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North Dakota Long Term Care Association Issue Briefs 2003 NURSING FACILITY
PAYMENT SYSTEM MINIMUM
DATA SET FOR PAYMENT EQUALIZATION
OF RATES
The 1987
legislature passed HB 1448 which required equalization of rates between
Medicaid residents and self pay residents in nursing facilities.
Equalization of rates requires all residents be charged the same
rate for comparable services. The
legislation was effective RATE
CALCULATIONS
The
determination of rates is the sum of four components: direct care, other
direct care, indirect care and property.
Today’s rates and limits are calculated based on 1999 costs and
minimally inflated each year. Direct Care Rate. Costs
in the Direct Care Category include: nursing and therapy salary and
benefits, OTC drugs, minor medical equipment and medical supplies. The
limit is established at the 99th percentile rate using the 1999
cost report year. Any facility
over the 99th percentile (4 in 2003) will be limited and not
get reimbursed for any costs over the 99th percentile.
The four nursing facilities exceeding the nursing limit are
spending another $422,750 in uncompensated care. Other Direct Care. Costs in the Other Direct Care Category include: food, laundry, social services and activity salaries and supplies. The limit is established at the 85th percentile using the 1999 cost report year. Any facility over the 85th percentile (20 in 2003) will be limited and not get reimbursed for any costs over the 85th percentile. The twenty nursing facilities exceeding this limit are spending $420,696 in uncompensated costs. Indirect
Care. Costs in the Indirect Care
Category include: Administration,
pharmacy, Chaplin, housekeeping and dietary salaries and supplies, medical
records and plant costs. The
limit is established at the 75th percentile using the 1999 cost
report year. Any facility over
the 75th percentile (39 in 2003) will be limited and not
reimbursed for any costs over the 75th percentile.
The thirty-nine nursing facilities exceeding this limit are
spending another $3,246,199 in uncompensated costs. Property
rate includes depreciation, interest expense, property taxes, lease and
rental costs, start-up costs and reasonable legal expenses.
If a facilities occupancy falls below 90% they receive a penalty.
In 2003, thirteen nursing facilities received an occupancy penalty
resulting in lost reimbursement. Unreimbursed
property costs for these thirteen facilities amounts to $958,472. Incentives - A reward is provided to nursing facilities who are under the limits
in indirect care. The
incentive is calculated for each facility based upon their indirect costs
compared to indirect limits (75th percentile).
Facilities are able to receive .70 cents for every dollar they are
below limits up to a maximum of $2.60 per resident day.
In 2003, 36 nursing facilities received an incentive, with the
average per day incentive at $1.58. Of
the 36 nursing facilities receiving an incentive, they ranged from $0.09
to $2.60 per resident per day. Operating Margin - All nursing facilities receive an operating margin of three percent
based on their historical direct care costs and other direct care costs
(up to limits). The operating
margin provides needed cash flow to cover up front salary adjustments,
replacement of needed equipment, unforeseen expenses, and dollars to
implement ever increasing regulations.
The operating margin covers the gap between the cost report and the
effective date of rates (this can be up to 18 months).
In 2003, the average operating margin was $2.36 per resident per
day. Inflation
- Rates are adjusted for inflation annually.
Inflation is a rise in price levels, generally price levels the
long term care facilities can not control.
Examples of price level increases include 90% increase in general
liability insurance, the price of over-the-counter drugs and medical
supplies, the increased cost of food, etc.
To attract and retain adequate staff nursing facilities need to
offer salary and benefit packages that reward people.
Approximately 75% of a nursing facility’s budget is dedicated to
personnel costs. Adequate
inflation adjustments are critical for salary and benefits so nursing
facilities can compete in the market place.
Turnover of certified nurse assistants, the largest pool of
employees is 43% annually. This
is down from a high of 66% in 2000. When the
current system was created over thirteen years ago, it was recommended by
the Department, consumers, and providers, that inflation for nursing
facility expenses be properly recognized and funded.
It was recommended that Data Resources Incorporated (DRI), a
national forecasting inflation firm, be utilized to track price
adjustments. DRI had the
capability to track inflation specific to the nursing home industry.
Today, the rates are adjusted utilizing the average of DRI and the
CPI and thus costs continue to exceed payments. Limits and Rebasing - Limits are based upon the 1999 rate year and have been minimally inflated each year. In 2003, 44 of 80 (55%) nursing facilities exceed at least one limit. If limits are not rebased for the 2004 rate year it is anticipated 70% of the nursing facilities will exceed a limit. Back
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