Provider Rate Setting Overview - South Dakota

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Provider Rate Setting OverviewJune 15, 20171

SB147 Provider Groups Nursing homes Assisted living In-home services (homemaker/nursing) Group care Psychiatric residential treatment Behavioral Health - substance abuse and mental health Community support providers2

Overview The goal of any effective rate setting methodology is to includeall allowable and reasonable costs and allow the provider tocover the cost incurred for the provision of the service whileincentivizing quality care. Not all programs and services for which rates are set are thesame, therefore there is no single methodology or formula toestablish rates. Federally, not all costs are allowable for Medicaid or other federalfund reimbursement. Some examples include advertising, baddebt and fund raising. Medicaid funded services cannot be reimbursed at rates greaterthan private pay. Federal Medicare Upper Payment Limits apply – i.e. comparisonof Medicaid to Medicare.3

Overview Based on the approach and service type, rates may be uniformfor a specific service for all providers or may be unique to eachprovider for the same service. Federal requirements can be very specific, or provide a generalframework and states have more flexibility in establishingreimbursement methods. For Medicaid and other grants, various federal regulations andguidance outline allowable costs and cost allocation methodsused to report costs.- OMB Circular A-87- CMS Publications 15-1 & 15-2 ProviderReimbursement Manual- South Dakota’s Medicaid State Plan4

Overview Reimbursement rates are set using primary sources: Based on other payer fee schedules (private pay, Medicare, etc.) Costs reported through annual cost reports Provider specific surveys – both state specific and national Rate setting cannot be done in isolation. A collaborativeapproach using financial workgroups is used when possible todevelop rate setting models. Most providers submit annual cost reports consistent with thetheir operating year-end. Not all costs are allowable for Medicaid reimbursement basedon federal requirements.5

Rate Setting Methodologies Once cost report data is validated, it can be used to developprospective reimbursement rates. Various methodologies are used depending on provider type.Models can include various components to minimize the impactthat outliers could have on rates and offer a tool to managecosts. The annual cost report data can be used to measure how wellthe model performed and if adjustments need to be made. Periodic adjustments to recognize more recent cost report datamay also be incorporated into the model.6

Payment Methodology Prospective rate based on historical cost. Providers submit an annual cost report subject to audit.The cost report includes revenue, expense, and units ofservice provided during the reporting period. Because of the time lag between submission of the costreport and use of the information for rate setting, costscan be inflated. Several categories of providers in this group haveadopted a uniform timeframe for the cost report period sothat all provider cost data is from the same time period.7

Payment Methodology Input from providers is gathered and used in methodologydevelopment. How the service is delivered, staffing patterns. Documentation and other training or certification requirements. Review and analysis of the raw cost report data is completedto identify outliers and establish ranges and mean values forvarious components of the model.- Per unit cost information by provider- Average salary and benefits- Relationship of personnel costs to operating If outliers exist, they can be excluded from use in modeldevelopment by use of standard deviation calculations.8

Payment Methodology In addition to cost report data, additional information maybe collected through surveys or other tools for use inmodel development. Survey data could include time spent updating careplans, travel time for home based services, averageleave days used, etc.9

Payment MethodologyBehavioral Health CMHCs and accredited substance use disorder providers Annual Expenditures: 46.9 million Fund sources: Medicaid, Substance Use Disorder andMental Health Block Grants, General funds Annual Unduplicated Number Served: 32,826 Number of Providers: 54 Majority of rates uniform – i.e. all providers paid the samerate10

Payment MethodologyBehavioral Health Substance Use Disorder – methodology development formajority of services in 2006/2007. Partial methodology/updates to halfway house services in 2010Long Term Residential to recognize federal psychiatric residentialtreatment (PRTF) requirements in 2011CJI-CBISA – 2014Analysis conducted annually to compare most recent cost reports tomethodology Mental Health – history of rate setting methodologytimeframes CARE – 2009SED – 2010IMPACT- 2013Outpatient psychiatric – Partial methodology review with 2016salary/cost survey, majority of other outpatient services 2008/2009JJRI- FFT – 2016Analysis conducted annually to compare most recent cost reports tomethodology Complete list of fees and fee schedule can be found here es/dss/11

Payment Methodology ExampleBehavioral Health – CD CounselorLOCAL/GROUP COUNSELINGAVERAGE COUNSELOR STAFF SALARYAvg Salary 24,950TOTAL COUNSELOR SALARYTOTAL BENEFITS AND TAXESTOTAL COUNSELOR SALARY COST (B&T) 24,950 4,758 29,708TOTAL SALARY COST (B&T)( ) TOTAL OPERATING COSTS( ) TOTAL COST 29,708 10,100 39,708TOTAL COSTAVG BILLABLE HOURSRATE PER HOUR 39,8081,768 22.52RATE 22.52per hour 5.44per 15 min12

Payment MethodologyResidential Treatment for Youth Annual Expenditures: 29.8 million Fund Sources: Group Care – General funds and Title IV-E PRTF- Medicaid Independent Living - General, Chafee grant funds Average Monthly Number Served: 329 DSS and DOC Number of Providers: 1113

Payment MethodologyResidential Treatment for Youth Currently each facility paid a unique daily rate – FY2017 rates rangefrom 122.35 to 226.38 Moving to more standardized rates. Group care - rate setting methodology developed by SDAYCP in2014. Cost report data used to compare to rate modeling. Utilizedthis information for purposes of rate methodology target forGovernor’s 3 year plan. When PRTF federal requirements were implemented in 2007, ratemethodology was adjusted. SDDSS currently working with SDAYCPon review of methodology. Independent Living – Case Management and Housing supports Analysis conducted annually to compare most recent cost reports tomethodology.14

Payment MethodologyIn Home Services – Homemaker/Nursing Annual Expenditures: 20.6 million (DSS/DHS) Fund Sources: Medicaid, state general funds, Social ServicesBlock Grant Average Monthly Number Served: 6,431 Number of Providers: 72 sites Multiple agencies and programs purchase this service. ADLS and HCBS waivers in Long Term Care Services andSupports and Medical Services State Plan utilize thisreimbursement method and rates.15

Payment MethodologyIn Home Services – Homemaker/Nursing All providers paid the same hourly rate. SFY2017 rates:- Nursing - 49.60- Homemaker/personal care aide - 25.16HCBS waivers have historically paid one rate for nursing services –whether provided by an RN or LPN. State Plan pays rates unique toLPN. Initial rate methodology completed in 2007/2008. Updated in 2010 and again in 2015 to accommodate changes intravel time, documentation and training requirements, andmarket factors for salary and wages. Home based service includes wide variability in travel time forservice provider. Analysis conducted annually to compare most recent costreports to methodology.16

Payment Methodology ExampleIn Home Services – Homemaker/NursingHOMEMAKER/PERSONAL CARE AID RATE METHODOLOGY (2015 data)DIRECT STAFFSalary% FTE 22,0001.00Total Cost 22,000TOTAL DIRECT SALARIESTOTAL DIRECT BENEFITS & TAXESTOTAL DIRECT SALARY COST (B&T) 22,000 7,788 29,788TOTAL SALARY COST B&T( ) TOTAL OPERATING COSTS( ) TOTAL COST 29,788 10,100 39,888TOTAL COSTBILLABLE HOURSRATE PER HOUR 39,8881,425 27.9917

Payment MethodologyAssisted LivingAnnual Expenditures: 9.0 millionFund Source: Medicaid (Waiver)Average Monthly Number Served: 652Number of Providers: 123SFY2017 daily rate: 40.50 per day (Waiver services only- does notinclude room and board which is paid by the resident). Rate was originally based relationally to nursing home rate until 2007 (onehalf nursing home rate based on certain RUG groups) Financial workgroup formed in 2007-obtained cost report data fromrepresentative sample of providers. Workgroup recommended priority forcost reporting those who serve 25% or greater Medicaid. Rate methodologyadjustments made in 2008 and 2009 to reflect updated cost data. FY2015 sample of providers cost report data, national and state survey data,and nursing home rate utilized to develop rate methodology.18 Analysis conducted annually to compare most recent cost reports tomethodology.

Payment MethodologyNursing FacilityAnnual Expenditures: 141.5 millionFund Source: MedicaidAverage Monthly Number Served: 3,156Number of Providers: 107 Prospective rate based on historical costs Medicaid pays for approximately 55% of nursing facility residents inSouth Dakota SFY 2016 Average facility rate 132.22 (case mix not included) Long Term Care Study completed in 2007. Task force evaluatedreimbursement methodology and industry did not recommend anychanges – did recommend changes to methodology for facilitiesdesignated as Access Critical.19

Payment MethodologyNursing Facility South Dakota’s reimbursement method pays a daily rate uniqueto each resident. Rates for residents with special or heavy careneeds are higher while those with less needs are lower. Thismethodology is referred to as a “case mix methodology”. The majority of states (38) utilize this type of methodology. A resident’s care needs are identified through an assessmentcalled the Minimum Data Set (MDS). The MDS is used to collectdata regarding the individual’s functional capacity including basicself care activities such as health, bathing, dressing, toileting,eating, and transferring. The assessments are completed by thenursing home staff and monitored by state staff. Each level of care from the MDS is assigned a Case Mix Weight.20

Payment MethodologyNursing Facility When facilities are reimbursed for services, the direct carecomponent of the rate is multiplied by the resident’s case mixscore resulting in an individualized rate for each residentbased on their specific care needs.The total rate is calculated by:Facility Direct Care Rate X Resident Case Mix Facility NonDirect Care Rate Total Rate per day Specialized populations - for example, wound care,challenging behaviors, and traumatic brain injury, includeadditional cost of providing specialized services not capturedthrough the case mix methodology.21

Payment MethodologyNursing FacilityExample 1: higher care needsSally’s care requirements put her in the Extensive Category forreimbursement. Sally needs the assistance of 2 staff for multipleassistive daily living categories (bathing, dressing, assistance withfeeding) along with a diagnosis of Multiple Sclerosis, IV Medication,and oxygen therapy.Before Case Mix Adjustment:DC rate 54.78NDC rate 77.44Total rate 132.22Case Mix weight 2.67After Case Mix Adjustment: 54.78 * 2.67 146.26 77.44 Total Daily Rate 223.7022

Payment MethodologyNursing FacilityExample 2: lower care needsSue requires minimal assistance with assistive daily living activities,has mild cognitive decline and requires restorative therapy 3 daysper week.Before Case Mix AdjustmentDC rate 54.78NDC rate 77.44Total rate 132.22Case Mix weight .59After Case Mix Adjustment 54.78 * .59 32.32 77.44 Total Daily Rate 109.7623

Current Methodology for PaymentDHS Community Based Providers – Direct Support(Residential Habilitation, Day Habilitation, Prevocational, Supported Employment, Nursing, Other Medical)FY16 Expenditures: 114,436,192 Providers: 20Payment Methodology: Service Based Rates (SBR) System– Statistical model used to fairly and equitably distributeexisting resources within the system based upon thecare level and mix of services of the person supported– Establishes a daily rate for every person supported –those with higher needs receive a higher rate– Sources of data used in SBR system Provider cost reportsActivity logging (time study) dataServices received by individual supportedAdaptive behavior assessment toolEconomic measures24

Current Methodology for PaymentDHS Community Based Providers – Direct Support25

Current Methodology for PaymentDHS Community Based Providers – Direct Support26

Current Methodology for PaymentDHS Community Based Providers – Direct Support 40 payment categories & enhanced rates–––––Low: 2.65High: 529.39Mode: 145.88Median: 132.63Mean: 128.99 Payment categories can be located at the DSSwebsite es/dhs/27

Current Methodology for PaymentDHS Community Based Providers – Case Mgmt.FY16 Expenditures: N/AProviders: 4Payment Methodology: Fee-for-service delivery system– Complies with CMS Final Rule regarding conflict-freecase management– 15-minute unit established for the delivery of casemanagement services– 12.08 per unit rate initially calculated Base data used from CSP cost reports included salaries,benefits and taxes, operating overhead and staff time forexisting case managersDepartment of Labor wage statistics were reviewed tovalidate base data– 12.49 per unit rate after applying 3.42% inflationeffective for services provided on or after June 1, 201628

Current Methodology for PaymentDHS Community Based Providers – Case Mgmt. Budget neutral Approximately 50% of CSP case management budgetremained with CSP 1,550 reduced from each individual’s SBR calculation ––Less than 5% reduced from total CSP budget29

Current Methodology for PaymentDHS Community Based Providers – Family Support(Case Mgmt., Companion Care, Respite, Personal Care, Home/Vehicle Modification, Supported Employment)FY16 Expenditures: 5,134,274Providers: 33 programsPayment Methodology: Fee-for-service, actual cost, negotiated– Fee-for-service 15-minute unit rate is used for thepayment of case management services and based onprovider cost reports and time study data– Supplies/Vendor services provided at market/retail rates– Rates for Personal Care, Respite, Companion Care andSupported Employment are negotiated by the participantwith their provider Participants must follow Fair Labor Standards Act includingstate and federal minimum wage requirements30

Current Methodology for PaymentDHS Community Based Providers – Family SupportDuration ofCurrentCurrentCodesUnitsT101615 minutesT1020T100515 minutesA9900T1019G0154S5165B4222T2018T203915 minutes15 minutes15 minutesCurrent DescriptionService CoordinationCompanion Care, adult; per 15 minutesRespite Care ServicesSpecialized Medical Equipment, not otherwise specified,waiverPersonal Care ServicesPersonal Care 2 ServicesHome Modifications, per serviceMedical foods for inborn errors of metabolismHabilitation, supported employment, waiver; per 15minutesVehicle modifications, waiver; per serviceFY17 RateFY18 Rate 16.82 16.87Billed Charges Billed ChargesBilled Charges Billed ChargesBilled Charges Billed ChargesBilled ChargesBilled ChargesBilled ChargesBilled ChargesBilled ChargesMonthlyLimitsn/a 2,500 2,000 7,500Billed ChargesBilled ChargesBilled ChargesBilled ChargesBilled Charges 2,500 750 10,000 1,000 750Billed Charges Billed Charges dules/dhs/31

Fund Source: Medicaid . Average Monthly Number Served: 3,156 . Number of Providers: 107 Prospective rate based on historical costs Medicaid pays for approximately 55% of nursing facility residents in South Dakota SFY 2016 Average facility rate 132.22 (case mix not included) Long Term Care Study completed in 2007.

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