Michigan. Source: Data collected by George Washington University for MACPAC Back to Summary. Date Last Searched. Documentation Date

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Arlene Bryant
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1 Medicaid Nursing Facility Payment Policy Landscapes - Note: Data is based on publicly available policy documentation identified in March, April, May of Follow-up contact was made with state Medicaid employees (primarily policy staff) to clarify policies which could not be found or were unclear. Every attempt was made to find the most recent and up-to-date data, however, not all recent data was publicly available and many of the policies may have been developed years earlier and may not be in current practice. Policy details are generally in the state's own words, copied from the state's Medicaid State Plan Attachment 4.19-D, State Plan Amendments, state regulations and administrative codes, provider manuals and bulletins, Medicaid agency website, and contact with state officials. Many of the sources are best accessed through Internet Explorer. Any errors or changes, please contact MACPAC at Source: Data collected by George Washington University for MACPAC Back to Summary Details Source Summary General Basic payment policy/per diem approach (Cost-based or price-based) Basis of rates (Facility specific, resident specific, statewide) The Medicaid nursing facility reimbursement rate is prospectively determined based on the nursing facility's historical or acquisition costs, which are subject to limitations put forth in policy. The per diem reimbursement rate for Class I and Class III nursing facility providers is made up of three components: a plant cost component, a variable cost component, and add-ons. The Medicaid nursing facility reimbursement rate is prospectively determined based on the nursing facility's historical or acquisition costs, which are subject to limitations put forth in policy. Reimbursement Appendix, Page a1: Cost-based 4/1/2014 4/2/2014 Reimbursement Appendix, Page a1: Facility specific 4/1/2014 4/2/2014 Basis of costs (Medicare or Medicaid cost reports) All participating skilled nursing and intermediate care providers are required to submit to the state agency an annual cost report. Title XIX per patient day cost, for a designated cost component, is the total inpatient cost for that cost component, divided by total inpatient days, as determined from the provider s Medicaid cost report. MI State Plan Amendment, Attachment 4.19-D, Section 1, Page 1, Section III, Page 1a: CR - Medicaid 3/15/2006, 2/8/2012 5/16/2014 Rebasing frequency The base cost component will be rebased (recalculated) annually to reflect the more current costs of both the resource needs of patients and the business expenses associated with nursing care. MI State Plan Amendment, Attachment 4.19-D, Section IV, Page 15: Annually 3/15/2006 5/16/2014 Inflation adjustments The basis for the cost index is the Global Insight Health Care Cost Review, DRI-WEFA Skilled Nursing Facility Market Basket without Capital Care Cost Review. The annual economic inflationary rate for Class I and Class III facilities is 0%. MI State Plan Amendment, Attachment 4.19-D, Section IV, Page 15: Economics and Country Risk 3/15/2006 5/16/2014 Peer grouping There are six classes of long term care facilities and one special type of patient for which there are separate reimbursement methods: Class I: proprietary and nonprofit nursing facilities. Class II: proprietary nursing facilities for the mentally ill or developmentally disabled Class III: proprietary and nonprofit nursing facilities that are county medical care facilities, hospital long term care units or state owned nursing facilities Class IV: state owned and operated institutions certified as ICF/MR facilities. Class V: facilities that are a distinct part of special long term care facilities for ventilator-dependent patients. Class VI: hospitals with programs for short-term nursing care (swing beds). MI State Plan Amendment, Attachment 4.19-D, Section IV, Page 1: Yes 11/15/2010 4/2/2014 Charge cap For dates of service on or after June 1, 1981, providers of nursing care will be reimbursed under this plan on the basis of the lower of customary charge to the general public or a payment rate determined in accordance with this section of the State Plan. MI State Plan Amendment, Attachment 4.19-D, Section IV, Page 1: NTE charges 11/15/2010 5/30/2014 Payment for capital (Cost, FRV, flat) Medicaid reimburses nursing facilities for costs associated with capital asset ownership. The costs are referred to as plant costs and are reimbursed as the Plant Cost Component of the per diem reimbursement rate. The Plant Cost Component is based on the cost report data submitted by the nursing facility for the previous calendar year. Reimbursement Appendix, Page a25: Cost 4/1/2014 5/30/2014

2 Details Source Summary Occupancy rate minimum The occupancy that will be used in per patient day cost determinations, for all but Class II facilities, is the greater of the paid occupancy including paid held-bed days excluding hospital leave days or 85 percent of (certified) bed days available during the cost reporting period for which cost information is reported, including new facilities. MI State Plan Amendment, Attachment 4.19-D, Section III, Page 1: 85% 3/15/2006 4/2/2014 Bed hold policy Medicaid reimburses a nursing facility to hold a bed for up to ten days during a beneficiary s temporary absence from the facility due to admission to the hospital for emergency medical treatment only when the facility s total available bed occupancy is at 98 percent or more on the day the beneficiary leaves the facility. If the beneficiary has a temporary absence from the nursing facility for therapeutic reasons as approved by a physician, Medicaid reimburses the facility to hold the bed open for up to a total of 18 days during a 365-day period. Medicaid Provider Manual, Nursing Facility Coverages, Page 66, Page 68: H: 10 days T: 18 days 4/1/2014 4/2/2014 New nursing facility/owner (A) New Facility: A "new facility" is defined as a LTC provider in a facility that does not have a Medicaid historical cost basis. The new provider's initial- period plant cost component will be the provider's certified and agency approved plant cost per patient day (per Section IV.B.4.a.) up to the plant cost limit, where the plant cost limit is determined using update methods. (B) Variable Cost Component. a. New Facility During the first two cost reporting periods, rates for providers defined in Sections a. and b. above will be calculated using a variable rate base equal to the class average of variable costs. (A) (B) MI State Plan Amendment, Attachment 4.19-D, Section IV, Page 12, Page 20a: New facility: peer group average (A) 3/15/2006 (B) 5/17/2012 5/30/2014 Out-of-state The routine nursing care per diem rate for the out-of-state nursing facility is the lesser of the individual provider's home state Medicaid rate or the Medicaid out-of-state provider ceiling rate. The ceiling rate is effective for the time period coinciding with the State fiscal year rate period October 1 through September 30. The ceiling rate is the sum of three components: 1) Class I nursing facility Variable Cost Limit (VCL) for the corresponding rate year, 2) Economic Inflationary Update, and 3) most recent Plant Cost 80th percentile per diem amount. Out-of-state nursing facility rates do not participate in the Quality Assurance Assessment program. Reimbursement Appendix, Page a109: Lesser of in-state rate or other 4/1/2014 4/2/2014 Recent or planned changes Primary Cost Centers Reimbursement of room and board for Medicaid-eligible beneficiaries was discontinued effective October 1, 2013, for all new admissions to hospice residences with licensed-only nursing facility beds. However, impacted facilities may continue to bill and receive reimbursement for room and board services for Medicaid beneficiaries admitted prior to October 1, 2013, and this arrangement will continue through September 30, Reimbursement for all other hospice services, including care rendered in the home, skilled nursing facility and hospice residence settings will continue unchanged. Provider Bulletin: Yes 1/30/2014 4/2/2014 Direct care Base costs cover activities associated with direct patient care. Major activities under these categories are payroll and payrollrelated costs for departments of nursing, nursing administration, dietary, laundry, diversional therapy and social services, food, linen (excluding mattress and mattress support unit), workers compensation, utility costs, consultant costs from related party organizations for services relating to base cost activity, nursing pool agency contract service for direct patient care nursing staff, and medical and nursing supply costs included in the base cost departments. to the highest IVC, then accumulating Medicaid resident days of the rank-ordered facilities, beginning with the lowest, until 80% of the total Medicaid resident days for the class are reached. The Variable Cost Limit for the class of facilities equals the Reimbursement Appendix, Page a58, a9: IVC of the nursing facility in which the 80th percentile of accumulated Medicaid resident days occurs. A VCL is calculated for

3 Details Source Summary Indirect care Base costs cover activities associated with direct patient care. Major activities under these categories are payroll and payrollrelated costs for departments of nursing, nursing administration, dietary, laundry, diversional therapy and social services, food, linen (excluding mattress and mattress support unit), workers compensation, utility costs, consultant costs from related party organizations for services relating to base cost activity, nursing pool agency contract service for direct patient care nursing staff, and medical and nursing supply costs included in the base cost departments. to the highest IVC, then accumulating Medicaid resident days of the rank-ordered facilities, beginning with the lowest, until 80% of the total Medicaid resident days for the class are reached. The Variable Cost Limit for the class of facilities equals the IVC of the nursing facility in which the 80th percentile of accumulated Medicaid resident days occurs. A VCL is calculated for Reimbursement Appendix, Page a58, a9: Administration Support costs cover allowable activities not associated with direct patient care. Major items under these categories are payroll and payroll-related costs for the departments of housekeeping, maintenance of plant operations, medical records, medical director, and administration, administrative costs, all consultant costs not specifically identified as base, all equipment maintenance and repair costs, purchased services, and contract labor not specified as base costs. Contract services costs for these departments are also support costs. to the highest IVC, then accumulating Medicaid resident days of the rank-ordered facilities, beginning with the lowest, until 80% of the total Medicaid resident days for the class are reached. The Variable Cost Limit for the class of facilities equals the IVC of the nursing facility in which the 80th percentile of accumulated Medicaid resident days occurs. A VCL is calculated for Reimbursement Appendix, Page a58, a59, a9: Capital Plant Cost Component (for Class I and II facilities): Effective for cost reporting periods beginning on or after April 1, 1985, the prospectively established plant cost component for Class I and Class II facilities will be the sum of four components: the tax component, the interest expense component, the lease/rental component and the return on current asset value component. Current value asset upper limitation is a limit placed upon current asset value per bed above which values are not recognized for reimbursement purposes. The per bed value of the upper limit is based upon a survey of construction and other purchase costs per bed of Class I and Class II nursing homes (A) MI State Plan Amendment, Attachment 4.19-D, Section IV, Page 2, Page 6, : Cost-based, ceiling=none found 3/27/1992 4/2/2014 Pass-through None found See notes below None found NA 5/30/2014 Adjustments Acuity system None found See notes below None found NA 5/30/2014 Bed size None found See notes below None found NA 5/30/2014 Geographic None found See notes below None found NA 5/30/2014 Lower care patients None found See notes below None found NA 5/30/2014 Specialized care The Complex Care Prior Approval-Request/Authorization for Nursing Facilities form (MSA-1576) is used to request prior approval (PA) for the placement of a Medicaid beneficiary for whom placement from a hospital has been, or could be, hindered due to the cost and/or complexity of nursing care or special needs. The authorization covers an individually negotiated reimbursement rate for the placement. Special individualized placement requests and payment arrangements are based on medical necessity and/or service/supply needs exceeding those covered by Medicaid reimbursement for routine nursing facility care. Examples include, but are not limited to: Ventilator dependent care (for nursing facilities not contracted Medicaid Provider Manual, Nursing Facility Coverages, Page 72: with MDCH to provide ventilator dependent care); Multiple skin decubiti utilizing several treatment modalities; Tracheostomy Yes 4/1/2014 with frequent suctioning needs; Beneficiaries who require intensive nursing care or treatment. 5/30/2014 Medicaid Provider Manual, Hospital Reimbursement Appendix, If a claim is a high day outlier and review shows that the beneficiary required less than acute continuous medical care during Page A14: the outlier day period, Medicaid payment is made at the statewide nursing facility (NF) per diem rate for the continuous sub Outlier payments acute outlier days if nursing care was medically necessary. Yes 4/1/2014 4/2/2014 Payments related to provider taxes None found See notes below None found N/A 5/30/2014

4 Details Source Summary Ventilator (A) The payment rates for all special facilities for ventilator-dependent patients shall be a flat per patient day prospective rate determined by the single State agency. (B) Factors used by the single State agency in the determination of the per patient day prospective rate shall include audited costs at facilities providing similar services, expected increases in the appropriate inflationary adjustor over the effective period of the prospective rate, the supply response of providers and the number of patients for whom beds are demanded. The prospective rate will not exceed 85 percent nor fall below 15 percent of an estimate of the average inpatient hospital rate for currently placed acute care Medicaid patients who are ventilator dependent. The prospective rate shall be periodically reevaluated (no more than annually) to ensure the reasonableness of the rate and the appropriate balance of supply and demand for special care is met. (A) (B) MI State Plan Amendment, Attachment 4.19-D, Section IV, Page 21b, 21c: Yes (A) 7/16/2008 (B) 3/15/2010 4/2/2014 Head trauma None found See notes below None found N/A 5/30/2014 AIDS None found See notes below None found N/A 5/30/2014 Behavioral add-on None found See notes below None found N/A 5/30/2014 Mental health/cognitive impairment Class II facilities, being proprietary nursing facilities for the mentally ill or mentally retarded, are reimbursed an all-inclusive prospective payment rate negotiated with the MDCH State Mental Health Agency on an annual basis. Final reimbursement is a retrospective cost settlement, not to exceed a ceiling limit. The provider may be eligible for a reimbursement efficiency allowance in the final rate if total allowable costs do not exceed the prospectively established ceiling limit. Reimbursement Appendix, Page a87: Yes 4/1/2014 5/30/2014 Special Payments to County Medical Care Facilities (CMCF) for Un-reimbursed Medicaid Costs: A special payment to county government-owned nursing facilities will be established and renewed annually. The purpose of the payment is to compensate MI State Plan Amendment, Attachment 4.19-D, Section IV, Page 25: Public facilities CMCFs for incurred un-reimbursed routine costs. Allocations for individual facilities will be determined based upon unreimbursed routine costs certified as public expenditures in accordance with 42 CFR Yes 1/23/2012 5/12/2014 Medicaid volume None found See notes below None found N/A 4/2/2014 Other The Coverages portion of this chapter, Dietary Services and Food subsection, provides for program reimbursement to nonprofit nursing facilities for special dietary needs for religious reasons. Interim payment reimbursement to the nursing facility will be made by inclusion of a per diem rate add-on amount to the nursing facility routine nursing care rate. The total special dietary add-on reimbursement to the nursing facility during the reimbursement year will be adjusted through the annual cost report reimbursement settlement. Certification, Survey & Enforcement Appendix, Staff Certification section provides for nursing facility Medicaid reimbursement for Medicaid's share of costs incurred by the nursing facility for approved Nursing Aide Training and Competency Evaluation Program (NATCEP) expenditures. Interim payment reimbursement to the nursing facility will be made by inclusion of a per diem rate add-on amount to the nursing facility routine nursing care rate. The total NATCEP add-on reimbursement paid to Reimbursement Appendix, Page a104, a105: the nursing facility during the nursing facility's cost report reimbursement year will be adjusted through the annual cost report Yes 4/1/2014 reimbursement settlement. 5/30/2014 Supplemental Payments Public facilities None found See notes below None found N/A 5/30/2014 Payments related to provider taxes Quality Assurance Assessment Program (QAAP)- Effective September 24, 2011, Class I, and Class III nursing facilities receive a monthly payment as part of the Quality Assurance Assessment Program (QAAP). A facility s QAAP payment is based on the facility s Medicaid utilization multiplied by a Quality Assurance Supplement (QAS) percentage. MI State Plan Amendment, Attachment 4.19-D, Section IV, Page 20a: Yes 5/17/2012 4/2/2014 Other None found See notes below None found N/A 5/30/2014 Incentive Payments Quality/pay for performance None found See notes below None found N/A 5/30/2014 Bed program None found See notes below None found N/A 5/30/2014 Efficiency If a Class II provider cost settles below the ceiling rate, they will be paid a per patient day efficiency incentive of 50 percent of the difference between actual per diem cost and the ceiling, not to exceed $2.50 per patient day. Class II providers will not be paid any other incentive. MI State Plan Amendment, Attachment 4.19-D, Section IV, Page 21: Yes 7/16/2008 5/12/2014 Other Notes: Facility Innovative Design Supplemental (FIDS) Incentive: Providers actively participating in the Facility Innovative Design MI State Plan Amendment, Attachment 4.19-D, Section IV, Page 21: Supplemental (FIDS) program on and after October 1, 2007 are eligible to receive a payment incentive not to exceed $5.00 per Yes 7/16/2008 Medicaid day over a consecutive 20 year period. 5/12/2014

5 Details Source Summary Sites for None Found include:

Medicaid Long Term Care Reimbursement

Medicaid Long Term Care Reimbursement LeadingAge Michigan 2014 Leadership Institute August 13, 2014 Jon Lanczak, Manager Beth Sullivan, Senior Manager Plante & Moran, PLLC 1 What is the Medicaid Cost Report?