The following summary is a narrative of the changes in the 7/1/04 Wisconsin Medicaid Skilled Nursing Home reimbursement methodology.  The changes will be incorporated into the 7/1/04 rate-setting process for the rates which will be in effect from 7/1/04 – 6/30/05.

Minimum Occupancy Factor

With the phaseout of the occupancy penalty complete as of 6/30/04, it is no longer necessary for the state to include the minimum occupancy factor in the methods; therefore, it was eliminated.  The methods do retain “beds for ratesetting,” as there are still beds remaining in the bed bank.  The primary reason some providers have left beds in the bank is to qualify for the incentives a facility receives for having 50 licensed beds or less.

Cost Center Changes

The Over the Counter Drug cost center was eliminated in the new methods.  These costs are now included in the Other Direct Care Supplies and Services cost center, with the price for that cost center increased accordingly.   Also, the Administration and Fuel/Utilities cost centers have been eliminated with these costs now being included in the Support Services cost center.   A separate allowance is still calculated for Administration and Fuel/Utilities; however, these allowances will be combined into one payment with the Support Services price.  The primary reason for still calculating them separately is for operational purposes, so facilities can continue to monitor the relationship of their actual costs to the allowance in each cost center.  DHFS has indicated, however, that this will only be done for this year, and beginning 7/1/05, they will not calculate these allowances separately.  Therefore, providers will need to find alternative ways of monitoring the relationship between their spending and reimbursement on a cost center-by-cost center basis.

Phasedown/Phaseout Agreements

DHFS modified the methods to allow facilities under common ownership to combine bed reductions at multiple facilities in order to qualify for a major phasedown.  This is designed to allow more facilities to qualify for the phasedown incentives and allow the state to recoup additional beds from the system.

Bedhold Billing

The methods were modified to potentially allow more facilities to qualify to bill bedholds.  Effective 11/1/04, facilities will qualify to bill bedholds if they achieve 94% occupancy or have 9 or fewer vacant beds in the month prior to billing, a change from the previous criteria of 95% occupancy and 8 or fewer vacant beds.  Therefore, the first month the new occupancy criteria will apply to will be October.

Specialized Psychiatric Rehabilitative Services

DHFS revised the policy regarding reimbursement for Specialized Psychiatric Rehabilitative Services (SPRS).  Effective 7/1/04, facilities no longer need to submit a care plan in order to receive the SPRS payment.  However, every 2 years, the facility will have to prove appropriate placement via a Level II PASARR screen in order to maintain eligibility.

IGT Funds Distribution

The methodology relating to how IGT funds are distributed was changed from Medicaid licensed beds to Medicaid patient days.

Exceptional Medicaid/Medicare Utilization Adjustment (EMMUA)

The EMMUA incentive was adjusted to allow more facilities to qualify.  Facilities with a combined Medicare and Medicaid population percentage of 65% or greater will receive this incentive, a change from prior years where the percentage needed to be 70% or greater.   In addition, an increased incentive is now available for facilities within the City of Milwaukee limits.   This new incentive is meant to ease the financial burden of operating in the City of Milwaukee with high Medicaid utilization and is in direct response to the number of actual and potential nursing home closings in the City of Milwaukee.

Home Office Limitation

The $7.36 limitation on home office costs has been eliminated now that full-price-based reimbursement is in effect for administrative costs.   The state will continue to enforce the related-party compensation methodology.

Employee Meals

The state has modified the methodology for allowable employee meals as a fringe benefit.    The allowable portion which can be included as a fringe benefit will be $4.25 per employee meal, less any revenue received for the meal.

Prices/Targets

Below is a comparison of the prices/targets from the 7/1/03 methods to the 7/1/04 methods: