Indiana Medicaid Reimbursement System Update and Emerging Issues

Transcription

1 Indiana Medicaid Reimbursement System Update and Emerging Issues May 8, 2017 Presented by: Scott E. Martin, CPA HC Advisory Managing Director LTC/Senior Living Services Group Crowe Horwath LLP Crowe 2017 Crowe Horwath Horwath LLP LLP Today s Session Topics I. Medicaid Updates and Emerging Issues II. III. IV. American Health Care Act (aka ObamaCare Repeal and Replace) Indiana s 5 8 Year Rebalancing Plan for Long Term Services and Supports Indiana Long Term Care Industry Snapshot V. Indiana Medicaid Reimbursement System Today VI. VII. Value Based Purchasing (VBP) Intergovernmental Transfer (IGT) / Upper Payment Limit (UPL) Program VIII. Medicaid Cost Report Compliance Reviews 2017 Crowe Horwath LLP 2

2 Medicaid Updates and Emerging Issues 3% rate reduction effective from January 1, 2015 to June 30, 2017 Likely to be extended for an additional 2 years Quality Assessment Fee (QAF) effective through June 30, 2017 Likely to be extended for an additional 2 years through June 30, 2019 Registered CCRCs Exempt Non-Exempt NFs - $16.37 per non-medicare resident day NSGO NFs - $4.09 per non-medicare resident day (only NSGOs before July 1, 2003) Status of old outstanding Medicaid appeals resolution with OMPP 2017 Crowe Horwath LLP 3 Medicaid Updates and Emerging Issues OMPP/FSSA implementation of Medicaid RUG-IV, 48-Grouper, classification system effective January 1, 2016 (RED July 1, 2016) / 8 major RUG-IV classifications (Exhibit A) Resources available on Myers and Stauffer website: Indiana Preadmission Screening and Resident Review Redesign (Exhibit B) New system and process changes implemented effective July 1, 2016 Resources available on Ascend website: Core Medicaid Management Information System (Core MMIS) (Exhibit C) New system and process changes implemented effective February 13, 2017 Resources available on Indiana Medicaid website: American Health Care Act (aka ObamaCare Repeal and Replace) (Exhibit D) Indiana s 5 8 Year Rebalancing Plan (Exhibit E) HB 1493 contains language requiring OMPP to provide public notice at least one (1) year before reducing nursing facility reimbursements and review current home health programs and help develop additional programs Crowe Horwath LLP 4

3 American Health Care Act (aka ObamaCare Repeal and Replace) Medicaid related provisions that would have impacted nursing facilities are as follows: Convert federal Medicaid financing to a per capita cap beginning October 1, 2019 Per Medicaid enrollee cap for five enrollment groups Elderly/Aged Blind and Disabled Children Expansion Adults Other Adults Nursing facilities would receive funding from the aged and disabled categories Each state would receive a fixed dollar amount per Medicaid enrollee/beneficiary in each category based on 2016 Medicaid expenditures updated for inflation using Medicaid CPI. State would then decide how to expend funds within the categories which could be different than current expenditure levels for nursing facility services Crowe Horwath LLP 5 American Health Care Act (aka ObamaCare Repeal and Replace) Previous study conducted by Avalere Health, dated February 6, 2016, had concluded that capped funding in Medicaid could significantly reduce federal expenditures by approximately $110 billion over five (5) years. (Exhibit F) Study actually showed Indiana would receive increased federal funds overall under a per capita cap system. (Winners 24 states / Losers 26 states and DC) Study also showed that under a Block Grant federal funding system for Medicaid, Indiana would incur a 16 30% reduction in federal funding for Medicaid. (Winners 1 state / Losers 49 states and DC) Not entirely clear how American Health Care Act would have impacted Indiana Quality Assessment Fee (QAF) and IGT/UPL programs which generate significant additional federal funding for Indiana nursing facilities. American Health Care Act legislation was withdrawn without vote in late March Anticipate this will resurface in some form and another over next few years Crowe Horwath LLP 6

4 Indiana s 5-8 Year Rebalancing Plan 2017 Crowe Horwath LLP 7 History and Context Indiana ranks 48 th lowest out of 50 states at 31.8% in the percentage of long term services and supports (LTSS) Medicaid funding used for home and community based services (HCBS) as compared to institutional services. Nursing home association interest in stability in the rate setting system. Discussions began in late 2014 with Joe Moser, Indiana Medicaid Director, about long term services and supports LTSS rebalancing. Creation of four workgroups assisted living Waiver, nursing home reimbursement, preadmission screening, and housing Crowe Horwath LLP 8

5 Rebalancing Plan Development The nursing home reimbursement group was the focus of much of the rebalancing discussions. The preadmission screening group used consultants to develop a new system that was discussed earlier. Goal of plan increased utilization of home and community based services and a decreased reliance on institutional services relative to the growth in need for services Crowe Horwath LLP 9 Focus of the Rebalancing Plan The plan would be turned into a memorandum of agreement between the nursing home associations and OMPP/FSSA and approved by the Governor s Office and the Budget Agency. The plan s key objectives are: Reduction of Medicaid program expenditure growth over the 8-year period Investment in home and community based services Improvement of current nursing home capacity Incentivizing quality improvement 2017 Crowe Horwath LLP 10

6 Investment in Home and Community Based Services (HCBS) Three Percent (3%) Rate Reduction All Medicaid savings currently realized from the nursing facility 3% rate reduction would be allocated to Home and Community Based Services (HCBS). HB 1493 would change this to a report on HCBS options to be conducted by OMPP and presented to the legislative council by October 1, Ten Percent (10%) of Quality Assessment Fee (QAF) Funds Ten percent (10%) of QAF funds collected by the State are to be used exclusively for HCBS. These QAF funds are currently utilized by the State for other Medicaid services pursuant to IC (c)(2). This is the split of the QAF funds between nursing facilities and Medicaid (70/30) from the 2011 QAF reauthorization. HB 1493 excludes this language, so it appears this provision will not be implemented Crowe Horwath LLP 11 Investing in HCBS Leveraging Additional Resources for Rebalancing Develop and obtain approval from CMS for a Non-State Government Owned Home Health Agency supplemental payment program to enhance availability of home health services for Medicaid recipients that are at-risk of using institutional services or are using more institutional services than is necessary due to the lack of home health service access and ability meet acuity levels. Waiver Reform Rapid and active engagement between FSSA and key stakeholders concerning reform of existing HCBS waivers to make them more efficient to administer and to increase access by consumers Crowe Horwath LLP 12

7 Utilization of Nursing Facility Services Nursing Home Capacity Reduction Indiana has an excess number of nursing home facilities and related beds available, resulting in low occupancy levels approximating 75%. There is agreement to support legislation needed to increase the QAF by an amount necessary to generate $25 million in state and federal dollars per year, for three (3) years. These new funds would be used solely to reimburse existing Medicaid-certified nursing facilities for the purchase and closure of other Medicaid-certified nursing facilities and any unspent assessment would be utilized by the State exclusively for Assisted Living HCBS services on the third year following the collection. HB 1493 excludes this language, so it appears this provision will not be implemented Crowe Horwath LLP 13 Utilization of Nursing Facility Services Nursing Facility Moratorium There is agreement to support and partner to modify and extend the existing moratorium restricting additional nursing facility beds which expires on July 1, HB 1493 would extend moratorium 2 ½ years through December 31, RUG-IV Grouper There is agreement that the RUG-IV, 48-grouper model will be used for Medicaid reimbursement purposes indefinitely after initial adoption on July 1, HB 1493 provides for implementation of an end of therapy reclassification methodology if therapy services are not being provided, effective July 1, Development of Utilization Management Programs A partnership between the FSSA and key stakeholders to design and implement utilization management programs aimed at ensuring Medicaid recipients that could be cared for longer in the community, are cared for longer in the community Crowe Horwath LLP 14

8 Utilization of Nursing Facility Services Medicaid Managed Care for LTSS The office would postpone all efforts to transition long term services and supports (LTSS) to a risk-based managed care program for five (5) years. In 2022, the office would review the progress of the 5-8 Year Rebalancing Plan in achieving the state s goals for rebalancing. HB 1493 would change postponement timeframe to 2 ½ years instead of 5 years. Success in achieving the rebalancing benchmarks will be determined by improvements in the proportion of beneficiaries served and expenditures in institutional and non-institutional settings. Medicaid managed care would be a major issue for nursing homes, particularly stand-alone or small chain facilities. It could impact whether the IGT/UPL program could continue and in what form and the current Medicaid rate system could eventually go away Crowe Horwath LLP 15 Incentivizing Quality Improvement Indiana currently places at-risk approximately $78M per year of QAF dollars to be earned by nursing facilities based on performance through the Quality Add-On rate component. There is agreement that more can be done with value based purchasing. Indiana s unique program involving county hospitals and nursing facilities would provide the opportunity for the State and these health care providers to lead the nation in the dollars allocated to quality performance Crowe Horwath LLP 16

9 Incentivizing Quality Improvement Supplemental Payments Tied to Total Quality Score There is agreement that a portion of Non-State Governmental Owned (NSGO) supplemental Medicaid payments shall be linked to quality and performance metrics. The agreement, however, is contingent on CMS s approval and that any proposal to CMS be withdrawn and reversion to the current program take place if CMS attempts to substantially alter the proposal submitted to CMS for approval. Under the proposals, the supplemental payment is divided into three (3) components. Each facility is responsible to fund, through an inter-governmental transfer (IGT) to the State, the non-federal portion of all supplemental payments it is qualified to receive Crowe Horwath LLP 17 Incentivizing Quality Improvement The supplemental payment amounts described above would be phased in during a period of four (4) years, beginning July 1, 2018, as outlined in the schedule below: Percentage of Each Facility s Upper Payment Limit Amount Phase-In Period Base Supplemental At-Risk Facility- Specific Supplemental At-Risk Pooled Supplemental Year 1 90% 5% 5% Year 2 85% 7.5% 7.5% Year 3 80% 10% 10% Year 4 75% 12.5% 12.5% 2017 Crowe Horwath LLP 18

10 Incentivizing Quality Improvement Harmonization of Quality and Performance Measures There is agreement that the current methodology for Indiana s nursing facility value based purchasing incentive, while good, needs to be improved. The current methodology is scattered amongst too many metrics and ignores clinically-based process and outcome measures. In order to achieve consistency within Medicaid s nursing facility value based purchasing incentive and the proposed incentive under the supplemental payment program, a new set of metrics will be developed that will not only align Medicaid incentives, but also align with incentives in other payor systems and networks. In addition, special consideration within the quality payment program must be given to identification and provision of additional resources to facilities that serve resident populations that most facilities are unwilling to serve Crowe Horwath LLP 19 Indiana Long Term Care Industry Snapshot Description State Proprietary For Profit Voluntary Non-Profit Government Beds Available Total Bed Days Available 35,863 35,821 29,825 36,113 Medicaid Patient Days 17,204 15,273 10,343 17,619 Total Patient Days 27,378 24,478 25,228 27,667 Occupancy Percentage 76.34% 68.33% 84.59% 76.61% Medicaid Utilization 62.84% 62.40% 41.00% 63.68% Total Hours Worked 163, , , ,297 Hours Worked PPD Total Number of Providers Facility Average CMI Medicaid Average CMI Medicaid Case Mix Rate Average Source: Myers and Stauffer LC, Indiana Medicaid LTCIS, Statistical Data Per Facility (Quarter: 01/01/17) 2017 Crowe Horwath LLP 20

11 Indiana Long Term Care Industry Snapshot (continued) The following information is based on the last set of consumer reports generated by the Indiana State Department of Health (ISDH) as of March 17, 2017 (Exhibit G): Number of nursing homes with consumer report scores 515 Number of annual certification surveys of nursing homes to date this year 16 Number of annual certification surveys of nursing homes to date this year that have been deficiency free 2 Percent of annual certification surveys of nursing homes to date this year that have been deficiency free 12.5% Nursing homes that currently have a perfect zero (0) computed score 18 State average (mean) consumer report score 145 Number of facilities with scores under the average 338 Percent of facilities with scores under the average 65.6% Median consumer report score, score where half are above and half are below 115 Current worst computed score (highest) 730 Source: Indiana State Department of Health, Publications and Brochures Reports, Consumer Reports 2017 Crowe Horwath LLP 21 Indiana Long Term Care Industry Snapshot (continued) Indiana Nursing Facilities Participating in UPL/IGT Program as of December 31, 2016 Annualized Net UPL/IGT Supplemental Payments Annualized Average Net UPL/IGT Supplemental Payments per Nursing Facility Name of NSGO Provider No. of Nursing Facilities Quarterly Net UPL/IGT Supplemental Payments Adams County Hospital 43 $10,546,764 $42,187,056 $981,094 Byron Health Center 1 $428,954 $1,715,816 $1,715,816 Columbus Regional Hospital 9 $3,994,818 $15,979,272 $1,775,475 Daviess County Hospital 16 $4,371,653 $17,486,612 $1,092,913 Dearborn County Hospital 10 $1,921,373 $7,685,492 $768,549 Decatur County Memorial Hospital 5 $820,501 $3,282,004 $656,401 Floyd Memorial Hospital Good Samaritan Hospital 12 $1,285,617 $5,142,468 $428,539 Greene County General Hospital 4 $648,625 $2,594,500 $648,625 Hancock Regional Hospital 30 $9,493,687 $37,974,748 $1,265,825 Healthwin Specialized Care 1 $468,677 $1,874,708 $1,874,708 Hendricks County Hospital 30 $13,690,650 $54,762,600 $1,825,420 Henry County Memorial Hospital 31 $6,655,750 $26,623,000 $858,806 Source: Myers and Stauffer, LC, NSGO UPL Documents, Indiana SFY 2016 NSGO 2 nd Quarter Est UPL (10/01/16 12/31/16) 2017 Crowe Horwath LLP 22

12 Indiana Long Term Care Industry Snapshot (continued) Indiana Nursing Facilities Participating in UPL/IGT Program as of December 31, 2016 (continued) Annualized Net UPL/IGT Supplemental Payments Annualized Average Net UPL/IGT Supplemental Payments per Nursing Facility Name of NSGO Provider No. of Nursing Facilities Quarterly Net UPL/IGT Supplemental Payments Health & Hospital Corporation 78 $47,514,558 $190,058,232 $2,436,644 Jay County Hospital 2 $442,191 $1,768,764 $884,382 Johnson Memorial Hospital 39 $10,174,299 $40,697,196 $1,043,518 Logansport Memorial Hospital 2 $309,421 $1,237,684 $618,842 Major Hospital 40 $13,469,584 $53,878,336 $1,346,958 Perry County Memorial Hospital 1 $97,822 $391,288 $391,288 Pulaski Memorial Hospital 9 $1,345,293 $5,381,172 $597,908 Putnam County Hospital 16 $3,965,270 $15,861,080 $991,318 Riverview Hospital 25 $8,715,090 $34,860,360 $1,394,414 Rush Memorial Hospital 4 $644,145 $2,576,580 $644,145 Jackson County Schneck Memorial Hospital 15 $5,872,243 $23,488,972 $1,565,931 Witham Memorial Hospital 44 $10,735,685 $42,942,740 $975,971 Woodlawn Hospital 10 $2,166,379 $8,665,516 $866,552 Totals 477 $159,779,049 $639,116,196 $1,339,866 Source: Myers and Stauffer, LC, NSGO UPL Documents, Indiana SFY 2016 NSGO 2 nd Quarter Est UPL (10/01/16 12/31/16) 2017 Crowe Horwath LLP 23 Indiana Medicaid Reimbursement System Today Case mix reimbursement system Hybrid cost/acuity-based Prospective daily per diem rates Multiple rate components subject to certain limitations and caps Annual re-basing of rates based on Medicaid cost report filing due five months after fiscal year-end Effective July 1 st for all providers FYE June 30, 2016 RED July 1, 2017 FYE December 31, 2016 RED July 1, 2017 Direct care component adjusted quarterly for Medicaid CMI changes Medicaid CMI always one quarter in arrears from Myers and Stauffer Time-Weighted CMI report Annual Medicaid cost report filings subject to subsequent compliance reviews by Myers and Stauffer that could result in retroactive rate adjustments 2017 Crowe Horwath LLP 24

13 Indiana Medicaid Reimbursement System Today (continued) Current case-mix rate components Direct Care (nursing, clinical and medical services, supplies, and related costs) Therapy (physical, speech, occupational, and respiratory therapy services) Indirect Care (dietary, laundry, housekeeping, plant operations and maintenance, activities, and social services) Administrative (administrative and general services) Capital (interest, depreciation, lease/rentals, property insurance, property taxes, and other capital-related costs) Nursing Facility Quality Add-On (eight quality measures) Assessment (QAF) Add-On (Quality Assessment Fee aka Provider Tax) Special Care Unit Add-On (Alzheimer and Dementia services) Ventilator Unit Add-On (Ventilator services) 2017 Crowe Horwath LLP 25 Indiana Medicaid Reimbursement System Today (continued) Reduced Medicaid Case Mix Indices for Low Needs Residents FSSA initiative to create a disincentive for nursing facilities to admit low needs individuals potentially creating opportunities to serve seniors in home and/or community based settings. RUG IV Group RUG-IV Classification Code CMI Weights Reduced Physical Function PB Reduced Physical Function PB Reduced Physical Function PA Reduced Physical Function PA Crowe Horwath LLP 26

14 Indiana Medicaid Reimbursement System Today (continued) Minimum occupancy penalties still in effect under the current rule Subjects fixed costs in the direct care and indirect care rate components to a penalty if occupancy rate is less than specified threshold of 90% for the provider s most recent annual cost reporting period Subjects capital related costs in the capital rate component to a penalty if occupancy is less than 95% for the provider s annual cost reporting period Many providers negatively impacted by this provision If facility occupancy rate is significantly less than specified threshold, may want to evaluate de-licensure of beds Must request bed changes through Indiana State Department of Health 45 days prior to beginning of next calendar quarter Certain restrictions on number of bed changes during the year. May not get these beds back as Medicaid certified beds under current bed moratorium, so proceed with caution 2017 Crowe Horwath LLP 27 Indiana Medicaid Reimbursement System Today (continued) Special Care Unit (SCU) and Ventilator Unit Add-Ons FSSA provides for additional Medicaid reimbursement (i.e., rate add-ons) to facilities that provide specialized care for residents with Alzheimer s disease and/or dementia and for ventilator units. The SCU add-on was created in conjunction with the implementation of the QAF several years ago. Medicaid Schedule Z NF Special Care Unit Qualifications must be filed annually by March 31 st following end of previous calendar year reporting period. SCU room numbers reported on Schedule Z must match exactly with how being reported on MDS 3.0, Item A1300.B to get credit for SCU Medicaid days used for rate add-on calculation. MDS 3.0, Item I4200 Alzheimer s Disease or Item I4800 Non-Alzheimer s Dementia must be marked as well to get credit for SCU Medicaid days used for rate add-on calculation. 198 nursing facilities with qualifying SCUs. SCU add-on amount is equivalent to $12.00 per SCU Medicaid resident day as measured on an annual basis on December 31 each year. 7 nursing facilities with Ventilator units. Vent add-on amount is equivalent to $11.50 per Vent Medicaid resident day. Must have more than 8 ventilator-dependent residents in-house to qualify for rate add-on Crowe Horwath LLP 28

15 Indiana Medicaid Reimbursement System Today (continued) Hospital and/or therapeutic leave days (aka bedhold or reserve) days cannot be billed to Medicaid program Medicaid program does not pay for Medicare Part A crossover claims for coinsurance. Reimbursable bad debts for crossover claims can be claimed on annual SNF Medicare cost report filing. Proper documentation critical to ensure reimbursement by Medicare under desk review. Medicare remittance advice must be received prior to provider s fiscal year end to support reimbursable bad debts claimed for unpaid coinsurance amounts Medicaid remittance advice (EOB) must be received prior to provider s fiscal year end (showing crossover claim paid at zero with a code of 9013) to support reimbursable bad debts claimed for unpaid coinsurance amounts Must write-off Medicare coinsurance amount from accounting records prior to the fiscal year end, but after the Medicaid remittance advice date Reimbursement for Medicare Part A coinsurance bad debts is being reduced over a 3-year phase-in period for cost reporting periods beginning on or after October 1, SNF Medicare deductible and coinsurance bad debts/private Pay 70% 65% SNF Medicare deductible and coinsurance bad debts/dual Eligibles 100% 88% 76% 65% 2017 Crowe Horwath LLP 29 Indiana Medicaid Reimbursement System Today (continued) Nursing facility providers subject to Minimum Data Set (MDS) audits by state contractor, Myers and Stauffer LC No less frequently than (36) months based on risk assessment Maximum error threshold of 20% Subject to 15% penalty on administrative rate component if error rate exceeds threshold (maximum penalty of $3.30 based on current administrative rate component rate cap of $21.99); higher penalty amounts ranging from 20-50% for failing 2-4 consecutive audits Quarterly Medicaid per diem rates retroactively adjusted for any changes in case mix indices resulting from MDS audit 2017 Crowe Horwath LLP 30

16 VBP Quality Measures and Points Quality Measures Quality Points ISDH Report Care Score (RCS) 75 Normalized Weighted Average Nursing Hours per Resident Day 10 RN/LPN Retention Rate 3 CNA Retention Rate 3 RN/LPN Turnover Rate 1 CNA Turnover Rate 2 Administrator Turnover 3 (3 Administrators in 5 years) DON Turnover 3 (3 DONs in 5 years) Medical Director Board Certified in Geriatric Medicine 0 (Deferred) 2017 Crowe Horwath LLP 31 VBP Quality Measures and Points (continued) Quality Measures Quality Points Certified Medical Director by AMDA 0 (Deferred) Resident Satisfaction/Quality of Life Survey 0 (Deferred) Family Satisfaction Survey 0 (Deferred) Staff Satisfaction Survey 0 (Deferred) Total Crowe Horwath LLP 32

17 VBP Quality Scoring Methodology Points for each quality measure determined as follows: ISDH RCS Measure: RCS 82 or less = 75 points RCS = prorated points RCS > 265 = 0 points Staff Related Measures: Separate calculations for each staff related quality measure as defined in approved Indiana State Plan Amendment (SPA) Top quintile (20 th percentile) = max points Middle 3 quintiles = prorated points Bottom quintile = 0 points 2017 Crowe Horwath LLP 33 VBP Quality Score Add-On Rate Component Points for each quality measure summed to calculate total quality score Total Quality Score > 84 = $14.30 Max Add-On Total Quality Score = Prorated Add-On Each point = $0.22 Total Quality Score < 18 = $0 Add-On See accompanying analysis of Quality Scores by nursing facility prepared by Myers and Stauffer as of RED July 1, 2016 (Exhibit H) 2017 Crowe Horwath LLP 34

18 VBP Quality Score Add-On Rate Component - Example Calculations Provider No. 1 Provider No. 2 Provider No. 3 Report Card Score on 07/01/ Quality Measures Report Card Score Nursing Hours Per Day RN/LPN Retention Rate CNA Retention Rate RN/LPN Turnover Rate CNA Turnover Rate Admin Turnover Rate DON Turnover Rate Total Quality Score Quality Score Add-on Rate Component $14.30 $8.80 $ Crowe Horwath LLP 35 VBP Proposed Changes Proposed System Revision Under Consideration Target date for implementation July 1, 2018 Revised quality measures to be used for scoring for purposes of determining Medicaid Quality Add-on rate component 2017 Crowe Horwath LLP 36

19 VBP Proposed Quality Measures and Points Quality Measures Quality Points CMS Quality Measures (QMs) (9 Long Stay) 60 ISDH Report Care Score (RCS) 25 All Facility Retention Rate 10 Advanced Care Planning 5 Total Crowe Horwath LLP 37 CMS Quality Measure Domain VBP Quality Measure Subcommittee was formed to develop proposal (Exhibit I) CMS measures for Long-Stay residents (residents in the facility for greater than 100 days) that are derived from MDS assessments and used for the Five-star rating system are as follows: Percentage of residents whose need for help with activities of daily living has increased Percentage of residents whose ability to move independently worsened Percentage of high risk residents with pressure ulcers (sores) Percentage of residents who have/had a catheter inserted and left in their bladder Percentage of residents who were physically restrained Percentage of residents with a urinary tract infection Percentage of residents who self-report moderate to severe pain Percentage of residents experiencing one or more falls with major injury Percentage of residents who received an antipsychotic medication 2017 Crowe Horwath LLP 38

20 Intergovernmental Transfer (IGT)/Upper Payment Limit (UPL) Program As of December 31, 2016, there were 477 nursing facilities in the IGT/UPL Program (approximates 93% of all nursing facilities) 25 governmental entities now own nursing facilities in the Program $ per Medicaid day was the average gross facility-specific UPL amount paid last quarter ($75.95 net of 33.26% IGT payment by NSGO nursing facility provider) 2017 Crowe Horwath LLP 39 Upper Payment Limit Calculations Identifies all Medicaid residents on the last day of the quarter from the Myers and Stauffer Time Weighted CMI Resident Roster Report (TWR) using most current MDS OBRA Assessment. March 31 June 30 September 30 December 31 Converts the Medicaid RUG-IV (48 Grouper) classifications from the TWR to the Medicare RUG-IV (66 Grouper) to calculate applicable Medicare reimbursement rate for each individual Medicaid resident. Low Needs residents are excluded from calculation. Then calculate facility-specific average Medicare reimbursement rate for each nursing facility and compare to facility-specific Medicaid case-mix rate to get gross UPL amount Crowe Horwath LLP 40

21 Example UPL/IGT Supplemental Payment Calculation Calculated Average Medicare PPS Rate for NF $ Actual Medicaid Case Mix Rate plus $20.75 Non-covered Services Add-on Gross Upper Payment Limit (UPL) $ Intergovernmental Transfer (IGT) Percentage 33.26% IGT Amount Paid by NSGO entity $ Net UPL Amount (Per Medicaid Resident Day) $ NSGO Nursing Facility Share (50%) $ Former Owner / Operator Share (50%) $ Crowe Horwath LLP 41 Medicaid Cost Report Compliance Reviews Myers and Stauffer previously posted an announcement to their website addressing compliance review requests from nursing facility providers. Significant increase in the number of providers failing to submit requested records prior to fieldwork. Failure to comply with records request in a timely manner could result in the following: Payment denials Termination of provider agreement 2017 Crowe Horwath LLP 42

22 Medicaid Cost Report Compliance Reviews (continued) Common compliance review adjustments are as follows: Over-the-counter drugs charged to nursing facility by pharmacy Reclassification of certain lease expenses from direct care to capital area Reclassification of certain non-direct care type personnel from direct care to indirect care or administrative Capitalization of certain repairs and minor equipment > $1,000 that were expensed Reclassification of certain indirect care costs from nursing facility to other operating divisions (e.g., assisted and independent living, etc.) Elimination of collection fees and investment fees from administrative 2017 Crowe Horwath LLP 43 Medicaid Cost Report Compliance Reviews (continued) Additional requests for non-state government owned/operated (NSGO) nursing facilities participating in the Upper Payment Limit (UPL) program Bank statements for the applicable period showing that UPL funding was deposited into the operating account of the nursing facility Written policy detailing procedures for handling UPL payments Bank statements and supporting documentation for the applicable period for the check requests showing that IGT payments are made by the NSGO entity NSGO entity audited financial statements FSSA / OMPP issued clarification on UPL program supplemental payment agreement requirements on October 16, 2015 (Exhibit J) Subsequently, issued Frequently Asked Questions document on January 12, 2016 addressing questions from nursing facility providers (Exhibit J) 2017 Crowe Horwath LLP 44

23 Questions and Answers 2017 Crowe Horwath LLP 45 Thank you Scott E. Martin, CPA Office (574) Mobile (574) In accordance with applicable professional standards, some firm services may not be available to attest clients. This material is for informational purposes only and should not be construed as financial or legal advice. Please seek guidance specific to your organization from qualified advisers in your jurisdiction Crowe Horwath LLP, an independent member of Crowe Horwath International crowehorwath.com/disclosure 2017 Crowe Horwath LLP 46

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