Medicaid Reimbursement Update LeadingAge MO September 5, 2019

Presenter Brian P. Hickman, CPA Partner BKD| 417.865.8701

Medicaid Rates Net Medicaid rate increases NFRA rate reduction $7.83 PPD effective 7/1/18 $7.76 PPD $0.54 PPD ($.47) PPD (NFRA reduction) $1.49 PPD effective 7/1/19 (pending CMS approval) NFRA rate reduction $0.47 PPD effective 7/1/18 Now $12.93 PPD ($13.40 - $0.47) Future increases to offset minimum wage increases??

Update on Capital Component Bill

S.B. 514, Section 208.225.3 Any intermediate care facility or skilled nursing facility, as such terms are defined in section 198.006, participating in MO HealthNet that incurs total capital expenditures, as such term is defined in section 197.305, in excess of two thousand dollars per bed shall be entitled to obtain from the MO HealthNet division a recalculation of its Medicaid per diem reimbursement rate based on its additional capital costs or all costs incurred during the facility fiscal year during which such capital expenditures were made. Such recalculated reimbursement rate shall become effective and payable when granted by the MO HealthNet division as of the date of application for a rate adjustment.

Questions - Regulations: Effective August 28, 2019. However, will require implementing regulations. Definition of “Capital Expenditure”? As defined in §197.305(3)? As defined in 13 CSR 70-10.015 (“Medicaid Plan”) (7)(C)? Methodology to calculate the “additional capital costs”? What amendments to Medicaid plan will be required?

Questions - Regulations: What changes to Medicaid Plan are needed for a “recalculation” a facility’s rate? Revisions to existing reg sections? Should an entirely new section be created under this regulation, similar to 13 CSR 70-10.015(20) for 2004 rebasing?

Questions - Application What base year cost report will be utilized for a facility rate recalculation? Frequency of allowed future rate recalculation requests? Will capital expenditures incurred prior to 8/28/19 qualify? Documentation to support expenditures? Date by which per bed costs must be incurred to be timely under the statute? Will project costs spanning over multiple cost reporting periods be allowed to be accumulated?

Components of Medicaid Per Diem Prospective Rate Basic Cost Components Patient Care (Ceiling of 120% of Median) Ancillary (Ceiling of 120% of Median) Administration (Ceiling of 110% of Median) Capital (Fair Rental Value (FRV)) Working Capital Allowance Incentives Patient Care Incentive Ancillary Multiple Component NFRA Add-On

Medicaid Per Diem Prospective Rate – Other Considerations Minimum Occupancy Administration and Capital components subject to 85% minimum occupancy, based on licensed bed capacity Rate Setting Initial rate based on 2nd full 12-month cost reporting period Facility continues to receive initial rate with no changes other than subsequent statewide trend factor increases, etc. applicable to all NFs in the state Rebasing Since inception of current plan in 1995, Medicaid rates have only been partially (1/3) rebased once, in 2004

Medicaid Per Diem Prospective Rate – Other Considerations Per Diem Rate based on “allowable” costs Certain costs (i.e. penalties, income taxes, certain related party costs, donations, owners’ compensation above prescribed limits, and other non-allowable costs) are excluded from allowable costs in determining prospective payment rate, and certain revenues received are required to be offset against allowable costs Important to monitor current Medicaid allowable costs (Cost Report Schedule L) as compared to current rate received. See the following Example Schedule L:

Questions? bhickman@bkd.com