ARTICLE 14 AS AMENDED

RELATING TO MEDICAL ASSISTANCE NURSING FACILITIES RATE REFORM

SECTION 1. Section 40-8-19 of the General Laws in Chapter 40-8 entitled “Medical

Assistance“ is hereby amended to read as follows:

40-8-19. Rates of payment to nursing facilities. -- (a) Rate reform.

     (1) The rates to be paid by the state to nursing facilities licensed pursuant to chapter 17 of

title 23, and certified to participate in the Title XIX Medicaid program for services rendered to

Medicaid-eligible residents, shall be reasonable and adequate to meet the costs which must be

incurred by efficiently and economically operated facilities in accordance with 42 U.S.C. §

1396a(a)(13). The department of human services shall promulgate or modify the principles of

reimbursement for nursing facilities currently in effect on as of July 1, 2003 2011 to be consistent

with the provisions of this section and Title XIX, 42 U.S.C. § 1396 et seq., of the Social Security

Act.

        (2) The department of human services shall review the current methodology for

providing Medicaid payments to nursing facilities, including other long-term care services

providers, and is authorized to modify the principles of reimbursement to provide for an acuity

based rate adjustment to nursing facilities. The department of human services is authorized to

implement changes to the payment structure for the purpose of basing compensation for Medicaid

services to nursing facilities and long term care service providers for services which shall be

based upon performance, quality, and the scope and the intensity of the services required by the

provider to meet the Medicaid recipient's level of care needs replace the current cost based

methodology rates with rates based on a price based methodology to be paid to all facilities with

recognition of the acuity of patients and the relative Medicaid occupancy.

No adjustment, subject to this section, that is made on the basis of, or in order to

accommodate or address, resident acuity shall be designed or implemented in such a way as to:

(i) Decrease the total of Medicaid funding for nursing facility care, although such

methodology may reallocate such funding from one nursing facility to another;

(ii) Provide incentives, financial or otherwise, that would disproportionately influence

the nursing facilities that loses funding under the acuity adjustment to accommodate those losses

by decreasing nursing staff, as opposed to non-nursing staff or other areas of expense. Such a

prohibited incentive would be created by incorporating incentives for cost containment only with

regard to nursing labor costs, or disproportionately disfavoring nursing labor costs.

(iii) Result, by itself, in any single nursing facility gaining or losing more than two and

two tenths percent (2.2%) of its existing per diem rate between July 1, 2010 and October 1, 2011.

        (3) By no later than October 1, 2011 January 1, 2012, under the direction of the

Secretary of Health and Human Services, the Department of Human Services shall modify the

principles of reimbursement to include the acuity needs of patients and the relative Medicaid

occupancy as a factor in determining the reimbursement rates to nursing facilities.

(b) Rate reform. Subject to the phase-in provisions in subsections (c) and (d), the

department shall, on or before October 1, 2005, modify the principles of reimbursement for

nursing facilities to include the following elements:

(1) Annual base years;

(2) Four (4) cost centers: direct labor, property, other operating, and pass through items;

(3) Re-array of costs of all facilities in the labor and other operating cost centers every

three (3) years beginning with calendar year 2002;

(4) A ceiling maximum for allowable costs in the direct labor cost center to be

established by the department between one hundred ten percent (110%) and one hundred twenty-

five percent (125%) of the median for all facilities for the most recent array year.

(5) A ceiling maximum for allowable costs in the other operating cost center to be

established by the department between ninety percent (90%) and one hundred fifteen percent

(115%) of the median for all facilities for the most recent array year;

(6) Adjustment of costs and ceiling maximums by the increase in the National Nursing

Home Price Index ("NNHPI") for the direct labor cost center and the other operating cost center

for year between array years; such adjustments to be applied on October 1st of each year

beginning October 1, 2003 for the direct labor cost center and October 1, 2005 for the other

operating cost center, except for the fiscal year beginning July 1, 2006 for which the price index

shall be applied on February 1, 2007 and for the fiscal year beginning October 1, 2007 for which

the adjustment of costs and ceiling maximums shall be one and one-tenth percent (1.1%). For the

fiscal year beginning July 1, 2008, the price index shall be applied on April 1, 2009.

(7) Application of a fair rental value system to be developed by the department for

calculating allowable reimbursement for the property cost center;

(8) Such quality of care and cost containment incentives as may be established by

departmental regulations.

(9) Notwithstanding the above provisions, for FY 2009 the department is authorized to

reduce the per diem room and board rate calculated in accordance with the principles of

reimbursement as described above, paid to the nursing facilities certified to participate in the Title

XIX Medicaid program for services rendered to Medicaid-eligible residents by five percent (5%).

This reduction is deemed to be reasonable and adequate to meet the costs which must be incurred

by efficiently and economically operated facilities in accordance with 42 U.S.C. § 1396a(a)(13).

(c) (b) Phase I Implementation. The department shall file a state plan amendment with

the U.S. Department of Health and Human Services on or before August 1, 2003 November 1,

2011 to modify the principles of reimbursement for nursing facilities, to be effective on October

1, 2003 January 1, 2012, or as soon thereafter as is authorized by an approved state plan

amendment, to establish the direct labor cost center and the pass through items cost center

utilizing calendar year 2002 cost data, and to apply the ceiling maximums in subsections (b)(4)

and (b)(5). Nursing facilities whose allowable 2002 direct labor costs are below the median in the

direct labor cost center may make application to the department for a direct labor cost interim

payment adjustment equal to twenty-five percent (25%) of the amount such allowable 2002 direct

labor costs are below the median in the direct labor cost center, provided that the interim payment

adjustment granted by the department on or after October 1, 2003 must be expended by the

facility on expenses allowable within the direct labor cost center, and any portion of the interim

payment not expended on allowable direct labor cost center expenses shall be subject to

retroactive adjustment and recoupment by the department upon the department's determination of

a final direct labor payment adjustment after review of the facility's actual direct labor

expenditures. The final direct labor payment adjustment will be included in the facility's October

1, 2004 rate until the facility's next base year.

(d) Phase II Implementation. The department shall file a state plan amendment with the

U.S. Department of Health and Human Services to modify the principles of reimbursement for

nursing facilities, to be effective on September 1, 2004, or as soon thereafter as is authorized by

an approved state plan amendment, to establish a fair rental value system for calculating

allowable reimbursement for the property cost center in accordance with subsection (b)(7);

provided, however, that no facility shall receive a payment as of September 1, 2004 for property-

related expenses pursuant to the fair rental value system that is less than the property-related

payment they would have received for the other property-related ("OPR") cost center system in

effect as of June 30, 2004 price based payment rates for nursing facilities, recognizing patient

acuity and Medicaid occupancy.

SECTION 2. The executive office of health and human services shall submit a report to

the chairpersons of the house and senate finance committees by November 1, 2011, to coincide

with the filing of the state plan amendment, detailing the changes to the nursing home

reimbursement rates.

SECTION 3. This Article shall take effect upon passage.