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AB-1472 Medi-Cal: long-term care reimbursement: ratesetting methodology. (2009-2010)

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CALIFORNIA LEGISLATURE— 2009–2010 REGULAR SESSION

Assembly Bill
No. 1472

Introduced  by  Assembly Member Torrico

February 27, 2009

An act to amend Section 14126.023 of the Welfare and Institutions Code, relating to Medi-Cal.


LEGISLATIVE COUNSEL'S DIGEST


AB 1472, as introduced, Torrico. Medi-Cal: long-term care reimbursement: ratesetting methodology.
Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, and under which qualified low-income individuals receive health care services. The Medi-Cal Long-Term Care Reimbursement Act requires the department to implement a facility-specific ratesetting system, using a cost-based reimbursement rate methodology, and to update these rates annually. Under existing law, the methodology is required to reflect the sum of the projected cost of specified cost categories and passthrough costs, including a labor cost category.
This bill would require labor costs to be determined by facility payroll data, submitted electronically to the department on a quarterly basis, as prescribed.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 14126.023 of the Welfare and Institutions Code is amended to read:

14126.023.
 (a) The methodology developed pursuant to this article shall be facility specific and reflect the sum of the projected cost of each cost category and passthrough costs, as follows:
(1) Labor costs limited as specified in subdivision (c).
(2) Indirect care nonlabor costs limited to the 75th percentile.
(3) Administrative costs limited to the 50th percentile.
(4) Capital costs based on a fair rental value system (FRVS) limited as specified in subdivision (d).
(5) Direct passthrough of proportional Medi-Cal costs for property taxes, facility license fees, new state and federal mandates, caregiver training costs, and liability insurance projected on the prior year’s costs.
(b) The percentiles in paragraphs (1) through (3) of subdivision (a) shall be based on annualized costs divided by total resident days and computed on a specific geographic peer group basis. Costs within a specific cost category shall not be shifted to any other cost category.
(c) The labor costs category shall be comprised of a direct resident care labor cost category, an indirect care labor cost category, and a labor-driven operating allocation cost category, as follows:
(1) Direct resident care labor cost category which shall include all labor costs related to routine nursing services including all nursing, social services, activities, and other direct care personnel. These costs shall be limited to the 90th percentile.
(2) Indirect care labor cost category which shall include all labor costs related to staff supporting the delivery of patient care including, but not limited to, housekeeping, laundry and linen, dietary, medical records, inservice education, and plant operations and maintenance. These costs shall be limited to the 90th percentile.
(3) Labor-driven operating allocation shall include an amount equal to 8 percent of labor costs, minus expenditures for temporary staffing, which may be used to cover allowable Medi-Cal expenditures. In no instance shall the operating allocation exceed 5 percent of the facility’s total Medi-Cal reimbursement rate.
(d) The capital cost category shall be based on a FRVS that recognizes the value of the capital related assets necessary to care for Medi-Cal residents. The capital cost category includes mortgage principal and interest, leases, leasehold improvements, depreciation of real property, equipment, and other capital related expenses. The FRVS methodology shall be based on the formula developed by the department that assesses facility value based on age and condition and uses a recognized market interest factor. Capital investment and improvement expenditures included in the FRVS formula shall be documented in cost reports or supplemental reports required by the department. The capital costs based on FRVS shall be limited as follows:
(1) For the 2005–06 rate year, the capital cost category for all facilities in the aggregate shall not exceed the department’s estimated value for this cost category for the 2004–05 rate year.
(2) For the 2006–07 rate year and subsequent rate years, the maximum annual increase for the capital cost category for all facilities in the aggregate shall not exceed 8 percent of the prior rate year’s FRVS cost component.
(3) If the total capital costs for all facilities in the aggregate for the 2005–06 rate year exceeds the value of the capital costs for all facilities in the aggregate for the 2004–05 rate year, or if that capital cost category for all facilities in the aggregate for the 2006–07 rate year or any rate year thereafter exceeds 8 percent of the prior rate year’s value, the department shall reduce the capital cost category for all facilities in equal proportion in order to comply with paragraphs (1) and (2).
(e) For the 2005–06 and 2006–07 rate years, the facility specific Medi-Cal reimbursement rate calculated under this article shall not be less than the Medi-Cal rate that the specific facility would have received under the rate methodology in effect as of July 31, 2005, plus Medi-Cal’s projected proportional costs for new state or federal mandates for rate years 2005–06 and 2006–07, respectively.
(f) The department shall update each facility specific rate calculated under this methodology annually. The update process shall be prescribed in the Medicaid state plan, regulations, and the provider bulletins or similar instructions described in Section 14126.027, and shall be adjusted in accordance with the results of facility specific audit and review findings in accordance with subdivisions (h) and (i).
(g) The department shall establish rates pursuant to this article on the basis of facility cost data reported in the integrated long-term care disclosure and Medi-Cal cost report required by Section 128730 of the Health and Safety Code for the most recent reporting period available, and cost data reported in other facility financial disclosure reports or supplemental information required by the department in order to implement this article. Labor costs shall be determined by facility payroll data that facilities shall submit electronically to the department on a quarterly basis, in a uniform format established by the department. The facility reports shall specify the category of work an employee performs, such as whether the employee is a registered nurse, licensed vocational nurse, or certified nurse assistant, and shall provide daily resident census data.
(h) The department shall conduct financial audits of facility and home office cost data as follows:
(1) The department shall audit facilities a minimum of once every three years to ensure accuracy of reported costs.
(2) It is the intent of the Legislature that the department develop and implement limited scope audits of key cost centers or categories to assure that the rate paid in the years between each full scope audit required in paragraph (1) accurately reflects actual costs.
(3) For purposes of updating facility specific rates, the department shall adjust or reclassify costs reported consistent with applicable requirements of the Medicaid state plan as required by Part 413 (commencing with Section 413.1) of Title 42 of the Code of Federal Regulations.
(4) Overpayments to any facility shall be recovered in a manner consistent with applicable recovery procedures and requirements of state and federal laws and regulations.
(i) (1) On an annual basis, the department shall use the results of audits performed pursuant to subdivision (h), the results of any federal audits, and facility cost reports, including supplemental reports of actual costs incurred in specific cost centers or categories as required by the department, to determine any difference between reported costs used to calculate a facility’s rate and audited facility expenditures in the rate year.
(2) If the department determines that there is a difference between reported costs and audited facility expenditures pursuant to paragraph (1), the department shall adjust a facility’s reimbursement prospectively over the intervening years between audits by an amount that reflects the difference, consistent with the methodology specified in this article.
(j) For nursing facilities that obtain an audit appeal decision that results in revision of the facility’s allowable costs, the facility shall be entitled to seek a retroactive adjustment in its facility specific reimbursement rate.
(k) Compliance by each facility with state laws and regulations regarding staffing levels shall be documented annually either through facility cost reports, including supplemental reports, or through the annual licensing inspection process specified in Section 1422 of the Health and Safety Code.