by the facility's reported patient days to determine the facility fair rental payment which will be used to compute the facility's rate.(e) After the operating costs, direct patient care costs, and indirect patient care costs have been added together, the allowable property costs are added. The resulting costs is the rate per patient day for the cost report year.(f) Example: 1. Operating Costs (actual allowable reported costs per patient day up to the ceiling).2. Direct Patient Care Costs (actual allowable reported cost per patient day plus 10% not to exceed the established ceiling plus 10%).3. Indirect Patient Care Costs (actual allowable reported cost per patient day plus 50% of the difference between the reported cost and the ceiling up to the ceiling amount).4. Total of Items 1, 2, and 3.5. Allowable Property Costs.6. Laundry fee-for-service.7. Total of Items 4, 5, and 6.(g) NF/IDD facilities will not be subject to the above outlined ceilings; however, their rates will be computed in a like manner.(h) NF/IMD facilities and any other facility owned and operated by the State of Alabama will have their rates computed in the above manner, but will not be eligible for incentive payments in the direct care and indirect care areas, nor will they receive a Fair Rental payment. Instead, their rates will be determined using actual cost with no ceiling limitations and a usage allowance for property costs (2% for buildings and 6 and 2/3% for equipment).(3) Ceilings Not Subject to Adjustments. Once the ceiling has been established for a fiscal year, it will be final and not subject to revision or adjustment during that year. However, at the discretion of the Agency, it may be changed upon discovery of material error. Since the ceiling rate is based on information provided in the cost reports, it is to the benefit of each provider to ensure that their information is correct and accurate. If obvious errors are detected during the desk audit process, providers will be given an opportunity to submit corrected data.(4) After the rates have been set, each provider will be notified of its rate. If the provider has questions regarding any disallowances made during the rate setting process, they may request further information in writing. Only those requests submitted in writing will be honored.(5) During the fiscal year, the Commissioner of Medicaid will consider extraordinary expenditures which are not reasonably foreseeable and are totally beyond the control of the provider. (Example: Additional personnel or equipment mandated by federal or state governmental agencies.) Such expenditures do not include those which can be reasonably anticipated in connection with inflation, such as employee compensation increases and employee benefit increases. Requests to Medicaid for consideration must be fully substantiated, to include the reason for the request, total computed cost, effective date and other supporting data, as pertinent.(a) Costs [as referenced in (5) above] which are approved and added to a projected rate during the period January 1 - June 30 are subject to retroactive settlement upon submission of the next cost report. Costs which are approved and added to a rate during the rate period July 1 - December 30 shall be settled through the next rate weighting cycle (January 1 -June 30).(6) The monthly rate is computed by multiplying the per diem rate by 30.42 days. This rate is valid for patients in the nursing facility for the full month. For partial monthly coverage, the per diem rate is multiplied times the number of days.(7) Dollar values are rounded.(8) Effective July 1, 1989, the reasonable allowable costs of compliance with the provisions of §4211 OBRA 87 as incurred by nursing facilities for nurse aide competency evaluation and training is recognized for purposes of reimbursement. Reimbursement for these costs will be as follows:(a) For those employees hired prior to July 1, 1989, nursing facilities will be reimbursed the Medicaid share (based on percentage of occupancy) of costs associated with the original competency evaluation as incurred and documented. These costs will be reimbursed as a pass-through item outside the per diem rate, not subject to the 60th percentile upper limit.(b) For the period July 1, 1989, through December 31, 1989, nursing facilities will budget the allowable costs of nurse aide training and competency evaluation. The resulting amount per day, for these costs only, will be added to existing per diem rates outside the 60th percentile limitation. These budgeted costs will be subject to retroactive adjustment when the actual cost is verified.(c) Subsequent reimbursement of nurse aide competency evaluation and training expenses will be paid outside of the normal per diem system. Nurse aide training expenses allowed to be paid outside the normal per diem system are costs of the test, any charge for training by other than the facility, necessary supplies, and cost of transportation of the aide to the training or testing site. These expenses should be reported in the unallowable section of the cost report, on a separate line, and identified as nurse aide training expenses. An attachment to the cost report is required itemizing expenses. If equipment costs are included, the normal capitalization policy will apply. These expenses will be extracted from the cost reports and paid at a later date as a separate payment. Under the current rules, these procedures will continue into future years.(d) Equipment used in nurse aide competency evaluation and training. Reimbursement for equipment (i.e., ProCare) will be reimbursed by one of the following methods:1. Will be recognized as medical specialized equipment and capitalized and depreciated over a useful life of three (3) years, or2. A rate of $30.00 will be paid for each nurse aide that is trained and passes the competency test.(e) Because nurse aide training is considered an administrative cost by HCFA and has a federal match of 50%, these costs cannot go through the cost report. These costs must be reported in the "unallowable" section of the cost report and will be paid as outlined in (c) above.Ala. Admin. Code r. 560-X-22-.06
Rule effective 10/1/1982. Amended effective 7/9/1984; August 11, 1986; March 12, 1988; July 13, 1989. Emergency rule effective 1/22/1990. Amended effective 4/17/1990. Emergency rule effective 5/1/1990. Amended effective 5/15/1990; August 14, 1990; October 1, 1990. Emergency rule effective 9/12/1991. Amended effective 12/12/1991; August 12, 1992. Amended: Filed December 8, 1997; effective 1/12/1998.Author: Susan Mims, Bob Murphy
Statutory Authority: State Plan; Title XIX, Social Security Act; 42 C.F.R. §§ 447.200 - .272, et seq.