Haw. Code R. § 17-1739.2-8 - Calculation of component per diem costs by reference to each provider's base year cost report

(a) Cost data shall be abstracted from the base year cost report and categorized into the following three components:

(1) Direct nursing costs shall include all allowable costs involved in the direct care of the patient. Examples of such costs include the following:

(A) Salaries for nurses' aides, registered nurses, and licensed practical nurses not involved in administration;

(B) The portion of employee fringe benefits that are properly allocated to those salaries;

(C) Physician-ordered maintenance therapy, which is not billed directly to the department. The cost of maintenance therapy services provided by persons other than nursing staff shall be limited to an amount equivalent to the cost if performed by nursing staff or a physical therapy aide; and

(D) Costs of nursing supplies and medical supplies not separately billable to patients.

(2) Capital costs shall include all allowable capital related operating costs under Medicare reasonable cost principles of reimbursement, as defined in 42 CFR Chapter 413 of the long-term care facility or distinct part unit. Examples of such costs include the following:

(A) Rent;

(B) Interest;

(C) Depreciation;

(D) Equipment or lease rental;

(E) Property taxes; and

(F) Insurance relating to capital assets.

(3) G&A costs shall include all additional allowable costs incurred in providing care to long-term care patients. Examples of such costs shall include the following:

(A) Dietary;

(B) Housekeeping;

(C) Laundry and linen;

(D) Operation of plant;

(E) Medical records;

(F) The costs of insuring against or paying for malpractice, including insurance premiums, attorneys' fees and settlements of claims; and

(G) The costs of fringe benefits properly allocated to employees involved in general and administrative duties.

(b) Costs allocated to line items on the base year cost report other than those components listed in subsection (a) or to inappropriate line items, shall be appropriately reclassified to the three components. Reclassification shall be performed by the department or its fiscal agent. If maintenance therapy is identified as a separate line item on the provider's cost report, then the department shall include those costs in calculating the PPS rates. The department shall not, however, allow reclassification of maintenance therapy costs from the physical or occupational therapy ancillary cost center to routine costs.

(c) Costs of services specifically excluded from the basic PPS rate under section 17-1739.2-4(b) shall be deleted from the costs identified in subsection (a) for purposes of the basic PPS rate calculation. This process shall involve identifying line items from the base year cost report or other financial records of the provider pertaining to the excluded services and subtracting these costs from the appropriate component. If a provider's base year cost report does not identify the costs of excluded services, then the department shall so advise the provider and request additional financial records. If the provider does not respond with appropriate information, then the department may delete from the provider's costs an amount reasonably estimated to represent the costs of such excluded services.

(d) Cost reports for facilities which began operations after the beginning of the base year are not included in calculating the statewide weighted average per diem costs or used to calculate the provider's basic PPS rate.

(e) Costs attributable to new beds that are placed in service after the beginning of the base year are also not included in calculating the statewide weighted average per diem costs or used to calculate the portion of the provider's basic PPS rate that relates to the new beds.

(f) Where an existing facility has partial year cost reports from more than one owner or operator, the department may either select one of the partial year cost reports or combine the cost reports from the former and current owners or operators, or both. In either case, the cost reports shall be adjusted to approximate the costs that would have been incurred for a twelve-month period.

(g) Gross excise taxes paid on receipts, NF taxes, and any return on equity received by a for-profit provider shall be deleted from the costs used to calculate the basic PPS rate and shall be reimbursed separately.

(h) If a provider received a rate increase pursuant to a rate reconsideration request in the base year, and that increase is for a non-recurring cost, then the department may delete from the base year costs that are included in calculating the basic PPS rates an amount equal to the costs that were used to calculate the rate increase.

(i) If a provider received supplemental payments from the state (with no federal matching funds) for special services in the base year, then the department shall adjust the provider's base year costs to remove the differential cost of those special services in calculating the provider's basic PPS rates.

(j) The resulting component costs shall be standardized to remove the effects of varying fiscal year ends. Costs are inflated from the end of each provider's fiscal year to a common point in time. Therefore, facilities with fiscal years that end earlier receive a higher rate (more months) of inflation.

(k) To recognize annual inflationary cost increases, these standardized component costs shall be inflated as described in section 17-1739.2-14.

(l) For nursing facility providers, the portions of a provider's standardized and inflated costs (except for the costs of maintenance therapy services included in direct nursing costs and the costs of complying with OBRA 87) that are in excess of the routine cost limits (excluding the add-on to those limits for OBRA 87 costs) for long-term care facilities shall be deleted from the costs used to calculate the basic PPS rates. The department shall apply its estimate of what the federal routine cost limits would have been for urban Honolulu facilities to all nursing facilities.

(m) Costs that are not otherwise specifically addressed in this chapter shall be included in base year costs if they comply with HCFA Publication No. 15 standards.

(n) Legal expenses for the prosecution of claims in federal or state court against the State of Hawaii or the department incurred after September 30, 1988, shall not be included as allowable costs in determining the PPS per diem rates.

(o) A provider-specific per diem component cost shall be calculated by dividing the cost associated with each component identified in subsection (a) as adjusted in subsection (b) by the number of long-term care provider census days for each acuity level report on the cost report and segregated in accordance with the classifications in section 17-1739.2-5.

(p) For providers with both acuity levels A and C residents in the base year, per diem component rates shall be established as follows:

(1) Costs as reported on the base year cost report shall be used for the computation of the level A and level C per diem component rates for providers which report costs for acuity levels A and C residents separately;

(2) If a provider reports combined costs for acuity levels A and C and does not segregate its direct nursing costs based upon a case mix method or study, then the department shall allocate the provider's direct nursing costs based upon the acuity ratio;

(3) Costs for the general and administrative component shall be allocated equally on a per diem basis between acuity levels A and C, or at the provider's option, allocated by the provider using the same case-mix index developed for nursing costs;

(4) Capital costs shall be allocated equally between Acuity levels A and C on a per diem basis; and

(5) In no case shall a provider's acuity level A per diem costs exceed its acuity level C per diem costs.

(q) Notwithstanding the foregoing, if a provider's base year cost report indicates that the provider had insufficient experience at a particular level of care, then its basic PPS rate for that level of care shall be computed as follows:

(1) The G&A and capital cost components shall remain the same for both levels of care;

(2) The provider shall receive the substitute direct nursing component for the level of care for which it had insufficient experience;

(3) If the provider allocated its costs between levels A and C, then the costs and days allocated to the level of care for which it had insufficient experience shall not be considered in calculating its basic PPS rates;

(4) If the provider did not allocate its costs between levels A and C, then no part of its costs or days shall be allocated to the level of care for which it had insufficient experience in calculating its basic PPS rates; and

(5) The calculation of the basic PPS rate for an acuity level in which the provider has insufficient experience shall also consider the adjustments that have been incorporated into the basic PPS rate for which sufficient experience exists.

Notes

Haw. Code R. § 17-1739.2-8

[Eff 09/01/03] (Auth: HRS § 346-59; 42 U.S.C. §1396 a) (Imp: 42 C.F.R. §447.252)