Medicaid NSGO Programs: RISKS, REWARDS AND PITFALLS. Kristen Gentry, Esq.

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1 Medicaid NSGO Programs: RISKS, REWARDS AND PITFALLS Kristen Gentry, Esq.

2 UPPER PAYMENT LIMIT ( UPL ) PROGRAMS GENERAL

3 UPL Payments Generally Medicaid s Upper Payment Limit is the maximum payment amount that States can pay for specific Medicaid services--- this is called the UPL. The UPL Rule: 42 CFR applies to inpatient services provided by Hospitals, NFs, and ICFs/IID. This rule provides that the UPL for nursing facility services is a reasonable estimate of the amount Medicare would pay for the same or similar services. States typically pay for Medicaid services at rates well below the Medicare payment amount. Therefore, UPL payments or supplemental payments refers to the difference between a reasonable estimate of the amount Medicare will pay for the same or similar services and the amount Medicaid has already paid for the services. Outpatient UPL at 42 CFR

4 UPL Payments Generally Medicaid allows States to use aggregate UPLs for entire categories of providers. In the late 1990s, federal investigations revealed abuse of these UPL categories. Certain states were drawing down billions of dollars through public providers and using the federal funding to supplement their general state revenues. (Pennsylvania) Formerly, there were 2 UPL categories. Federal UPL published on 4/19/2001 added a third category State-owned governmental facilities Private facilities Non-state governmental facilities

5 UPL Payments Generally To be considered Non-State Governmental (NSGO): 1. The entity owning or operating the nursing facility must be able to either make an intergovernmental transfer of funds ( IGT ), or have an IGT of Medicaid matching funds made on its behalf, directly or indirectly through a governmental owner or operator; Public entity 2. The entity owning or operating the nursing facility must have a non-state governmental governing board; and 3. A non-state governmental entity must retain ultimate liability for the facility it operates

6 UPL Payments Generally Consist of two (2) portions: 1. Non-Federal Share: Generally paid through an intergovernmental transfer of funds by the governmental or non-governmental facility (depending on which UPL category) States can fund up to 60% of non-federal share of Medicaid payments with non-state governmental monies 2. Federal Share: paid by federal government

7 INDIANA UPL PROGRAMS

Indiana UPL Programs Indiana has several UPL Programs in its approved Medicaid State Plan: Inpatient Hospital In the HAF/ UPL is Medicare Outpatient Hospital In the HAF/ UPL is Medicare

8 Indiana UPL Programs Indiana has several UPL Programs in its approved Medicaid State Plan: Inpatient Hospital In the HAF/ UPL is Medicare Outpatient Hospital In the HAF/ UPL is Medicare Non-State Governmental Nursing Facility UPL Faculty Physician Access to Care Payments UPL is based on the UCR. Non-State Governmental Ambulance---Cost-based Supplemental Payment program

Indiana Nursing Facility UPL Program Began in 2001.

9 Indiana Nursing Facility UPL Program Began in Participating Indiana Nursing Facilities are owned or operated by a County Hospital (only two are NSGO due to county affiliation Healthwin and Byron) County Hospital IGTs the State Share of Medicaid Payments. IGTs fund the non-federal share of UPL payments and the State draws down Federal Financial Participation ( FFP ) for the Supplemental Payments to pay the providers.

10 Indiana Nursing Facility UPL Program County Hospital receives supplemental payments in an amount equal to the difference between the Medicaid rate and approximate Medicare equivalent rate for each Nursing Facility. Payments are NF-specific (no longer based on average rates across all participating providers). Supplemental payments must be held in nursing facility specific accounts until end of Hospital s fiscal year---when can be transferred to the Hospital s general account.

11 Indiana Nursing Facility UPL Program As of January 2014, 332 of the 475 Indiana Medicaid Certified Nursing Facilities are participating. Participating Indiana County Hospitals, include: Adams Columbus Dearborn Eskenazi (Wishard) Floyd Hancock Hendricks Henry HHC Jackson Jasper Johnson Logansport Major Pulaski Putnam Riverview Rush Wabash Witham Woodlawn

12 Indiana Nursing Facility UPL Program Hospitals are beginning to acquire NFs from other Hospitals already in the Program M&S recently released information on the SFY 2013 NSGNF Payments Total UPL Distribution, Net of Provider IGT for all participating facilities: $312,700,109 (based on 267 NFs) UPL PAYMENT PER MEDICAID DAY AVERAGES: $71.54

Indiana Nursing Facility UPL Program SPA Change On Sept. 10, 2013, CMS approved the amended Indiana NSGO Nursing Facility UPL State Plan Amendment ( SPA )---effective October 1, 2012.

13 Indiana Nursing Facility UPL Program SPA Change On Sept. 10, 2013, CMS approved the amended Indiana NSGO Nursing Facility UPL State Plan Amendment ( SPA )---effective October 1, The SPA modifies the methodology for calculating and distributing UPL supplemental payments to NSGO nursing facilities. The previously utilized methodology paid the UPL to each facility by averaging the Medicaid per diem and then allocating the aggregate UPL pool to each facility based on the facility s Medicaid days. Each facility received the same supplemental payment per Medicaid day, varied based upon number of Medicaid days.

14 Indiana NSGO Program: New Methodology New methodology pays the UPL to each facility based on each facility s actual contribution to the UPL pool. The Facility s UPL gap (reasonably estimated Medicare RUG rate less adjusted Medicaid rate) x Facility s Medicaid days = Supplemental Payment Amount. Most facilities will not be significantly impacted by the change in methodology. Change is helpful to some because of patient acuity.

15 Indiana NSGO Program: Why Participate? Rewards $$$$$ Additional resources to use for NF capital improvements and other big dollar infrastructure items. Annual UPL payment per bed = (average using $71.54 per day) $26,112. Nursing facility with 100 MD beds X 365 = $2,611, Hospital and NF split 50/50 at $1,305, Clinical considerations Reduce Hospital re-admissions Care continuum and Care Coordination improvements Hospital/NF partnerships and cross-education Electronic Health Records Quality Incentive Payments

16 Indiana NSGO Programs: What are the Risks? Use of UPL Funding NFs are hesitant to build UPL funding into operational budgets (increase staffing ratios/ hire staff Nurse Practitioners) due to uncertainty of funding Cost Limit rule would have limited NSGO UPL programs to cost. (Rule was successfully challenged due to procedural missteps by the Bush Administration and Congress issued strong language disaproving the cost limit rule.) 2013 State Medicaid Director Letter/ UPL surveys indicate CMS desire to uniformly define UPL payments.

17 Indiana NSGO Programs: What are the Risks? Cash-Flow issues if CHOW transition not properly handled. Valuations May Favor one party over the other. Lag in obtaining NSGO recognition for NFs. IGTs may require NSGO to obtain short term financing. Hospital/ NF partnership may favor NF OIG Audit, Qui Tams, Bad press

18 Indiana NSGO Programs: Pitfalls Nursing Facility Pitfalls: Mission Alignment Operational Expenses Capital Budgets Quality Incentive Fees Valuations Lease values Hospital Pitfalls: Designation NF executive to oversee NF operations. Hospital shopping. Understanding liabilities / risks of NF operations. Operational Expenses Capital budgets

19 UTAH NF UPL PROGRAM

20 Utah Nursing Facility UPL Program The State of Utah submitted a NSGO UPL SPA modeled on the Indiana SPA SPA Submitted: March 22, 2013 SPA Approved: December 13, 2013 Effective: February 1, 2013

21 Utah Nursing Facility UPL Program Facility specific UPL calculation UPL per diem gap calculated by subtracting Medicaid weighted average per diem from the weighted average Medicare per diem that reasonably estimated would have been paid using Medicare payment principals Per diem data from previously completed state fiscal year Medicaid rate adjusted for program differences: therapy, lab, radiology, and pharmaceuticals. Payments made each quarter

22 Utah Nursing Facility UPL Program 3 NFs eligible at the time the SPA was submitted 3 Additional NFs became eligible after the SPA was submitted.

23 Utah Nursing Facility UPL Program Lessons Learned: Utah has no required settle up at year end CMS questioned inclusion of ancillaries (e.g. therapy, lab, pharmaceuticals) into Medicaid rate for purposes of comparing Medicare and Medicaid rates and calculating UPL---pointing to the March 2013 UPL CMS issued state UPL surveys as authority to remove ancillaries from Medicare rate to establish comparison. Impact would have been >$30 per day. CMS backed down.

24 TEXAS NF UPL PROGRAM

25 Texas Nursing Facility UPL Program SPA was approved on October 23, 2012 Effective October 1, 2012 Texas delayed implementation until October 1, Managed Care will effectively end the program on October 1, Grandfathered Nursing Facilities Section 1115 waiver

26 Texas Nursing Facility UPL Program Methodology similar to Indiana s original program. Aggregate UPL calculation, allocated to each participating NF based on Medicaid days Medicaid rate adjusted for program differences: pharmacy services, specialized services, emergency dental Payments made each quarter Requires application by NF: Medicaid Supplemental Payment Program Certification of Nursing Facility Participation

27 Texas Nursing Facility UPL Program On March 21, 2013, Texas HHSC sent letter to NFs describing the new UPL program and requesting interested NFs notify HHSC. However, due to impending managed care implementation, there has been very little interest by either nursing facilities or hospitals. Certain hospitals have joined health care authorities in Austin.

28 CMS MOVEMENT ON UPL PROGRAMS

29 CMS Letter On March 18, 2013 CMS issued a State Medicaid Director ( SMD ) Letter regarding Federal and State Oversight of Medicaid Expenditures Letter indicates that CMS will be watching State s NF UPL programs more closely and support ongoing compliance with the UPL requirements Starting in 2013, states must submit information on the UPL demonstrations on an annual basis rather than only when initiating the demonstration or amending the demonstration, including: Provider specific reporting on all payments made to providers, including supplemental payments Source of non-federal funding for UPL payments Letter also provides for CMS review of other UPL programs either in accordance with CMS schedule of review or when a Medicaid State Plan is submitted in the relevant section of the Plan.

30 THANK YOU! Kristen Gentry, Esq Partner One Indiana Square, Suite 2800 Indianapolis, Indiana

Examining Medicaid and CHIP s Federal Medical Assistance Percentage

Testimony Before the United States House of Representatives Committee on Energy and Commerce: Subcommittee on Health Examining Medicaid and CHIP s Federal Medical Assistance Percentage Testimony of: John