10A NCAC 22G .0102. RATE SETTING METHODS

(a)  A rate for nursing facility care shall be determined quarterly for each facility to be effective for dates of service for a three month period beginning the first day of each calendar quarter.  Rates shall be derived from either desk or field audited cost reports for a base year period.  For rates effective October 1, 2003, the FY01 cost reports shall be used as the base year period.  Cost reports shall be filed and audited under provisions set forth in 10A NCAC 22G .0104.

(b)  Each prospective rate consists of two components: a direct care rate and an indirect rate computed and applied as follows:

(1)           The direct care rate shall be that portion of the Medicaid daily rate that shall be attributable to:

(A)          Case-mix adjusted costs defined as registered nurse (RN), licensed practical nurse (LPN) and nurse aide salaries and wages; a direct allocation or proportionate allocation of allowable payroll taxes and employee benefits; and the direct allowable cost of contracted services for RN, LPN and nurse aide staff from outside staffing companies.

(B)          Non-case-mix adjusted costs defined as nursing supplies, dietary or food service, patient activities, social services, a direct allocation or proportionate allocation of allowable payroll taxes and employee benefits, and Medicaid cost of direct ancillary services.

(2)           Each facility's direct care rate shall be determined as follows:

(A)          The per diem case-mix adjusted cost shall be determined by dividing the facility's case-mix adjusted base year cost by the facility's total base year inpatient days. This case-mix adjusted base year cost per diem shall be trended forward using the index factor set forth in 10A NCAC 22G .0102(e). A per diem neutralized case-mix adjusted cost shall be then calculated by dividing each facility's case-mix adjusted per diem cost by the facility cost report period case-mix index. The facility cost report period case-mix index shall be the resident-weighted average of quarterly facility-wide average case-mix indices, carried to four decimal places. The quarters used in this average shall be the quarters that most closely coincide with the facility's base year cost reporting period. Example: An October 1, 2000 – September 2001 cost report period would use the facility-wide average case-mix indices for quarters ending December 31, 2000, March 31, 2001, June 30, 2001, and September 30, 2001.

(B)          The per diem non-case-mix adjusted cost shall be determined by dividing the facility's non-case-mix adjusted base year cost, excluding the Medicaid cost of direct ancillary services, by the facility's total base year inpatient days plus the facility's Medicaid cost of direct ancillary services base year cost divided by the facility's total base year Medicaid resident days. This non-case-mix adjusted base year cost per diem shall be trended forward using the index factor set forth in 10A NCAC 22G .0102(e).

(C)          The base year per diem neutralized case-mix adjusted cost and the base year per diem non-case-mix adjusted cost shall be summed for each nursing facility.  Each facility's base year per diem result shall be arrayed from low to high and the Medicaid-day-weighted median cost shall be determined.  Also for each facility, the percentage that each of these components represents of the total shall be determined. 

(D)          The statewide direct care ceiling shall be established at 110 percent of the base year neutralized case-mix adjusted and non-case mix adjusted Medicaid-day-weighted median cost.

(E)           For each nursing facility, the statewide direct care ceiling shall be apportioned between the per diem case-mix adjusted component and the per diem non-case-mix adjusted component using the facility-specific percentages determined in 10A NCAC 22G .0102(b)(2)(C).

(F)           On a quarterly basis, each facility's direct care rate shall be adjusted to account for changes in its Medicaid average case-mix index. The facility's direct care rate shall be determined as the lesser of the facility's specific case-mix adjusted component of the statewide ceiling times the facility's Medicaid average case-mix index, plus each facility's specific non-case mix adjusted component of the statewide ceiling; or the facility's per diem neutralized case-mix adjusted cost times the Medicaid average case-mix index, plus the facility's per diem non-case-mix adjusted cost.  If applicable an incentive allowance shall be included as provided below.

Effective October 1, 2003, the incentive allowance shall be equal to 50% times the difference (if greater than zero) of the facility-specific case-mix component as set out above.  The program shall be rebased using full price-based methodology. The Division of Medical Assistance may negotiate direct rates that exceed the facility's specific direct care ceiling for ventilator dependent and head injury patients. Payment of such special direct care rates shall be made only after specific prior approval of the Division of Medicaid Assistance.

(G)          For rates effective October 1, 2003, the Medicaid average case-mix index calculated as of March 31, 2003 shall be used to adjust the case-mix adjusted component of the statewide direct care ceiling. For rates effective January 1, 2004 and thereafter, the prior quarters Medicaid average case-mix index shall be used to adjust the case-mix adjusted component of the statewide direct care ceiling. Example: January 1, 2004 rate shall use the Medicaid average case-mix index calculated as of September 30, 2003.

(H)          The statewide direct care ceiling shall be adjusted annually using the index factor set forth in 10A NCAC 22 G .0102(e). The facility's base year per diem neutralized case-mix adjusted cost plus the facility's base year per diem non-case-mix adjusted cost shall be adjusted annually using the index factor set forth in 10A NCAC 22G .0102(e).

(3)           The indirect rate shall be intended to cover the following costs of an efficiently and economically operated facility:

(A)          Administrative and General;

(B)          Laundry and Linen;

(C)          Housekeeping,

(D)          Operation of Plant and Maintenance/Non Capital;

(E)           Capital Lease; and

(F)           Medical Cost of Indirect Ancillary Services.

(4)           Effective for dates of service beginning October 1, 2003, the indirect rate shall be standard for all nursing facilities. Each facility's per diem indirect cost shall be the sum of:

(A)          the facility's indirect base year cost, excluding the Medicaid cost of indirect ancillary services, divided by the facility's total base year inpatient days plus; and

(B)          the facility's Medicaid cost of indirect ancillary services base year cost divided by the facility's total base year Medicaid resident days.

The base year per diem indirect cost, excluding property ownership and use and mortgage interest shall be trended forward using the index factor set forth in 10A NCAC 22G .0102(e) of this Section. Each facility's base year per diem indirect cost shall be arrayed from low to high and the Medicaid-day-weighted median cost shall be determined.  The indirect rate shall be established at 100 percent of the Medicaid-day-weighted median cost.  The indirect rate shall be adjusted annually by the index factor set forth in 10A NCAC 22G .0102(e).

(c)  Nursing facility assessments.  An adjustment to the nursing facility payment rate calculated in accordance with 10A NCAC 22G .0102(b) shall be established, effective October 1, 2003, to reimburse Medicaid participating nursing facilities for the provider's assessment costs that shall be incurred for the care of North Carolina Medicaid residents.  No adjustment shall be made for the provider's assessment costs that shall be incurred for the care of privately paying residents or others who shall be not Medicaid eligible.

(d)  Return on Equity. Effective October 1, 2003, the nursing facility payment rate calculated in accordance with 10A NCAC 22G .0102(b) shall be adjusted to include a return on equity capital add-on for those proprietary providers who received a FY01 return on equity capital payment. The return on equity capital add-on shall be equal to the facility's total FY01 return on equity capital payment divided by the facility's base year total Medicaid resident days.

(e)  Index factor. The index factor shall be based on the Skilled Nursing Facility Market Basket without Capital Index published by Global Insight using the most current quarterly publication available annually as of August 1.  The index factor shall not exceed that approved by the North Carolina General Assembly.  If necessary, the Division of Medical Assistance shall adjust the annual index factor or rates in order to prevent payment rates from exceeding upper payment limits established by Federal Regulations.

(f)  New Facilities and Transfer of Ownership of Existing Facilities

(1)           New facilities shall be those entities whose beds have not previously been certified to participate or otherwise participated in the Medicaid program immediately prior to the operation of the new owner. A new facility's rate shall be determined as follows and shall continue to be reimbursed under this section until the incentive allowance percentage referenced in 10A NCAC 22G .0102(b)(2)(F) shall be equal to 100%:

(A)          The direct care rate for new facilities shall be equal to the statewide Medicaid day-weighted average direct care rate that shall be calculated effective on the first day of each calendar quarter. After the second full calendar quarter of operation, the statewide Medicaid day-weighted average direct care rate in effect for the facility shall be adjusted to reflect the facility's Medicaid acuity and the facility's direct care rate shall be calculated as the sum of 65 percent of the statewide Medicaid day-weighted average direct care rate multiplied by the ratio of the facility's Medicaid average case-mix index (numerator) to the statewide Medicaid day-weighted average Medicaid case-mix index (denominator) and the statewide Medicaid day-weighted average direct care rate times 35%.

(B)          The indirect rate for a new facility shall be equal to the standard indirect rate in effect at the time the facility shall be enrolled in the Medicaid Program.  The indirect rate shall be adjusted annually by the index factor set forth in 10A NCAC 22G .0102(e).

(C)          A new facility's rate shall include also the nursing assessment adjustment calculated in accordance with 10A NCAC 22G .0102(c).

(2)           Transfer of ownership of existing facilities. Transfer of ownership means, for reimbursement purposes, a change in the majority ownership that does not involve related organizations (as defined in Rule .0104 of this Section) including corporations, partnerships and limited liability companies. Majority ownership shall be defined as an individual or entity that owns more than 50 percent of the entity, which shall be the subject of the transaction. The following applies to the transfer of ownership of a nursing facility:

(A)          For any facility that transfers ownership, the new owner shall receive a per diem rate equal to the previous owner's per diem rate less any return on equity adjustment received by the previous owner, rate adjusted quarterly to account for changes in its Medicaid average case-mix index. The old provider's base year cost report shall become the new facility's base year cost report until the new owner has a cost report included in a base year rate setting.

(B)          Regardless of changes in control or ownership for any facility certified for participation in the Medicaid program, the Division shall issue payments to the facility identified in the current Medicaid participation agreement. Regardless of changes in control of ownership for any facility certified for participation in Medicaid, the Division shall recover from that entity liabilities, sanctions and penalties pertaining to the Medicaid program, regardless of when the services were rendered.

(g)  Each out‑of‑state provider shall be reimbursed at the lower of the appropriate North Carolina statewide Medicaid day-weighted average direct care plus the indirect rate or the provider's payment rate as established by the state in which the provider is located.  For patients with special needs who must be placed in specialized out‑of‑state facilities, a payment rate that exceeds the North Carolina statewide Medicaid day-weighted average direct care plus the indirect rate may be negotiated.  A facility's negotiated rate for specialized services shall be based on budget projections of revenues, allowable costs, patient days, staffing and wages, at a level no greater than the facility's specific projected cost, and subject to review by the Division of Medical Assistance.

(h)  Specialized Service Rates:

(1)           Head Injury Intensive Rehabilitation Services.

(A)          A single all‑inclusive prospective per diem rate combining both the direct and indirect cost components may be negotiated for nursing facilities that specialize in providing intensive rehabilitation services for head‑injured patients.  The rate may exceed the maximum rate applicable to other Nursing Facility services.  A facility must specialize to the extent of staffing at least 50 percent of its Nursing Facility licensed beds for intensive head‑injury rehabilitation services.  The facility must also be accredited by the Commission for the Accreditation of Rehabilitation Facilities (CARF).

(B)          A facility's initial rate shall be negotiated based on budget projections of revenues, allowable costs, patient days, staffing and wages, at a level no greater than the facility's specific projected cost, and subject to review by the Division of Medical Assistance upon the completion of an audited full year cost report.  The negotiated rate shall not be less than the North Carolina statewide Medicaid day-weighted average direct care plus the indirect rate.  The facility must provide a complete description of the medical program.  Rates in subsequent years shall be determined by applying the index factor as set forth in 10A NCAC 22G .0102(e) average annual skilled nursing care adjustment factors to the rate in the previous year, unless either the provider or the State requests a renegotiation of the rate within 60 days of the rate notice.

(C)          Cost reports for this service must be filed in accordance with the rules in 10A NCAC 22G .0104, but there shall not be cost settlements for any differences between cost and payments.  The negotiated rate shall be considered to provide payment for all financial considerations and shall not include return or equity adjustment as defined in 10A NCAC 22G .0102.  The negotiated rate shall be paid to the facility for services provided to head injured patients only. The per diem payment rate for non-head injured patients shall be the rate calculated in accordance with 10A NCAC 22G .0102(b)-(e).

(2)           Ventilator Services.

(A)          Ventilator services approved for nursing facilities providing intensive services for ventilator dependent patients shall be reimbursed at higher direct rates as described in Subparagraph (b)(2)(A) of this Rule.

(B)          A facility's initial direct rate shall be negotiated based on budget projections of revenues, allowable costs, patient days, staffing and wages, at a level no greater than the facility's specific projected cost, and subject to review by the Division of Medical Assistance upon the completion of an audited full year cost report.  The negotiated rate shall not be less than the North Carolina statewide Medicaid day-weighted average direct care plus the indirect rate. Rates in subsequent years shall be determined by applying the index factor as set forth in 10A NCAC 22G .0102(e) to the negotiated rate in the previous year, unless either the provider or the State requests a renegotiation of the rate within 60 days of the rate notice.

(C)          Cost reports for this service shall be filed in accordance with 10A NCAC 22G .0104 but there shall not be settlements for any difference between cost and payments.

(D)          A single all‑inclusive prospective per diem rate combining both the direct and indirect cost components may be negotiated for nursing facilities that specialize in providing intensive services for ventilator‑dependent patients.  The negotiated rate shall be considered to provide payment for all financial considerations and shall not include the return on equity adjustment as defined in Rule .0102.  The negotiated rate shall be paid to the facility for services provided to ventilator patients only.  The per diem payment rate for non-ventilator patients shall be the rate calculated in accordance with 10A NCAC 22G .0102(b) through (e).

(i)  Religious Dietary Considerations.

(1)           A standard amount may be added to a nursing facility's rate for special dietary need for religious reasons.

(2)           Facilities must apply to receive this special payment consideration.  In applying, facilities must document the reasons for special dietary consideration for religious reasons and must submit documentation for the increased dietary costs for religious reasons.  Facilities must apply for this special benefit each time rates shall be determined from a new database.  Fifty or more percent of the patients in total licensed beds must require religious dietary consideration in order for the facility to qualify for this special dietary rate add‑on.

(3)           The special dietary add‑on may not exceed more than 140% of the base year neutralized case-mix adjusted and non-case-mix adjusted Medicaid day-weighted median cost determined under 10A NCAC 22G .0102(b)(2)(D) and adjusted for inflation each year until a new database shall be used to determine rates.

 

History Note:        Authority G.S. 108A‑25(b); 108A‑54; 108A‑55; 29 C.F.R. 1910, Subpart Z; 42 C.F.R. 447, Subpart C; S.L. 1991, c. 689, s. 95;

Eff. January 1, 1978;

Temporary Amendment Eff. October 1, 1984 for a Period of 120 Days to Expire on January 28, 1985;

Temporary Amendment Eff. October 1, 1991 for a Period of 180 Days to Expire on March 31, 1992;

Amended Eff. April 1, 1992;

Temporary Amendment Eff. July 1, 1992 for a Period of 180 Days to Expire on December 31, 1992;

Amended Eff. May 1, 1995; February 1, 1993; January 1, 1993;

Temporary Amendment Eff. January 22, 1998;

Amended Eff. April 1, 1999;

Temporary Amendment Eff. November 9, 2001;

Temporary Amendment Expired August 30, 2002;

Amended Eff. April 1, 2003;

Temporary Amendment Eff. August 3, 2004;

Amended Eff. January 1, 2005.