Effective October 1, 2018, Medicaid nursing center rates are changing to a new Medicaid prospective payment system (PPS). The 2018 Legislature recently passed a budget that included one year in new funding for nursing center rates in a variety of ways, all of which take effect October 1 when the PPS is implemented. The budget includes $102 million in funding for increasing the direct care price level from 100% to 105% of the median, increasing the quality funds from 6% to 8.5% of non-property related costs, and funds to offset increased capital projects cost through the FRVS calculation (this could include, for example, the purchase of a generator). There is an additional $25 million that will increase the overall rates through the budget neutral adjustment. The budget also includes a separate $9.8 million in transition funding to support providers as they prepare the transition to the PPS.
As providers plan for the transition to the new payment system, we wanted to provide a refresher on the key characteristics that make up the PPS. The three major rate components of direct care, indirect care and operating still exist; however, under the PPS, providers will now be paid a percentage of the median cost for other providers in their peer grouping rather than receiving their actual cost. In addition, the direct and indirect components will have a rate “floor” which will ensure funding is used to enhance quality through required spending in those categories. Providers who spend less than the floor will have their reimbursement rates reduced accordingly:
- Direct Care: 105% of the cost median with a floor of 95%
- Indirect Care: 92% of the cost median with a floor of 92.5%
- Operating: 86% of the cost median with no floor
While the major rate components remain the same, there was some change to which costs make up the components. Costs that have the greatest impact on resident quality of life are included in the Direct Care component; costs with a strong impact are included in the Indirect Care component; and costs with less of an impact on resident quality of life are mapped to the Operating component. Most of the current cost mapping already meets these goals; however, changes include moving: a) all therapy and dietary costs to Direct Care; b) complex medical equipment, medical supplies and other allowable ancillary cost centers to Indirect Care, and c) medical records to the Operating component.
The property component is now reimbursed through a system that strongly incentivizes renovations and replacements for aging assets and adequately funds such improvements. The new system takes into account the size of the facility and the adjusted age based on improvements to determine a property rate. It is important providers make sure they have submitted the appropriate data to the Agency for Health Care Administration (AHCA) to capture these projects. Providers can go to the AHCA Fair Rental Value portal to submit information. Submissions must be made by April 30, 2018, to be reflected in this initial rate setting cycle.
The PPS includes a supplemental payment for ventilator dependent patients of $200 per day. This payment is an addition to the per diem that providers already receive. This is the first time Florida has paid providers for delivering care to residents who are ventilator dependent. The issue has long been voiced as something that should be reimbursed at a higher level.
The move to PPS is historical for Florida Medicaid, as it will be the first time nursing centers are financially rewarded for providing high quality of care. The PPS includes a quality incentive payment to providers who score points on a quality matrix. Measures include direct care and activities and social work staffing, overall 5-star rating, nationally and state recognized awards or accreditations, and several Centers for Medicare and Medicaid Services (CMS) long-stay Quality Measures. A total of 8.5% of funds are set aside for the quality incentive which will create large financial rewards for providers scoring well, and strong incentives for others to improve.
Lastly, because of wide variances in reimbursement changes for centers moving from the current, cost-based system to a PPS, the PPS plan includes a five-year transition period with new funding to cover losses of those centers facing reimbursement reductions. Funds will be directed as special payments over a three-year period for holding harmless those centers experiencing rate reductions under the new system.
At the end of three years, all centers’ reimbursements rates would be rebased using updated cost reports. In years four and five, centers still projected to lose funding under the new plan would see those losses capped at 5% less than their cost-based rates resulting from rebasing.
More information on all things PPS can be found on the FHCA website under the Reimbursement section.