1. The Current Status of the Long-Term Care Industry Presented to the 2008 TNhfma Fall Institute Park Vista, Gatlinburg, TN October 28, 2008

2. Learning Objectives Discuss changes affecting Medicare long-term care reimbursement Discuss the changes in TennCare reimbursement for long-term care providers Discuss ways to improve reimbursement Discuss the alternatives to institutional care Discuss options for financing care

3. Changes Affecting Medicare Changes to the Nursing Home quality measures Change in RUG categories Change in market basket calculation Changes in MDS

4. Quality Measures QIO program was established Part B of Title XI of the Social Act and was amended by the Peer Review Act of 1982 The are now in the 9 th Scope of Work Mission is to:..to improve the effectiveness, efficiency, economy, and quality of services delivered to Medicare beneficiaries.

5. Quality Measures (continued) Requirements of the QIO program: Improve quality of care Protect the integrity of the Medicare Trust Fund Protect beneficiaries Address complaints Address provider-issued notices And other QIO responsibilities

6. Quality Measures (continued) Current proposal for a Five Star ratings system. President Bush wants a system similar to the way hotels and restaurants are rated. Ratings would be published on CMS website Will encourage providers to improve quality Could be used to tier reimbursement to favor high quality providers

7. Change in Market Basket Methodology From inception of SNF PPS have used 1997 data trended forward using inflation factor For 2008 FFY will use 2004 data Why is this important?

8. RUG Categories Increased from 44 to 53 in FFY 2007 New categories deal with increased patient acuity RUX,RUL, RVX, RVL,RHX, RHL, RMX, RML Look for more changes in the future

9. MDS 3.0 Currently providers us MDS 2.0 to evaluate patients. CMS is set to introduce MDS 3.0 Will collect additional data on patient condition and resource utilization

10. FFY 09 Payment Changes Market basket increase of 3.4 % Recalibration of certain payment categories is delayed 09 Proposed Rule- changes needed to establish payment rates that more accurately meet patient needs. (bureau-o-speak) What it really means is, we botched this in making the refinements budget neutral.

11. Changes affecting TennCare Changes to add-on payments More dependence on Medicare Part D More detailed review of cost reports Schedule H State budget concerns

12. TennCare Rate Add-ons Cost Containment Incentive ( this is good)Cost Containment Incentive ( this is good) Sprinkler adjustment (whats up with this)Sprinkler adjustment (whats up with this) Minimum wage adjustment ( no longer available)Minimum wage adjustment ( no longer available) Bed tax pass-through ( hasnt changed in years)Bed tax pass-through ( hasnt changed in years)

13. Medicare Part D Previous TennCare Pharmacy program –Seven scripts per month –Advocate lawsuits –Rising cost of prescription drugs Federal Prescription Drug plan (MMA) TennCare now requires all eligible patients to participate in Medicare Part D

14. More Detailed Cost Report Review Now require all of the following be filed with cost report: Working trial balance Depreciation Management contract Leases Detailed analysis of anything other.

15. More Detailed Cost Report Review (continued) Adjustment of free meals Reasonableness adjustments Overhead (see Schedule H) Possible future adjustments; Excessive benefits Certain types of benefits Otherwise reasonable expenses Things that the reviewer does not understand

16. Ways to Improve Reimbursement Careful completion of the MDS Accurate assignment of cost on the cost report Push for a Nursing Home specific wage index Accurate and complete bad debt logs Appropriate charge structure

17. MDS Completion Involve an interdisciplinary team Clinical members Financial members Capture all clinical data about the patient Make sure all ADL needs are identified

18. Cost Report assignment Make sure ancillary charges are captured Assign cost to appropriate cost centers Proper overhead allocations Assign where overhead departments used Do not assign if no overhead, e.g. Outside pharmacy

19. Wage Index SNFs currently use the hospital wage index Rationale is that the nursing home data is not accurate SNFs do not use the occupational mix portions of the hospital wage index Wage disparities are not the same

20. Medicare Bad Debts Electronic maintenance of logs encouraged by CMS Complete all required columns Accumulate supporting documentation as you go Apply collection policies consistently Capture non-dual eligibles

21. Charge Structure Appropriate routine charge has significant impact on TennCare Level I reimbursement Allows for a more accurate distribution of cost to various payors May have a positive bottom line effect Many nursing home providers fail to capture ancillary charges for TennCare patients.

22. Alternatives to Traditional Services Home and community based services Assisted living facility Residential housing Adult day care services Facility-based home care and private duty services

23. Methods of Financing Care State budget constraints will limit increases in TennCare Medicare is eventually curtail cross subsidization of TennCare patient cost More affluent boomers coming into the nursing home age population will be more likely to have long-term care insurance.

24. Tennessee Long-Term Care Options Plan The legislation is officially titled, Long-Term Care Community Options Act of 2008. (LTCCOA 08) Bills nickname, Bubba Caring for Granny Act Has three key components: Create consumer-directed options (Friends and Family) Simplified process for access (Single point of entry) Whole-person care coordination ????????

25. What LTCCO 08 Act Addresses Limited access and options Over reliance on nursing homes More options Fragmented LTC services and system complexities Opens up Home and Community Based Services Simplifies entry

26. What LTCCO 08 Act Addresses (continued) Limited available resources Reduces dependence on costly services Seeks more cost-efficient services providers Work to reduce use of more costly services later Utilize natural support networks (Bubba)

27. Predicted Outcomes of LTCCOA 08 Existing providers will change their delivery models Potential for abuse will require specific oversight Patients will have more options The Act will provide more options and if properly funded will address the real problem, increased demand.

28. Questions and Contact Information William C. Matheney FHFMA, CPA, MBA Matheney Stees & Associates PC 6136 Shallowford Road Ste. 101 Chattanooga, TN 37421 Phone 800-556-1076 ext. 105 Fax 800-556-1075 email bmatheney@matheneystees.combmatheney@matheneystees.com