Updates for Michigan Providers of Long Term Care Services (September 2007) 

Medicare Rate Update

CMS has published the final rule for implementation of the October 1, 2007 RUG rates, and there is good news: Everyone in Michigan gets an increase this year! This is particularly welcome information because most counties experienced a decrease in the wage index factor. However, this year, the labor-related portion of the rates dropped from 75.8% to 70.2%, which minimized the impact of the wage index decreases. Additionally, the industry received the full market basket inflation increase of 3.3%. Overall, rate increases in Michigan range from .81% to 6.44%. See the attached schedule for the new October 1, 2007 rates and the average increases for each county.

Now for the bad news: The House and Senate both recently passed different versions of the Children’s Health & Medicare Protection Act of 2007 (CHAMP) which would eliminate the 3.3% market basket increase for 2008. In September, the house and the senate will conference together to work out the differences in the legislation. If the bill is enacted, there will be a reduction to the Medicare RUG rates effective January 1, 2008 to reflect the elimination.

Average Michigan Medicare rates for 2005/2006 approximated $360. The following factors significantly influence the determination of the RUG III classification and resulting Medicare rate. We recommend that facilities periodically evaluate staff expertise and effectiveness in the assessment process to ensure that accurate payment is received for the services rendered.

• Selection of Assessment Reference Date
• Documentation of assistance with Activities of Daily Living
• Documentation of Mood and Behavior
• Therapy Utilization

Medicaid Issues

Rate Setting
The State continues to wrestle with the budget for fiscal 2008 and there is still no definitive guidance on the impact to the October 1, 2007 Medicaid rates. Although formal legislation to limit the growth of Medicaid rates to the rate of inflation (Section 1690) was not implemented, the Department of Community Health is still considering options for capping rate increases at the rate of inflation. We will keep you updated as more information on the State budget and the Medicaid rates becomes available.

Provider Tax
As you may have heard, there is approximately $1.8 million dollars of provider taxes that the State has not been able to collect, mostly due to facility closings. Because of Federal matching, a $1.8 million loss of taxes equates to a $4.0 million loss of QAS revenues. In past years, the State has made up the difference. Starting this year, however, they are passing the shortfall through to providers. Currently, the plan is to reduce September QAS payments by approximately $4.50 per Medicaid day to cover the gap.

With the change to the September payments, this is a good time for facilities to review their QAS payments. The monthly QAS payments are estimates, based on historical Medicaid census data, and are settled to the actual Medicaid census at the end of the period. Facilities should compare the estimated days (found on the letter from the State establishing the monthly QAS payment amount) to actual data, and book a corresponding settlement payable to or from the Medicaid program. Furthermore, be reminded that the QAS payment is based on the audited variable costs of a facility. If your facility has not yet been audited, you may wish to consider establishing a reserve for the impact of potential audit adjustments.

Capital Reimbursement
One component of the October 2007 rates that has already been determined is the Current Asset Value (CAV) Limitation. The CAV limitation is currently at $50,000 increasing to $53,500 effective October 1, 2007, translating into an increase of between $0.25 and $0.50 per patient day for facilities that are over the limit, depending on tenure. The last few years have seen significant increases in the CAV limitation, making new construction and renovation projects much more financially appealing.

Available Beds
The CON Commission publishes the updated bed inventory/need on its website every month. As of September 1, the following counties had available beds without any pending applications:

In addition, there are 10 beds available under the state-wide special population pool for Alzheimer’s disease, which can be used by anyone wanting to establish an Alzheimer’s unit, regardless of the bed need in their county. Under the current CON rules, as long as there is a need for one bed in a planning area, the applicant can request and be awarded up to 20 beds. All applications received by the October 1 filing deadline will have first rights to the beds, subject to comparative review against competing applications.