Dear Administrator: 2006 Initial Rates

October 31, 2005

Dear Administrator:

Enclosed please find a copy of the Medicaid reimbursement rate computation sheets for your nursing facility for the period January 1, 2006 through December 31, 2006. The rate is an all-inclusive rate for services provided by your facility. The rate enclosed is based on costs recognized as reimbursable in 2006 and the Patient Review Instrument (PRI) data collection reflected in the latest approved 2005 Medicaid rate.

The 2006 Medicaid rate methodology continues to employ a modified pricing system, which combines the aspects of a pure pricing system with the principles of a cost-based system. The direct and indirect components utilize the principles of both reimbursement systems by comparing a facility's allowable cost to a base (minimum) and ceiling (maximum) price. The facility would receive the higher of the base price or their cost up to the ceiling. The following provides additional details of specific aspects of the 2006 rate calculation:

Medicare Part D Offset

With the implementation of the Medicare Prescription Drug Improvement and Modernization Act of 2003, an offset must be calculated for all dually eligible Medicare Part D residents to eliminate the reimbursable prescription drugs from the Medicaid rate effective January 1, 2006. A description of the calculation (Attachment 2) and a schedule detailing the Part D offset for your facility are enclosed.

Trend Factor

The 2006 roll factor incorporates final 2004, initial 2005, and initial 2006 trend factors. The final 2005 CPI will be utilized when calculating revised 2006 roll factors and will be incorporated in the 2006 hotline rates.

2006 Trend Factor Tables on Health Provider Network (HPN)

Copies of the 2006 roll factor tables have not been included with this correspondence. The Department of Health (Department) is utilizing the

Capital

For nursing facilities that have submitted an acceptable RHCF cost report, the capital component of the rate has been revised to reflect reimbursable property costs reported in the 2004 RHCF cost reports.

Effective with the January 1, 2005 rates and continuing for 2006, traceback percentages used in the calculation of allowable capital costs on Schedule VI of the rate sheet will utilize the stepdown traceback percentage from the RHCF-4 cost report being used for that rate year. This is a result of the health care industry adding or converting beds for the specialty units where separate Medicaid rates are calculated. By using updated RHCF-4 cost report traceback percentages, allowable capital costs are properly distributed to the appropriate service by an acceptable statistical methodology. This also insures that the facility will not be reimbursed more than 100% of their historical cost.

In accordance with Part 86-2.2(f), lack of respective certifications by both the operator and accountant, as required pursuant to Sections 86-2.5 and 86-2.6 of this Subpart shall render the financial and statistical report incomplete. For facilities, which have not submitted an acceptable cost report, your capital component will only include building depreciation, amortization, building interest, and return on and of equity. If an acceptable CPA certification is received during the hotline period, your capital component will be updated utilizing the acceptable 2004 RHCF cost report for the hotline rate.

Productivity and Efficiency Adjustment - Effective January 1, 2006

In accordance with subdivision 16 of Section 2808 of the Public Health Law, the nursing facility rates are reduced by $56M annually to encourage improved productivity and efficiency by providers. The $56M is allocated to each nursing facility based upon Medicaid days. The -$1.73 adjustment from the 2005 rate is being carried forward on Schedule VII. The 2006 productivity and efficiency adjustment will be recalculated utilizing the 2004 patient days and incorporated in the 2006 hotline rates.

Return on Investment and Real Property Equity for Proprietary Facilities

The rate of return on net investment for 2006 is 3.76% based upon the 26 week U.S. Treasury bill rate in effect on September 15, 2005 in accordance with Part 86-2.28.

The rate of return on real property equity, calculated pursuant to Part 86-2.21 is 4.45 % for 2006.

Hepatitis B Vaccine Costs and Measles & Rubella Immunization Expenses

Reimbursement for these reported costs are not included in the initial 2006 rates but will be included in the 2006 hotline rates.

Health Recruitment and Retention Payments, Nursing Home Quality Improvement Demonstration Grand Awards and Dementia Grants (if applicable)

The 2006 health recruitment and retention payments and nursing home quality improvement demonstration grant awards are not included in the 2006 rates. The Centers for Medicare and Medicaid Services (CMS) has not approved as yet the state plan amendment and therefore, the Department cannot implement these adjustments at this time. As soon as CMS approval is received, revised rates will be processed to include these adjustments. The Dementia Grants will be included in the hotline rates for those qualifying facilities.

Adult Day Health Care Rates

In accordance with Part 86-2.9 of the Commissioner's Administrative Rules and Regulations, Adult Day Health Care per visit rates for 2006 have been held to a ceiling based upon 65% of the SNF rate in effect on January 1, 1990. The 2006 roll factors used to calculate the operating component of the Adult Day Health Care rate include the final 2004, initial 2005 and initial 2006 factors. The final 2005 CPI will be utilized when calculating revised 2006 roll factors and will be incorporated in the 2006 Hotline rates.

Rate Hotline

As always, the Office of Health Systems Management has made every attempt to ensure that your rate calculation is complete and accurate. However, mistakes do occur and the Bureau of Long Term Care Reimbursement has again instituted an accelerated administrative process to correct any errors. This process, the "Rate Hotline," will be instituted again this year and will be in effect until December 2, 2005.

Facilities may telephone the Bureau of Long Term Care Reimbursement with inquiries as to the accuracy of the rates; however, no rate change will be made unless the Bureau has received such inquiry, in writing, properly documented in accordance with Subpart 86-2. <Any and all inquiries relating to the accuracy of your rate must be submitted, in writing, and be postmarked no later than December 2, 2005 to effect a change in your rate through this accelerated administrative process.

Any hotline appeal items that alter the 2004 cost data require that the annual reports be re-filed through the

Appeals

If you wish to appeal the initial 2006 rate computations, the appeal must be filed with this office and postmarked no later than March 15, 2006. All appeals should be on forms supplied by this office (copy enclosed).

In order to file an appeal with this office, the following information should be provided:

  1. A cover letter, signed by the Operator or Chief Executive Officer, containing a summary of the items of appeal. Cover letters from attorneys or fiscal consultants representing the nursing facility are not acceptable.
  2. The appeal packet, form DOH-2466 (copy enclosed) must be completed. The facility should complete items 1-6 on page 1. Page 2 should be duplicated as many times as necessary so that only one item of appeal appears on each page of Section 10. If more space is needed, summarize the item of appeal on page 2 and attach any further detail on your own schedule. Make sure the facility name appears on each page 2. All information on the form should be typed.
  3. Supporting schedules or any other pertinent data not related to the annual cost report may be attached.
  4. Any item of appeal that alters the cost data for the operating base year report must meet the same certification requirements as the original document. (See Parts 86-2.5 and 86-2.6.)
  5. Any item of appeal that alters the cost data for the 2004 annual cost report must be filed through

When submitting an appeal, please be advised that the New York State Commissioner of Health may consider only those applications for revisions of certified rates which are set forth in Sections 86-2.13 and 86-2.14 of the Commissioner's Administrative Rules and Regulations. Issues raised in a request for appeal that do not meet the criteria of an acceptable appeal under 86-2.13 or 86-2.14 but rather pertain to the methodology used to promulgate Medicaid rates will be rejected. The Medicaid rate methodology is based on the provisions of Subpart 86-2 and objections to regulatory provisions are not issues that can be resolved through the administrative rate appeal process.

<The submission of an appeal and any related information associated with the appeal MUST be forwarded to Ms. Kathleen E. Gill, Director, Bureau of Long Term Care Reimbursement, Empire State Plaza, Corning Tower, Room 943, Albany, New York 12237-0709. APPEALS SENT TO ANY ADDRESS OTHER THAN THE ABOVE MAY NOT BE RECOGNIZED AS AN APPEAL.

<To be considered timely filed, the above-mentioned requirements must be met and the packet postmarked by March 15, 2006.

2005 Annual Cost Report

Please be advised that the software for the 2005 RHCF-4 cost report will be available through the Health Provider Network by April 1, 2006. The deadline for filing the 2005 annual cost report will be May 31, 2006. This is to provide facilities with sufficient advance notice so that you may plan ahead and take the appropriate action necessary to ensure the timely filing of the report.

If you have any questions relating to the calculations of your Medicaid rates

Sincerely,

Mark H. Van Guysling
Assistant Director
Division of Health Care Financing

Enclosure(s)

Attachment 1
Electronic Access to Trend Factor Tables
Via Health Provider Network (HPN)

The following are instructions on how to access trend and roll factors from the Health Provider Network (HPN).

The HPN is a secured Internet network which health providers will need to enroll in, to gain access to functions associated with this network. Individuals that have an HPN account will also need to receive access to the trend factor function. If you have an HPN individual account and do not have access to the trend factors, please complete the electronic access request form and access will be granted within (3) three days. A notice of access will be delivered to your e-mail address listed on the HPN network.

  1. HPN Web site
  2. Security Screen - this screen will ask for your "HPN" id and password.
  3. New York Department of Health Internet Commerce Site screen - select HPN the Health Provider Network.
  4. Health Provider Network screen - select "Programs."
  5. Program Area screen - select "Division of Health Care Financing."
  6. Division of Health Care Financing screen - select under Nursing Homes "Trend and Roll Factor Reports."
  7. Bureau of Long Term Care Reimbursement screen - select the appropriate classification, year and roll or trend factor.
  8. The trend/roll factor table requested will appear.

Any questions on the access to the trend/roll factor tables should be directed to Mr. Russ Smith at (518) 473-9213.

Attachment 2
Explanation of The Medicare Part D Offset to the
2006 Medicaid Rate

  • The starting point is to determine the total amount reported as prescription drugs on Schedule 6 (Expenses by Natural Classification) of the base year cost report used to calculate the operating component of the facility's rate.

    You must multiply the prescription drug costs by the traceback percentage applicable to the program, which the offset is being calculated for. This allows for appropriate allocation of costs between programs, i.e. vent vs. nf.

    If the base year cost report is other than a 1983 cost report, adjust the amount by the applicable report adjustment factor to convert the costs into 1983 dollars.

    Adjust the costs by the case mix adjustment percentage. This serves to increase or decrease the costs based on changes in the case mix from 1986 to present prior to the comparison to base/ceiling.

    Determine if the facility's total case mix adjusted direct costs are below the base, above the ceiling or between the two (in the corridor). If the facility's total case mix adjusted direct costs are below the base, increase the prescription drug costs by the same factor that was used to inflate the facility's total direct costs up to the base. If the facility's total case mix adjusted direct costs are above the ceiling, decrease the prescription drug costs by the same factor that was used to decrease the facility's total direct costs down to the ceiling. If the facility's total case mix adjusted direct costs are in the corridor, no base/ceiling adjustment is made to the prescription drug costs. This calculation adjusts the costs by either the enhancement a facility received because they were below the base or the reduction they received because they were over the ceiling. Only a portion of the base/ceiling adjustment is applicable to prescription drugs and therefore, only a portion of the enhancement/reduction will be used to adjust the costs.

    Since the direct component of the rate is then further adjusted by a recalibration percentage, adjust the drug amount by this same percentage to arrive at the amount of drugs included in the direct component of the facility's rate.

    Multiply the prescription drug amount by the facility's 2006 roll factor to arrive at the reimbursed prescription drugs for 2006.

    Divide the 2006 reimbursed prescription drugs by the total days used to calculate the operating component of the rate (operating base year days).

  • The starting point is to determine the amount of non-salary pharmacy costs entered on the rate profile in ccln 3420/3430/042 then run it through each applicable step of the calculation for the direct component of the rate as described for the RHCF-4 filers above.

  • Since the operating components of group mean rates are determined by which WEF region a facility is located in, an average 2006 Medicare Part D offset has been calculated for each WEF region and used for an offset to these rates. The offset will be adjusted once a twelve-month cost report is submitted to rebase the rates.