Part 1 GENERAL
PROVISIONS
Section 1.1 Purpose
The purpose of these rules is to implement state and federal
reimbursement policy with respect to nursing facilities providing services to
Medicaid eligible persons. The methods, standards, and principles of rate
setting established herein reflect the objectives set out in
33 V.S.A. §
901 and balance the competing policy
objectives of access, quality, cost containment and administrative feasibility.
Rates set under this payment system are consistent with the efficiency,
economy, and quality of care necessary to provide services in conformity with
state and federal laws, regulations, quality and safety standards, and meet the
requirements of
42 U.S.C.
§1396 a (a)(13)(A).
Section 1.2 Scope
These rules apply to all privately owned nursing facilities
and state nursing facilities providing services to Medicaid residents.
Long-term care services in swing-bed hospitals, and Intermediate Care
Facilities for the Mentally Retarded are reimbursed under different methods and
standards. Swing-bed hospitals are reimbursed pursuant to
42
U.S.C. §13961(b)(1).
Intermediate Care Facilities for the Mentally Retarded are reimbursed pursuant
to the Regulations Governing the Operation of Intermediate Care Facilities for
the Mentally Retarded adopted by the Agency and are subject to the Division's
Accounting Requirements ( Section
2
) and Financial Reporting ( Section
3
).
Section 1.3 Authority
These rules are promulgated pursuant to
33 V.S.A. §§
904(a) and
908(c)
to meet the requirements of 33 V.S.A. Chapter 9,
42 U.S.C.
§§1396 a(a)(13)(A) and §
1396a(a)(30).
Section 1.4
General Description of the Rate Setting System
A prospective case-mix payment system for nursing facilities
is established by these rules in which the payment rate for services is set in
advance of the actual provision of those services. A per diem rate is set for
each facility based on the historic allowable costs of that facility. The costs
are divided into certain designated cost categories, some of which are subject
to limits. The basis for reimbursement within the Nursing Care cost category is
a resident classification system that groups residents into classes according
to their assessed conditions and the resources required to care for them. The
costs in some categories are adjusted to reflect economic trends and
conditions, and the payment rate for each facility is based on the per diem
costs for each category.
Section
1.5 Requirements for Participation in Medicaid Program
(a) Nursing facilities must satisfy all of
the following prerequisites in order to participate in the Medicaid program:
(1) be licensed by the Agency, pursuant to
33 V.S.A. §
7103(b),
(2) be certified by the Secretary of Health
and Human Services pursuant to 42 C.F.R. Part
442, Subpart C, and
(3) have executed a Provider Agreement with
the Agency, as required by 42 C.F.R. Part
442, Subpart B.
(b) To the extent economically and
operationally feasible, providers are encouraged, but not required, to be
certified for participation in the Medicare program, pursuant to
42
C.F.R. §
488.3.
(c) Medicaid payments shall not be made to
any facility that fails to meet all the requirements of Subsection
1.5(a).
Section 1.6
Responsibilities of Owners
The owner of a nursing facility shall prudently manage and
operate a residential health care program of adequate quality to meet its
residents' needs. Neither the issuance of a per diem rate, nor final orders
made by the Director or a duly authorized representative shall in any way
relieve the owner of a nursing facility from full responsibility for compliance
with the requirements and standards of the Agency of Human Services.
Section 1.7 Duties of the Owner
The owner of a nursing facility, or a duly authorized
representative shall:
(a) Comply with
the provisions of Sub sections 1.5 and 1.6 setting forth the requirements for
participation in the Medicaid Program.
(b) Submit cost reports in accordance with
the provisions of sub sections 3.2 and 3.3 of these rules.
(c) Maintain adequate financial and
statistical records and make them available at reasonable times for inspection
by an authorized representative of the Division, the state, or the federal
government.
(d) Assure that an
annual audit is performed in conformance with Generally Accepted Auditing
Standards (GAAS).
(e) Assure that
the construction of buildings and the maintenance and operation of premises and
programs comply with all applicable health and safety standards.
(f) Notwithstanding any other provision of
these rules, any provider that fails to make a complete cost report filing
within the time prescribed in subsection 3.3(a) or fails to file any other
materials requested by the Division within the time prescribed shall receive no
increase to its Medicaid rate until the first day of the calendar quarter after
a complete cost report or the requested materials are filed, unless within an
extension of time previously approved by the Division.
Section 1.8 Powers and Duties of the Division
and the Director
(a) The Division shall
establish and certify to the Department of Vermont Health Access per diem rates
for payment to providers of nursing facility services on behalf of residents
eligible for assistance under Title XIX of the Social Security Act.
(b) The Division may request any nursing
facility or related party or organization to file such relevant and appropriate
data, statistics, schedules or information as the Division finds necessary to
enable it to carry out its function.
(c) The Division may examine books and
accounts of any nursing facility and related parties or organizations, subpoena
witnesses and documents, administer oaths to witnesses and examine them on all
matters over which the Division has jurisdiction.
(d) From time to time, the Director may issue
notices of practices and procedures employed by the Division in carrying out
its functions under these rules.
(e) The Director shall prescribe the forms
required by these rules and instructions for their completion.
(f) Copies of each notice of practice and
procedure, form, or set of instructions shall be sent to each nursing facility
participating in the Medicaid program at the time it is issued. A compilation
of all such documents currently in force shall be maintained at the Division,
pursuant to
3 V.S.A. §
835, and shall be available to the
public.
(g) Neither the issuance of
final per diem rates nor Final Orders of the Division which fail, in any one or
more instances, to enforce the performance of any of the terms or conditions of
these rules shall be construed as a waiver of the Division's future performance
of the right. The obligations of the provider with respect to performance shall
continue, and the Division shall not be estopped from requiring such future
performance.
Section 1.9
Powers and Duties of the Department of Disabilities, Aging and Independent
Living's Division of Licensing and Protection as Regards Reimbursement
(a) The Division of Licensing and Protection
of the Department of Disabilities, Aging and Independent Living shall receive
from providers resident assessments on forms it specifies. The Department of
Disabilities, Aging and Independent Living shall process this information and
shall periodically, but no less frequently than quarterly, provide the Division
of Rate Setting with the average case-mix scores of each facility based upon
the federal RUG IV classification system (48 group version). This score will be
used in the quarterly determination of the Nursing Care portion of the
rate.
(b) The management of the
resident assessment process used in the determination of case-mix scores shall
be the duty of the Division of Licensing and Protection of the Department of
Disabilities, Aging and Independent Living. Any disagreements between the
facility's assessment of a resident and the assessment of that same resident by
the audit staff of Licensing and Protection shall be resolved with the Division
of Licensing and Protection and shall not involve the Division of Rate Setting.
As the final rates are prospective and adjusted on a quarterly basis to reflect
the most current data, the Division of Rate Setting will not make retroactive
rate adjustments as a result of audits or successfully appealed individual
case-mix scores.
Section
1.10 Computation of and Enlargement of Time; Filing and Service of
Documents
(a) In computing any period of time
prescribed or allowed by these rules, the day of the act or event from which
the designated period of time begins to run shall not be included. The last day
of the period so computed shall be included, unless it is a Saturday, a Sunday,
or a state or federal legal holiday, in which event the period runs until the
end of the next day which is not a Saturday, a Sunday, or a state or federal
legal holiday.
(b) For the purposes
of any provision of these rules in which time is computed from the receipt of a
notice or other document issued by the Division or other relevant
administrative officer, the addressee of the notice shall be rebuttably
presumed to have received the notice or other document three days after the
date on the document.
(c) When by
these rules or by a notice given thereunder, an act is required or allowed to
be done at or within a specified time, the relevant administrative officer, for
just cause shown, may at any time in her or his discretion, with or without
motion or notice, order the period enlarged. This subsection shall not apply to
the time limits for appeals to the Vermont Supreme Court or Superior Court from
Final Orders of the Division or Final Determinations of the Secretary, which
are governed by the Vermont Rules of Appellate Procedure and the Vermont Rules
of Civil Procedure respectively.
(d) Filing shall be deemed to have occurred
when a document is received and date-stamped as received at the office of the
Division or in the case of a document directed to be filed under this rule
other than at the office of the Division, when it is received and stamped as
received at the appropriate office. Filings with the Division may be made by
telefacsimile (FAX), but the sender bears the risk of a communications failure
from any cause. Filings with the Division may also be made electronically, but
the sender bears the risk of a communications failure from any cause,
including, but not limited to, filings blocked due to size.
(e) Service of any document required to be
served by this rule shall be made by delivering a copy of the document to the
person or entity required to be served or to his or her representative or by
sending a copy by prepaid first class mail to the official service address.
Service by mail is complete upon mailing.
Section 1.11 Representation in All Matters
before the Division
(a) A facility may be
represented in any matter under this rule by the owner (in the case of a
corporation, partnership, trust, or other entity created by law, through a duly
authorized agent), the nursing facility administrator, or by a licensed
attorney or an independent public accountant.
(b) The provider shall file written
notification of the name and address of its representative for each matter
before the Division. Thereafter, on that matter, all correspondence from the
Division will be addressed to that representative. The representative of a
provider failing to so file shall not be entitled to notice or service of any
document in connection with such matter, whether required to be made by the
Division or any other person, but instead service shall be made directly on the
provider.
Section 1.12
Severability
If any part of these rules or their application is held
invalid, the invalidity does not affect other provisions or applications which
can be given effect without the invalid provision or application, and to this
end the provisions of these rules are severable.
Section 1.13 Effective Date
(a) These rules are effective from January
29, 1992, (as amended June 18, 1993, July 1, 1994, January 4, 1995, January 1,
1996, January 1, 1997, July 1, 1998, May 1, 1999, July 1, 1999, August 1, 1999,
July 1, 2001, November 1, 2002, May 1, 2004, July 1, 2004, July 1, 2005,
October 29, 2007, August 25, 2008, April 1, 2011, September 17, 2012, September
9, 2013, and March 6, 2015).
(b)
Application of Rule: Amended provisions of this rule shall apply to:
(1) all cost reports draft findings issued on
or after the effective date of the most recent amendment, and
(2) all rates set on or after the effective
date of the most recent amendment.
(c) With respect to any administrative
proceeding pending on the effective date of the most recent amendment the
Director or the Secretary may apply any provision of such prior rules where the
failure to do so would work an injustice or substantial
inconvenience.
Part
2 ACCOUNTING REQUIREMENTS
Section
2.1 Accounting Principles
(a) All
financial and statistical reports shall be prepared in accordance with
Generally Accepted Accounting Principles (GAAP), consistently applied, unless
these rules authorize specific variations in such principles.
(b) The provider shall establish and maintain
a financial management system which provides for adequate internal control
assuring the accuracy of financial data, safeguarding of assets and operational
efficiency.
(c) The provider shall
report on an accrual basis. The provider whose records are not maintained on an
accrual basis shall develop accrual data for reports on the basis of an
analysis of the available documentation. In such a case, the provider's
accounting process shall provide sufficient information to compile data to
satisfy the accrued expenditure reporting requirements and to demonstrate the
link between the accrual data reports and the non-accrual fiscal accounts. The
provider shall retain all such documentation for audit purposes.
Section 2.2 Procurement Standards
(a) Providers shall establish and maintain a
code of standards to govern the performance of its employees engaged in
purchasing goods and services. Such standards shall provide, to the maximum
extent practical, open and free competition among vendors. Providers should
participate in group purchasing plans when feasible.
(b) If a provider pays more than a
competitive bid for a good or service, any amount over the lower bid which
cannot be demonstrated to be a reasonable and necessary expenditure that
satisfies the prudent buyer principle is a nonallowable cost.
Section 2.3 Cost Allocation Plans
and Changes in Accounting Principles
With respect to the allocation of costs to the nursing
facility and within the nursing facility, the following rules shall
apply:
(a) [Repealed]
(b) Providers that have costs allocated from
related entities included in their cost reports shall include, as a part of
their cost report submission, a summary of the allocated costs, including a
reconciliation of the allocated costs to the entity's financial statements,
which must also be submitted with the Medicaid cost report. In the case of a
home office or related management company, this would include a completed Home
Office Cost Statement. The provider shall submit this reconciliation with the
Medicaid cost report.
(c) The
Division reserves the right not to recognize changes in accounting principles
or methods or basis of cost allocation made for the purpose or having the
likely effect of increasing a facility's Medicaid payments.
(d) [Repealed]
(e) [Repealed]
(f) Each provider shall notify the Division
of changes in statistical allocations or record keeping required by the
Medicare Intermediary.
(g)
Preferred statistical methods of allocation are as follows:
(1) Nursing salaries and supplies - direct
cost,
(2) Plant operations - square
footage,
(3) Utilities - square
footage,
(4) Laundry - pounds of
laundry,
(5) Dietary - resident
days,
(6) Administrative and
General accumulated costs,
(7)
[Repealed]
(8) Property and Related
- square footage,
(9) Fringe
Benefits - direct allocation/gross salaries.
(h) Food costs included in allocated dietary
costs are calculated by dividing the facility's allocated dietary costs by
total organization dietary costs, both of which include allocated overhead, and
multiplying the result by the total organization food costs.
(i) Utility costs included in allocated plant
operation and maintenance costs are calculated by dividing the facility's plant
operation and maintenance costs by total organization plant operation and
maintenance cost, both of which include allocated overhead, and multiplying the
result by the total organization utility costs.
(j) All administrative and general costs,
including home office and management company costs, allocated to a facility
shall be included in the Indirect Cost category.
(k) The capital component of goods or
services purchased or allocated from a related or unrelated party, such as
plant operation and maintenance, utilities, dietary, laundry, housekeeping, and
all others, whether or not acquired from a related party, shall be considered
as costs for that particular good or service and not classified as Property and
Related costs of the nursing facility.
(l) Costs allocated to the nursing facility
shall be reasonable, as determined by the Division pursuant to these
rules.
Section 2.4
Substance Over Form
The cost effect of transactions that have the effect of
circumventing the intention of these rules may be adjusted by the Division on
the principle that the substance of the transaction shall prevail over the
form.
Section 2.5 Record
Keeping and Retention of Records
(a) Each
provider must maintain complete documentation, including accurate financial and
statistical records, to substantiate the data reported on the uniform financial
and statistical report (cost report), and must, upon request, make these
records available to the Division of Rate Setting, or the U. S. Department of
Health and Human Services, and the authorized representatives of both
agencies.
(b) Complete
documentation means clear and compelling evidence of all of the financial
transactions of the provider and affiliated entities, including but not limited
to census data, ledgers, books, invoices, bank statements, canceled checks,
payroll records, copies of governmental filings, time records, time cards,
purchase requisitions, purchase orders, inventory records, basis of
apportioning costs, matters of provider ownership and organization, resident
service schedule and amounts of income received by service, or any other record
which is necessary to provide the Director with the highest degree of
confidence in the reliability of the claim for reimbursement. For purposes of
this definition, affiliated entities shall extend to realty, management and
other entities for which any reimbursement is directly or indirectly claimed
whether or not they fall within the definition of related parties.
(c) The provider shall maintain all such
records for at least six years from the date of filing, or the date upon which
the fiscal and statistical records were to be filed, whichever is the later.
The Division shall keep all cost reports, supporting documentation submitted by
the provider, correspondence, workpapers and other analyses supporting
Summaries of Findings for six years. In the event of litigation or appeal
involving rates established under these regulations, the provider and Division
shall retain all records which are in any way related to such legal proceeding
until the proceeding has terminated and any applicable appeal period has
lapsed.
(d) Pursuant to
33 V.S.A. §
908(a), all documents and
other materials filed with the Division are public information, except for
individually identifiable health information protected by law or the policies,
practices, and procedures of the Agency of Human Services. With the exception
of the administrator's salary, the-salaries and wages of individual employees
shall not be made public.
Part 3 FINANCIAL REPORTING
Section 3.1 Repealed
Section 3.2 Uniform Cost Reports
(a) Each long-term care facility
participating in the Vermont Medicaid program shall annually submit a uniform
financial and statistical report (cost report) on forms prescribed by the
Division. The inclusive dates of the reporting year shall be the 12 month
period of each provider's fiscal year, unless advance authorization to submit a
report for a greater or lesser period has been granted by the Division.
(1) The Division may require providers to
file special cost reports for periods other than a facility's fiscal
year.
(2) The Division may require
providers to file budget cost reports. Such cost reports may be used inter alia
as the basis for new facilities' rates or for rate adjustments.
(b) The cost report must include
the certification page signed by the owner, or its representative, if
authorized in writing by the owner.
(c) The original and one copy of the cost
report must be submitted to the Division. All documents must bear original
signatures.
(d) The following
supporting documentation is required to be submitted with the cost report:
(1) Audited financial statements (except that
at the discretion of the Director, this requirement may be waived),
(2) Most recently filed Medicare Cost Report
with the required supplemental data on CMS Form 339 (if a participant in the
Medicare Program), which for hospital-based nursing homes shall be the Medicare
cost report for the same fiscal year as the Medicaid cost report,
(3) Independent auditor's adjusting entries
and reconciliation of the audited financial statements to the cost
report.
(e) A provider
must also submit, upon request during the desk review or audit process, such
data, statistics, schedules or other information which the Division requires in
order to carry out its function. If, before the draft findings are issued, the
facility has been specifically requested to provide certain information or
materials and has failed to do so, such information or materials will not be
admissible in any subsequent appeal taken pursuant to Section 15, provided the
Division has notified the provider of such failure and afforded the provider a
final opportunity to cure.
(f)
Providers shall follow the cost report instructions prescribed by the Director
in completing the cost report. The chart of accounts prescribed by the
Director, shall be used as a guideline providing the titles, and description
for type of transactions recorded in each asset, liability, equity, income, and
expense account.
Section
3.3 Adequacy and Timeliness of Filing
(a) With the exception of hospital-based
nursing homes, an acceptable cost report filing shall be made on or before the
last day of the fifth month following the close of the period covered by the
report.
(1) Hospital-based nursing homes shall
file their Medicaid cost-reports within five days after filing their Medicare
cost report for the same cost reporting period with CMS.
(2) If a hospital-based Medicaid nursing
home's cost report is not filed on or before June 30 following the end of the
facility's fiscal year, the Division may require the facility to provide
certain data or to file a draft cost report.
(b) The Division may reject any filing which
does not comply with these regulations and/or the cost reporting instructions.
In such case, the report shall be deemed not filed, until refilled and in
compliance.
(c) Extensions for
filing of the cost report beyond the prescribed deadline must be requested as
follows:
(1) All Requests for Extension of
Time to File Cost Report must be in writing, on a form prescribed by the
Director, and must be received by the Division of Rate Setting prior to the due
date. The provider must clearly explain the reason for the request and specify
the date on which the Division will receive the report.
(2) Notwithstanding any previous practice,
the Division will not grant automatic extensions. Such extensions will be
granted for good cause only, at the Director's sole discretion, based on the
merits of each request. A "good cause" is one that supplies a substantial
reason, one that affords a legal excuse for the delay or an intervening action
beyond the provider's control. The following are not considered "good cause":
ignorance of the rule, inconvenience, or a cost report preparer engaged in
other work.
(d)
Notwithstanding any other provision of these rules, any provider that fails to
make a complete cost report filing within the time prescribed in subsection
3.3(a) or within an extension of time approved by the Division, shall be
subject to the provisions of subsection 1.7(f).
Section 3.4 Review of Cost Reports by
Division
(a) Uniform Desk Review
(1) The Division shall perform a uniform desk
review on each cost report submitted.
(2) The uniform desk review is an analysis of
the provider's cost report to determine the adequacy and completeness of the
report, accuracy and reasonableness of the data recorded thereon, allowable
costs and a summary of the results of the review for the purpose of either
settling the cost report without an on-site audit or determining the extent to
which an on-site audit verification is required.
(3) Uniform desk reviews shall be completed
within an average of 18 months after receipt of an acceptable cost report
filing, except in unusual situations, including but not limited to, delays in
obtaining necessary information from a provider. Notwithstanding this
subdivision, the Division shall have an additional six months to complete its
review or audits of facilities' base year cost reports.
(4) Unless the Division schedules an on-site
audit, it shall issue a written summary report of its findings and adjustments
upon completion of the uniform desk review.
(b) On-site Audit
(1) The Division will perform on-site audits,
as considered appropriate, of the provider's financial and statistical records
and systems in accordance with the relevant provisions of the Medicare
Intermediary Manual - Audits-Reimbursement Program Administration, CMS
Publication 13-2 (CMS-13).
(2) The
Division will base its selection of a facility for an on-site audit on factors
such as length of time since last audit, changes in facility ownership,
management, or organizational structure, evidence or official complaints of
financial irregularities, questions raised in the uniform desk review, failure
to file a timely cost report without a satisfactory explanation, and prior
experience.
(3) The audit scope
will be limited so as to avoid duplication of work performed by an independent
public accountant, provided such work is adequate to meet the Division's audit
requirements.
(4) Upon completion
of an audit, the Division shall review its draft findings and adjustments with
the provider and issue a written summary report of such findings.
(c) The procedure for issuing and
reviewing Summaries of Findings is set out in Sub sections 15.1, 15.2 and
15.3.
Section 3.5
Settlement of Cost Reports
(a) A cost report
is settled if there is no request for reconsideration of the Division's
findings or, if such request was made, the Division has issued a final order
pursuant to Subsection 15.3 of these rules.
(b) Cost report determinations and decisions,
otherwise final, may be reopened and corrected when the specific requirements
set out below are met. The Division's decision to reopen will be based on new
and material evidence submitted by the provider, evidence of a clear and
obvious material error, or a determination by the Secretary or a court of
competent jurisdiction that the determination is inconsistent with applicable
law, regulations and rulings, or general instructions.
(c) Reopening means an affirmative action
taken by the Division to re-examine the correctness of a determination or
decision otherwise final. Such action may be taken:
(1) On the initiative of appropriate
authority within the applicable time period set out in paragraph (f),
or
(2) In response to a written
request of the provider or other relevant entity, filed with the Division
within the applicable time period set out in subsection (f), and
(3) When the reopening has a material effect
(more than one percent) on the provider's Medicaid rate payments.
(d) A correction is a revision
(adjustment) in the Division's determination or Secretary's decision, otherwise
final, which is made after a proper re-opening.
(e) A correction may be made by the Division,
or the provider may be required to file an amended cost report. If the cost
report is reopened by an order of the Secretary or a court of competent
jurisdiction, the correction shall be made by the Division.
(f) A determination or decision may be
reopened within three years from the date of the notice containing the
Division's determination, or the date of a decision by the Secretary or a
court.
(g) The Division may also
require or allow an amended cost report to correct material errors detected
subsequent to the filing of the original cost report or to comply with
applicable standards and regulations. Once a cost report is filed, the provider
is bound by its elections. The Division shall not accept an amended cost report
to avail the provider of an option it did not originally elect.
Part 4 DETERMINATION OF
ALLOWABLE COSTS FOR NURSING FACILITIES
Section
4.1 Provider Reimbursement Manual and GAAP
In determining the allowability or reasonableness of costs or
treatment of any reimbursement issue, not addressed in these rules, the
Division shall apply the appropriate provisions of the Medicare Provider
Reimbursement Manual (CMS-15, formerly known as HCFA or HIM-15). If neither
these regulations nor CMS-15 specifically addresses a particular issue, the
determination of allowability will be made in accordance with Generally
Accepted Accounting Principles (GAAP). The Division reserves the right,
consistent with applicable law, to determine the allowability and
reasonableness of costs in any case not specifically covered in the sources
referenced in this subsection.
Section
4.2 General Cost Principles
For rate setting purposes, a cost must satisfy criteria,
including, but not limited to, the following:
(a) The cost must be ordinary, reasonable,
necessary, related to the care of residents, and actually incurred.
(b) The cost adheres to the prudent buyer
principle.
(c) The cost is related
to goods and/or services actually provided in the nursing facility.
Section 4.3 Non-Recurring Costs
(a) Non-recurring costs shall include:
(1) any reasonable and resident-related cost
that exceeds $ 10,000, which is not expected to recur on an annual basis in the
ordinary operation of the facility, may be designated by the Division as a
"Non-Recurring Cost" subject to any limits on the cost category into which the
type of cost would otherwise be assigned,
(2) litigation expenses of $ 10,000 or more,
recognized pursuant to subsection 4.20.
(3) allowable lump-sum costs of $ 2,000 or
more per cost reporting period for recruitment and legal fees or similar
expenses associated with the hiring of registered nurses from countries outside
the United States on condition that such fees or expenses shall be allowable
only in respect of such nurses who are paid at least the prevailing salary/wage
and benefits for employed nurses of similar qualifications and experience in
the geographic area in which the facility is located or tuition expenses for
nurse aide training reimbursed pursuant to
42
C.F.R.
§
483.152(c)(2).
(b) A non-recurring cost shall be
capitalized and amortized and carried as an on-going adjustment beginning with
the first quarterly rate change after the settlement of the cost report for a
period of three years.
Section
4.4 Interest Expense
(a)
Necessary and proper interest is an allowable cost.
(b) "Necessary requires that:
(1) The interest be incurred on a loan made
to satisfy a financial need of the provider.
(2) A financial need does not exist if the
provider has cash and/or cash equivalents of more than 60 days cash
needs.
(3) Cash and cash
equivalents include:
(i) monetary investments,
including unrestricted grants and gifts,
(ii) non-monetary investments not related to
resident care that can readily be converted to cash net of any related
liability,
(iii) receivables from
(net of any payables to) officers, owners, partners, parent organizations,
brother/sister organizations, or other related parties, excluding education
loans to employees.
(iv)
receivables that result from transactions not related to resident
care.
(4) Cash and cash
equivalents exclude:
(i) funded depreciation
recognized by the Division,
(ii)
restricted grants and gifts.
(5) Interest income offset.
(i) Interest expense shall be reduced by
realized investment income, except where such income is from:
(A) funded depreciation recognized by the
Division pursuant to CMS- 15,
(B)
grants and gifts, whether restricted or unrestricted.
(ii) Only working capital interest expense
shall be offset by interest income derived from working capital.
(6) The provider must have a legal
obligation to pay the interest.
(c) "Proper" requires that:
(1) Interest be incurred at a rate not in
excess of what a prudent buyer would have had to pay in the money market
existing at the time the loan was made.
(2) Interest must be paid to a lender that is
not a related party of the borrowing organization except as provided in
paragraph (k).
(d)
Interest expense shall be included in property costs if the interest is
necessary and proper and if it is incurred as a result of financing the
acquisition of fixed assets related to resident care.
(e) The date of such financing must be within
60 days of the date the asset is put in use, except for assets approved through
the Certificate of Need process or approved by the Division under Subsection
4.11 of this rule. Allowable interest, on loans financed more than 60 days
before or after the asset is put in use, will be included in Indirect Costs for
the entire term of the loan.
(f)
Borrowings to finance asset additions cannot exceed the sum of the basis of the
asset(s), determined in accordance with Sub sections 4.5 and 4.7, and other
costs allowed pursuant to paragraph (g) related to the borrowing. The limit on
borrowings related to fixed assets is determined as follows:
Basis of the assets recognized by the Division, plus a
proportionate share of other costs allowed pursuant to paragraph (g), or the
principal amount of the loan, whichever is the lower:
Less: The provider's cash and cash equivalents in excess of
60 days needs, per subparagraph (b)(2) of this subsection.
Equals: The limits on borrowings related to fixed
assets.
(g) Other costs
related to the acquisition of the assets may be included in loans where the
interest is recognized by the Division. These costs include bank finance
charges, points and costs for legal and accounting fees, and discounts on
debentures and letters of credit.
(h) Necessary and proper interest expense on
debt incurred other than for the acquisition of assets shall be recognized as
working capital interest expense and included in Indirect Costs.
(i) Application of Principal Payments.
(1) For loans entered into before a
facility's 1998 fiscal year, principal payments shall be applied first to loan
balances on allowable borrowings and second to non-allowable loan
balances.
(2) For loans entered
into during or after a facility's 1998 fiscal year, principal payments shall be
applied to allowable and non-allowable loan balances on the ratio of each to
the total amount of the loan.
(j) Refinancing of indebtedness.
(1) The provider must demonstrate to the
Division that the costs of refinancing will be less than the allowable costs of
the current financing.
(2) Costs of
refinancing must include accounting fees, legal fees and debt acquisition costs
related to the refinancing.
(3)
Material interest expense related to the original loan's unpaid interest
charges, to the extent that it is included in the refinanced loan's principal,
shall not be allowed.
(4) A
principal balance in excess of the sum of the principal balance of the previous
financing plus accounting fees, legal fees and debt acquisition costs shall be
considered a working capital loan, subject to the cash needs test in subsection
4.4(b)(2), unless the provider demonstrates to the Division that the excess was
for the acquisition of assets as set forth in (a) through (g).
(k) Interest expense incurred as a
result of transactions with a related party (or related parties) will be
recognized if the expense would otherwise be allowable and if the following
conditions are met:
(1) The interest expense
relates to a first and/or second mortgage or to assets leased from a related
party where the costs to the related party are recognized in lieu of
rent.
(2) The interest rate is no
higher than the rate charged by lending institutions at the inception of the
loan.
(l) Interest is
not allowable with respect to any capital expenditure in property, plant and
equipment related to resident care which requires approval, if the necessary
approval has not been granted.
(m)
Interest on loans that do not include reasonable and ordinary principle
repayments in the debt service payments shall not be allowable except to the
extent that it would have been incurred pursuant to a standard amortization
schedule for a term equivalent to the useful life of the asset.
Section 4.5 Basis of Property,
Plant and Equipment
(a) The basis of a donated
asset is the fair market value.
(b)
The basis of other assets that are owned by a provider and used in providing
resident care shall generally be the lower of cost or fair market value.
Specific exceptions are addressed elsewhere in this rule. Cost includes:
(1) purchase price,
(2) sales tax,
(3) costs to prepare the asset for its
intended use, such as, but not limited to, costs of shipping, handling,
installation, architectural fees, consulting and legal fees.
(c) The basis of assets
constructed by the provider to provide resident care shall be determined from
the construction costs which include:
(1) all
direct costs, including, but not limited to, salaries and wages, the related
payroll taxes and fringe benefits, purchase price of materials, sales tax,
costs of shipping, handling and installation, costs for permits, architectural
fees, consulting fees and legal fees.
(2) indirect costs related to the
construction of the asset.
(3)
interest costs related to capital indebtedness used to finance the construction
of the asset and prepare it for its intended use.
(d) The basis of betterments or improvements,
if they extend the useful life of an asset two or more years or significantly
increase the productivity of an asset are costs as set forth in paragraphs (b)
and (c) above.
(e) Any asset that
has a basis of $ 2,000 or more and an estimated useful life of two or more
years must be capitalized and depreciated in accordance with Subsection 4.6.
Groups of assets with the majority of assets in the group valued at $ 300 or
more and a useful life of two years or more must also be capitalized and
depreciated in accordance with Subsection 4.6. Assets or groups of assets with
a basis lower than $ 2,000 may be expensed or depreciated at the provider's
election.
(f) The gain on a
transfer of an asset to a related party shall be calculated as follows: the
fair market value of the asset, less the net book value will be the gain
irrespective of the of the amount paid to the facility for the asset. This gain
will be offset against property and related costs.
Section 4.6 Depreciation and Amortization of
Property, Plant and Equipment
(a) Costs for
depreciation and amortization must be based on property records sufficient in
detail to identify specific assets.
(b) Depreciation and amortization must be
computed on the straight-line method.
(c) The depreciable basis of an asset shall
be the basis established according to Sub sections 4.5 and 4.7, net of any
salvage value.
(d) The estimated
useful life of an asset shall be determined by the Division as follows:
(1) The recommended useful life is the number
of years listed in the most recent edition of Estimated Useful Lives of
Depreciable Hospital Assets, published by the American Hospital
Association.
(2) Leasehold
improvements may be amortized over the term of an arms-length lease, including
renewal period, if such a lease term is shorter than the estimated useful life
of the asset.
Section
4.7 Change in Ownership of Depreciable Assets - Sales of
Facilities
(a) A change of ownership will be
recognized when the following criteria have been met:
(1) The change of ownership did not occur
between related parties, except for transactions that meet the criteria in
subparagraph (2).
(2) The
transaction takes place between family members and meets the following
conditions:
(i) The Division shall be
notified at least two years before the sale. The notice shall include a
description of the terms and conditions of the sale and be accompanied by a
current appraisal of the facility being sold.
(ii) The buyer shall demonstrate the capacity
to manage and/or administer the facility; or if the buyer is to be an absentee
owner, the buyer shall demonstrate that there will be sufficient capable staff
to operate the facility according to standards prescribed by state and federal
law.
(iii) The seller shall not
maintain full time employment with the facility, except for a transition period
which shall not be longer than one year during which the seller may provide
reasonable consultation to assure a smooth transition.
(iv) A sale of the facility shall not have
occurred between any members of the same family within the previous 12
years.
(v) For the purposes of this
subsection, family members shall include spouses, parents, grandparents,
children, grandchildren, brothers, sisters, spouses of parents, grandparents,
children, grandchildren, brothers and sisters, aunts, uncles, nieces and
nephews, or such other familial relationships as the Director may reasonably
approve in the circumstances of the transaction.
(3) The change of ownership was made for
reasonable consideration.
(4) The
change of ownership was a bona fide transfer of all the powers and indicia of
ownership.
(5) The change in
ownership is in substance the sale of the assets or stock of the facility and
not a method of financing.
(i) If the
transferor and the transferee enter into a financing agreement, the agreement
must be constructed to effect a complete change of ownership. The Division
shall determine if the agreement does in substance effect a complete change of
ownership and the Division shall monitor the compliance with the
agreement.
(ii) Where, subsequent
to a change of ownership, the transferor forgives or reduces the debt of the
transferee, the amount of the forgiveness or reduction shall be retroactively
applied to the acquisition or basis of the asset as determined by the
Division.
(6) The buyer
shall demonstrate to the satisfaction of the Division that all obligations to
the State of Vermont arising out of the transaction have been
satisfied.
(7) For rate setting
purposes, the transfer of stock or shares shall not be recognized as a change
in ownership in the following circumstances:
(i) the transferred stock or shares are those
of a publicly traded corporation.
(ii) the transfer was made solely as a method
of financing (not as a method of transferring management or control) and the
number of shares transferred does not exceed 25 percent of the total number of
shares in any one class of stock.
(b) Where the Division recognizes the change
in ownership of an asset, the basis of the assets for the new owner shall be
determined as follows:
(1) If the seller did
not own the assets during the entire twelve year period immediately preceding
the change in ownership or if the seller's facility did not receive Vermont
Medicaid reimbursement during the entire twelve year period immediately
preceding the change in ownership, the depreciable cost basis of the
transferred asset for the new owner shall be the lowest of:
(i) the fair market value of the
assets,
(ii) the acquisition cost
of the asset to the buyer,
(iii)
the original basis of the asset to the seller as recognized by the Division,
less accumulated depreciation.
(2) If the seller owned the assets during the
entire twelve year period immediately preceding the change in ownership and if
the seller's facility received Vermont Medicaid reimbursement during the entire
twelve year period immediately preceding the change in ownership, the
depreciable cost basis of the transferred fixed equipment and building
improvements for individual assets having an original useful life of at least
20 years in agreement with the useful life assigned in the American Hospital
Association guidelines, the depreciable cost basis of land improvements, the
depreciable cost basis of buildings and the cost basis of land for the new
owner shall be the lowest of:
(i) the fair
market value of the assets,
(ii)
the acquisition cost of the asset to the buyer,
(iii) the amount determined by the
revaluation of the asset. An asset is revalued by increasing the original basis
of the asset to the seller, as recognized by the Division, by an annual
percentage rate. The annual percentage rate will be limited to the lower of:
(A) One-half the percentage increase in the
Consumer Price Index (CPI) for All Urban consumers (United States City
Average).
(B) One-half the
percentage change in an appropriate construction cost index as determined by
the Division of Rate Setting, which change shall not be greater than one-half
of the percentage increase in the Dodge Construction index (or a reasonable
proxy therefor) for the same period.
(3) If the seller owned the assets during the
entire twelve year period immediately preceding the change in ownership and if
the seller's facility received Vermont Medicaid reimbursement during the entire
twelve year period immediately preceding the change in ownership, the
depreciable cost basis of individual assets categorized as building
improvements and fixed equipment with an original useful life of less than 20
years, in agreement with the useful life assigned in the American Hospital
Association guidelines, shall be the seller's net book value and shall be
depreciated over a useful life of seven years.
(4) If the seller owned the assets during the
entire twelve year period immediately preceding the change in ownership and if
the seller's facility received Vermont Medicaid reimbursement during the entire
twelve year period immediately preceding the change in ownership, the
depreciable cost basis of moveable equipment and vehicles shall be the seller's
net book value and shall be depreciated over a useful life of ten
years.
Section
4.8 Repealed
Section
4.9 Leasing Arrangements for Property, Plant and Equipment
Leasing arrangements for property, plant and equipment must
meet the following conditions:
(a)
Rent expense on facilities and equipment leased from a related organization
will be limited to the Medicaid allowable interest, depreciation, insurance and
taxes incurred for the year under review, or the price of comparable services
or facilities purchased elsewhere, whichever is lower.
(b) Rental or leasing charges, including sale
and leaseback agreements for property, plant and equipment to be included in
allowable costs cannot exceed the amount which the provider would have included
in allowable costs had it purchased or retained legal title to the asset, such
as interest on mortgage, taxes, insurance and depreciation.
Section 4.10 Funding of
Depreciation
(a) Funding of depreciation is
not required, but it is strongly recommended that providers use this mechanism
as a means of conserving funds for replacement of depreciable assets, and
coordinate their planning of capital expenditures with area-wide planning of
community and state agencies. As an incentive for funding, investment income on
funded depreciation will not be treated as a reduction of allowable interest
expense.
(b) To the extent that the
provider fails to retain sufficient working capital or sufficient resources to
support operations, before making deposits in a funded depreciation account,
the deposits will not be recognized as funded depreciation.
(c) To the extent that funded depreciation in
the cost reporting period under consideration is used for purposes other than
nursing facility asset acquisition, interest income on those sums will be
offset against interest expense not only in the current period, but the
Division may reopen settled cost reports for previous periods to revise funded
depreciation and allowable interest expense. However, with the prior approval
of the Division, under appropriate conditions, some or all of a provider's
funded depreciation may be used as follows without triggering an interest
income offset:
(1) to convert existing
nursing home beds to residential care or assisted living, or
(2) when more economic, for new construction
of residential care or assisted living units with a reduction in licensed
nursing home beds.
(d)
All relevant provisions of CMS-15 shall be followed, except as noted below:
(1) Replacement reserves. Some lending
institutions require funds to be set aside periodically for replacement of
fixed assets. The periodic amounts set aside for this purpose are not allowable
costs in the period expended, but will be allowed when withdrawn and utilized
either through depreciation or expense after considering the usage of these
funds. Since the replacement reserves are essentially the same as funded
depreciation the same regulations regarding interest will apply.
(2) If a facility is leased from an unrelated
party and the ownership of the reserve rests with the lessor, then the
replacement reserve payment becomes part of the lease payment and is considered
an allowable cost in the year expended. If the lessee is allowed to use this
replacement reserve for the replacement of the lessee's assets, lessee shall
not be allowed to depreciate the assets purchased.
(e) The provider must maintain appropriate
documentation to support the funded depreciation account and income earned
thereon to be eligible for relief from the investment income offset.
Section 4.11 Adjustments for Large
Asset Acquisitions and Changes of Ownership
(a) Large Asset Acquisitions
(1) A provider may apply to the Division for
an adjustment to the property and related component of the rate for individual
capital expenditures determined to be necessary and reasonable. No application
for a rate adjustment should be made if the change to the rate would be smaller
than one half of one percent of the facility's rate in effect at the time the
application is made. Interest expense related to these assets, provided it is
necessary and reasonable, shall be included in calculating the
adjustment.
(2) In the event that
approval is granted by the Division, the adjustment will be made effective from
the first day of the quarter after the filing date of the written notice,
following the date of the final order on the application, or following the date
the asset is actually put into service, whichever is the latest.
(b) Changes of Ownership
(1) Application shall also be made under this
subsection, no later than 30 days after the execution of a purchase and sale
agreement or other binding contract, or the receipt of a Certificate of Need
pursuant to
18 V.S.A. §
9434, for changes in basis resulting from a
change in ownership of depreciable assets recognized by the Division pursuant
to Subsection 4.7. The Division may make related adjustments to the Property
and Related rate component.
(2)
Adjustments to the Property and Related rate component resulting from a change
in ownership of depreciable assets shall be effective from the first day of the
month following the date of sale.
(c) Except in circumstances determined by the
Division to constitute an emergency precluding a 60 day notice period, a
provider applying for an adjustment pursuant to this subsection is required to
give 60 days written notice to the Division prior to the purchase of the asset.
Such applications shall be exempt from the materiality test set out in
subsection 8.7(b), but are subject to the other provisions of subsection 8.7.
The burden is on the provider to document all information applicable to this
adjustment and to demonstrate that any costs to be incurred are necessary and
reasonable. When applicable, such documentation shall include the Certificate
of Need application and all supporting financial information. The Division
shall review the application and issue draft findings approving, denying, or
proposing modifications to the adjustment applied for within 60 days of receipt
of all information required.
Section
4.12 Repealed
Section
4.13 Advertising Expenses
The reasonable and necessary expense of newspaper or other
public media advertisement for the purpose of securing necessary employees is
an allowable cost. No other advertising expenses are allowed.
Section 4.14 Barber and Beauty Service Costs
The direct costs of barber and beauty services are not
allowable for purposes of Medicaid reimbursement. However, the fixed costs for
space and equipment related to providing these services and overhead associated
with billing for these services are allowable.
Section 4.15 Bad Debt, Charity and Courtesy
Allowances
Bad debts, charity and courtesy allowances are deductions
from revenues and are not to be included in allowable costs.
Section 4.16 Child Day Care
Reasonable and necessary costs incurred for the provision of
day care services to children of employees performing resident related
functions will be allowable. Costs will be adjusted by any revenues received
for the provision of care provided to employees' children. The direct and
indirect expenses related to providing these services to non-employee children
are not an allowable expense. Costs must be accumulated in a separate cost
center. Revenues earned from providing day care must be identified for
employees and non-employees in a separate account.
Section 4.17 Community Service Activities
As an incentive for nursing home providers to furnish needed
services (i.e., meals-on-wheels, adult day and certain respite care, etc.) to
local communities, with the prior permission of the Division, only direct
identifiable incremental costs will be adjusted (i.e., food, direct labor and
fringe benefits, transportation). Overhead costs will not be apportioned for
adjustment unless there is a significant expansion to a program resulting from
community service involvement. The provider must maintain auditable records for
all incremental direct costs associated with providing a community
service.
Section 4.18
Dental Services
Costs incurred for services performed in connection with the
care, treatment, filling, removal, or replacement of teeth or structures
directly supporting teeth will not be allowed for the purposes of calculating
the per diem rate. Dental services for Medicaid eligible individuals are
covered pursuant to the Medicaid Covered Services Rules. However, the fixed
costs for space and equipment related to providing these services and overhead
associated with billing for these services may be allowable.
Section 4.19 Legal Costs
Necessary, ordinary, and reasonable legal fees incurred for
resident-related activities will be allowable.
Section 4.20 Litigation and Settlement Costs
(a) Civil and criminal litigation -
(1) General Rule. Attorney fees and other
expenses incurred in conjunction with litigation will be recognized only to the
extent that the costs are related to resident care, that the provider prevails,
and that the costs are not covered by insurance.
(2) Settlements. In instances, where a matter
is settled before judgment (whether or not a lawsuit has been commenced), one
half the costs, including attorney fees, settlement award, and other expenses,
relating to the matter will be recognized to the extent that the costs are
related to resident care and are not covered by insurance.
(3) Costs related to criminal or professional
practice matters are not allowable.
(b) Challenges to decisions of the Division
-Attorney fees and other expenses incurred by a provider in challenging
decisions of the Division will be allowed based on the extent to which the
provider prevails as determined on the ratio of total dollars at issue in the
case to the total dollars awarded to the provider.
(c) All costs recognized pursuant to this
subsection shall be subject to the non-recurring costs provision in subsection
4.3(a)(2) or subsection 6.4.
Section
4.21 Motor Vehicle Allowance
Cost of operation of a motor vehicle necessary to meet the
facility needs is an allowable cost. Where the vehicle is used for personal and
business purposes, the portion of vehicle costs associated with personal use
will not be allowed. If the provider does not document personal use and
business use under a pre-approved method, DRS reserves the right to disallow
all vehicle costs in question. All costs in excess of the cost of a similar
size mid-price vehicle are not allowable.
Section 4.22 Non-Competition Agreement Costs
Amounts paid to the seller of an on-going facility by the
purchaser for an agreement not to compete are considered capital expenditures.
The amortized costs for such agreements are not allowable.
Section 4.23 Compensation of Owners,
Operators, or their Relatives
(a) Facilities
which have a full-time (40 hours per week minimum) administrator and/or
assistant administrator, will not be allowed compensation for owners,
operators, or their relatives who claim to provide some or all of the
administrative functions required to operate the facility efficiently except in
limited and special circumstances such as those listed in paragraph (b) of this
subsection.
(b) The factors to be
evaluated by the Division in determining the amount allowable for owner's
compensation shall include, but not limited to the following:
(1) All applicable Medicare policies
identified in CMS-15.
(2) The
unduplicated functions actually performed, as described by the provider on the
Medicaid cost report.
(3) The hours
actually worked and the number of employees supervised, as reported on the cost
report.
(c) For any
facility fiscal year, the maximum allowable salary for an owner administrator
shall be equal to 110 percent of the average of all reported administrator
salaries for Vermont nursing facilities participating in the Medicaid program
for that facility fiscal year.
Section 4.24 Management Fees and Home Office
Costs
(a) Management fees, home office costs
and other costs incurred by a nursing facility for similar services provided by
other entities shall be included in the Indirect Cost category. These costs are
subject to the provisions for allowable costs, allocation of costs and related
party transactions contained in these rules and shall include property and
related costs incurred for the management company. These costs are allowable
only if such costs would be allowable if a nursing facility provided the
services for itself.
(b) Allowable
costs shall be limited to five percent of the total net allowable costs less
reported management fees, home office, or other costs, as defined in this
subsection.
Section 4.25
Membership Dues
Reasonable and necessary membership dues, including any
portions used for lobbying activities, shall be considered Medicaid allowable
costs, provided the organization's function and purpose are directly related to
providing resident care.
Section
4.26 Post-Retirement Benefits
The allowability of costs of certain benefits which may be
available to retired personnel shall be governed by CMS-15, except that all
such costs shall be included in fringe benefits and shall be allocated
accordingly.
Section 4.27
Public Relations
Costs incurred for services, activities and events that are
determined by the Division to be for public relations purposes will not be
allowed.
Section 4.28
Related Party
Expenses otherwise allowable shall not be included for
purposes of determining a prospective rate where such expenses are paid to a
related party unless the provider identifies any such related party and the
expenses attributable to it and demonstrates that such expenses do not exceed
the lower of the cost to the related party or the price of comparable services,
facilities or supplies that could be purchased elsewhere. The Division may
request either the provider or the related party, or both, to submit
information, books and records relating to such expenses for the purpose of
determining their allowability.
Section
4.29 Revenues
Where a facility reports operating and non-operating revenues
related to goods or services, the costs to which the revenues correspond are
not allowable. If the specific costs cannot be identified, the revenues shall
be deducted from the most appropriate costs. If the revenues are more than such
costs, the deduction shall be equal to such costs.
Section 4.30 Travel/Entertainment Costs
Only reasonable and necessary costs of meals, lodging,
transportation and incidentals incurred for purposes related to resident care
will be allowed. All costs determined to be for the pleasure and convenience of
the provider or providers' representatives will not be allowed.
Section 4.31 Transportation Costs
(a) Costs of transportation incurred, other
than ambulance services for emergency transportation or transportation home
from a nursing facility covered pursuant to the Medicaid Covered Services
Rules, that are necessary and reasonable for the care of residents are
allowable. Such costs shall include depreciation of utility vehicles, mileage
reimbursement to employees for the use of their vehicles to provide
transportation for residents, and any contractual arrangements for providing
such transportation. Such costs shall not be separately billed for individual
residents.
(b) Transportation costs
related to residents receiving kidney dialysis shall be reported in the
Ancillary cost category, pursuant to subsection 6.7(a)(5).
Section 4.32 Services Directly Billable
Allowable costs shall not include the cost of services to
individual residents which are ordinarily billable directly to Medicaid
irrespective of whether such costs are payable by Medicaid.
Part 5 REIMBURSEMENT STANDARDS
Section 5.1 Prospective Case-Mix
Reimbursement System
(a) In general, these
rules set out incentives to control costs and Medicaid outlays, while promoting
access to services and quality of care.
(b) Case-mix reimbursement takes into account
the fact that some residents are more costly to care for than others. Thus the
system requires:
(1) the assessment of
residents on a form prescribed by the Director of the Division of Licensing and
Protection;
(2) a means to classify
residents into groups which are similar in costs, known as RUG IV (48 group
version) and
(3) a weighting system
which quantifies the relative costliness of caring for different classes of
residents to determine the average case-mix score.
(c) Per diem rates shall be prospectively
determined for the rate year based on the allowable operating costs of a
facility in a Base Year, plus property and related and ancillary costs from the
most recently settled cost report, calculated as described in Subsection
9.2.
Section 5.2
Retroactive Adjustments to Prospective Rates
(a) In general, a final rate may not be
adjusted retroactively.
(b) The
Division may retroactively revise a final rate under the following conditions:
(1) as an adjustment pursuant to Sections
8
and
10;
(2) in response to a decision by the
Secretary pursuant to Subsection 15.5 or to an order of a court of competent
jurisdiction, whether or not that order is the result of a decision on the
merits, or as the result of a settlement pursuant to Subsection 15.8;
(3) for mechanical computation or
typographical errors;
(4) for a
terminating facility or a facility in receivership, pursuant to Sub sections
5.10, 8.3, and 10.2;
(5) as a
result of revised findings resulting from the reopening of a settled cost
report pursuant to Subsection 3.5;
(6) in those cases where a rate includes
payment for Ancillary services and the provider subsequently arranges for
another Medicaid provider to provide and bill directly for these
services;
(7) recovery of
overpayments, or other adjustments as required by law or duly promulgated
regulation;
(8) when a special rate
is revised pursuant to subsection 14.1(e)(2) or
(9) when revisions of final rates are
necessary to pass the upper limits test in
42 C.F.R.
§
447.272.
Section 5.3 Lower of Rate or
Charges
(a) At no time shall a facility's
Medicaid per diem rate exceed the provider's average customary charges to the
general public for nursing facility services in semi-private rooms at the
beginning of the calendar quarter. In this subsection, "charges" shall mean the
amount actually required to be paid by or on behalf of a resident (other than
by Medicaid, Medicare Part A or the Department of Veterans Affairs) and shall
take into account any discounts or contractual allowances.
(b) It is the duty of the provider to notify
the Division within 10 days of any change in its charges.
(c) Rates limited pursuant to paragraph (a)
shall be revised to reflect changes in the provider's average customary charges
to the general public effective on the latest of the following:
(1) the first day of the month in which the
change to the provider's charges is made if the changes is effective on the
first day of the month,
(2) the
first day of the quarter after the effective date of the change to the
provider's charges if the change to the provider's charges is not effective on
the first day of the quarter, or
(3) the first day of the following quarter
after the receipt by the Division of notification of the change pursuant to
paragraph (b).
Section
5.4 Interim Rates
(a) The
Division may set interim rates for any or all facilities. The notice of an
interim rate is not a final order of the Division and is not subject to review
or appeal pursuant to any provision of these rules or
33 V.S.A. §
909.
(b) Any overpayments or underpayments
resulting from the difference between the interim and final rates will be
either refunded by the provider or paid to the provider.
Section 5.5 Upper Payment Limits
(a) Aggregate payments to nursing facilities
pursuant to these rules may not exceed the limits established for such payment
in
42 C.F.R.
§
447.272.
(b) If the Division projects that Medicaid
payments to nursing facilities in the aggregate will exceed the Medicare upper
limit, the Division shall adopt a rule limiting some or all of the payments to
providers to the level that would reduce the aggregate payments to the Medicare
upper limit.
Section 5.6
Base Year
(a) A Base Year shall be a calendar
year, January through December.
(b)
All costs shall be rebased on July 1, 2007. Subsequent rebasing for Nursing
Care costs shall occur two years after the last rebase of such costs. All costs
shall be rebased no less frequently than every four years.
(c) For the purposes of rebasing, the
Director may require individual facilities to file special cost reports
covering the calendar year when this is not the facility's fiscal year or the
Division may use the facility's fiscal year cost report adjusted by the
inflation factors in subsection 5.8 to the Base Year. The Director may require
audited financial statements for the special cost reporting period. The costs
of preparing the special cost report and audited financial statements are the
responsibility of the provider, without special reimbursement; however, for
reporting purposes, these costs are allowable.
(d) The determination of a Base Year shall be
subject of a notice of practices and procedures pursuant to Subsection 1.8(d)
of these rules.
Section
5.7 Occupancy Level
(a) A
facility should maintain an annual average level of occupancy at a minimum of
90 percent of the licensed bed capacity.
(b) For facilities with less than 90 percent
occupancy, the number of total resident days at 90 percent of licensed capacity
shall be used, pursuant to section
7,
in determining the per diem rate for all categories except the Nursing Care and
Ancillary categories.
(c) The 90
percent minimum occupancy provision in paragraph (b) shall be waived for
facilities with 20 or fewer beds or terminating facilities pursuant to
Subsection 5.10, and when appropriate, for facilities operating under a
receivership pursuant to Subsection 8.3.
(d) Decreasing the Number of Licensed Beds -
For any facility that operated at less than 90 percent occupancy during the
period used as the cost basis for any rate component subject to subsection (b)
which subsequently reduces the number of licensed beds, the minimum occupancy
shall be calculated based on the number of the facility's licensed beds on the
first day of the quarter after the facility notifies the Division of such
reduction.
Section 5.8
Inflation Factors
The Director shall use the most recent publication of the
Health Care Cost Service available June 1 in the calculation of inflation
factors, whether for rebase inflation calculations or annual inflation
calculations. Different inflation factors are used to adjust different rate
components. Subcomponents of each inflation factor are weighted in proportion
to the percentage of actual allowable costs incurred by Vermont facilities for
specific subcomponents of the relevant cost component. For example, if a cost
in the Nursing Care cost component is 83.4 percent attributable to salaries and
wages and 16.6 percent attributable to employee benefits, the weights for the
two subcomponents of the Nursing Care inflation factor shall be 0.834 and 0.166
respectively. The weights for each inflation factor shall be recalculated no
less frequently than each time the relevant cost category is rebased.
(a) The Nursing Care rate component shall be
adjusted by an inflation factor that uses two price indexes to account for
estimated economic trends with respect to two subcomponents of nursing costs:
wages and salaries, and benefits. The price indexes for each subcomponent are
the wages and salaries portion of the Health-Care Cost Service NHMB, and the
employee benefits portion of the NHMB, respectively. An additional adjustment
of one percentage point shall be made for every 12 month period, prorated for
fractions thereof, from the midpoint of the base year to the midpoint of the
rate year.
(b) The Resident Care
Rate Component shall be adjusted by an inflation factor that uses four price
indexes to account for estimated economic trends with respect to the
subcomponents of Resident Care costs: wages and salaries, employee benefits,
utilities, and food and all other Resident care costs. The price indexes for
each subcomponent are: the wages and salaries portion of the Health-Care Cost
Service NHMB, the employee benefits portion of the NHMB, the utilities portion
of the NHMB, and the food portion of the NHMB respectively.
(c) The Indirect rate component shall be
adjusted by an inflation factor that uses three price indexes to account for
estimated economic trends with respect to three subcomponents of Indirect
costs: wages and salaries, employee benefits, and all other indirect costs. The
price indexes for each subcomponent are: the wages and salaries portion of the
Health-Care Cost Service NHMB, the employee benefits portion of the NHMB and
the NECPI-U (all items), respectively.
(d) The Director of Nursing rate component
shall be adjusted by an inflation factor that uses two price indexes to account
for estimated economic trends with respect to two subcomponents of Director of
Nursing costs: wages and salaries and employee benefits. The price indexes for
each subcomponent are: the wages and salaries portion of the Health-Care Cost
Service NHMB, and the employee benefits portion of the NHMB,
respectively.
(e) Pursuant to
Subsection 1.8(d), the Division shall issue a description of the practices and
procedures used to calculate and apply the Inflation Factors.
Section 5.9 Costs for New
Facilities
(a) For facilities that are newly
constructed, newly operated as nursing facilities, or new to the Medicaid
program, the prospective case-mix rate shall be determined based on budget cost
reports submitted to the Division and the greater of the estimated resident
days for the rate year or the resident days equal to 90 percent occupancy of
all beds used or intended to be used for resident care at any time within the
budget cost reporting period. This rate shall remain in effect no longer than
one year from the effective date of the new rate. The principles on
allowability of costs and existing limits in Sections
4 and
7
shall apply.
(b) The costs reported
in the budget cost report shall not exceed reasonable budget projections
(adjusted for inflation and changes in interest rates as necessary) submitted
in connection with the Certificate of Need.
(c) Property and related costs included in
the rate shall be consistent with the property and related costs in the
approved Certificate of Need.
(d)
At the end of the first year of, operation, the prospective case-mix rate shall
be revised based on the provider's actual allowable costs as reported in its
annual cost report filed pursuant to subsection 3.2 for its first full fiscal
year of operation.
Section
5.10 Costs for Terminating Facilities
(a) When a nursing facility plans to
discontinue all or part of its operation, the Division may adjust its rate so
as to ensure the protection of the residents of the facility.
(b) A facility applying for an adjustment to
its rate pursuant to this subsection must have a transfer plan approved by the
Department of Disabilities, Aging and Independent Living, a copy of which shall
be supplied to the Division.
(c) An
application under this subsection shall be made on a form prescribed by the
Director and shall be accompanied by a financial plan demonstrating how the
provider will meet its obligations set out in the approved transfer
plan.
(d) In approving such an
application the Division may waive the minimum occupancy requirements in
Subsection 5.7, the limitations on costs in Section
7,
or make such other reasonable adjustments to the facility's reimbursement rate
as shall be appropriate in the circumstances. The adjustments made under this
subsection shall remain in effect for a period not to exceed six
months.
Part
6 BASE YEAR COST CATEGORIES FOR NURSING FACILITIES
Section 6.1 General
In the case-mix system of reimbursement, allowable costs are
grouped into cost categories. The accounts to be used for each cost category
shall be prescribed by the Director. The Base Year costs shall be grouped into
the following cost categories:
Section
6.2 Nursing Care Costs
(a)
Allowable costs for the Nursing Care component of the rate shall include actual
costs of licensed personnel providing direct resident care, which are required
to meet federal and state laws as follows:
(1)
registered nurses,
(2) licensed
practical nurses,
(3) certified or
licensed nurse aides, including wages related to initial and ongoing nurse aide
training as required by OBRA,
(4)
contract nursing,
(5) the MDS
coordinator,
(6) fringe benefits,
including child day care.
(b) Costs of bedmakers, geriatric aides,
transportation aides, paid feeding/dining assistants, ward clerks, medical
records librarians and other unlicensed staff will not be considered nursing
costs. The salary and related benefits of the position of Director of Nursing
shall be excluded from the calculation of allowable nursing costs and shall be
reimbursed separately.
Section
6.3 Resident Care Costs
Allowable costs for the Resident Care component of the rate
shall include reasonable costs associated with expenses related to direct care.
The following are Resident Care costs:
(a) food, vitamins and food
supplements,
(b) utilities,
including heat, electricity, sewer and water, garbage and liquid propane
gas,
(c) activities personnel,
including recreational therapy and direct activity supplies,
(d) Medical Director, Pharmacy Consultant,
Geriatric Consultant, and Psychological/psychiatric Consultant,
(e) counseling personnel, chaplains, art
therapists and volunteer stipends,
(f) social service worker,
(g) employee physicals,
(h) wages for paid feeding/dining assistants
only for those hours that they are actually engaged in assisting residents with
eating,
(i) fringe benefits,
including child day care,
(j) such
other items as the Director may prescribe by a practice and procedure issued
pursuant to subsection 1.8(d).
Section 6.4 Indirect Costs
(a) Allowable costs for the indirect
component of the rate shall include costs reported in the following functional
cost centers on the facility's cost report, including those extracted from a
facility's cost report or the cost report of an affiliated hospital or
institution.
(1) fiscal services,
(2) administrative services and professional
fees,
(3) plant operation and
maintenance,
(4) grounds,
(5) security,
(6) laundry and linen,
(7) housekeeping,
(8) medical records,
(9) cafeteria,
(10) seminars, conferences and other
in-service training (except tuition for college credit in a discipline related
to the individual staff member's employment or costs of obtaining a GED which
shall be treated as fringe benefits),
(11) dietary excluding food,
(12) motor vehicle,
(13) clerical, including ward
clerks,
(14) transportation
(excluding depreciation),
(15)
insurances (director and officer liability, comprehensive liability, bond
indemnity, malpractice, premise liability, motor vehicle, and any other costs
of insurance incurred or required in the care of residents that has not been
specifically addressed elsewhere),
(16) office supplies/telephone,
(17) conventions and meetings,
(18) EDP bookkeeping/payroll,
(19) fringe benefits including child day
care.
(b) All expenses
not specified for inclusion in another cost category pursuant to these rules
shall be included in the Indirect Costs category, unless the Director at
her/his discretion specifies otherwise in the instructions to the cost report,
the chart of accounts, or by the issuance of a practice and procedure. For
nursing facility rate setting, the costs of prescription drugs are not
allowable.
Section 6.5
Director of Nursing
Allowable costs associated with the position of Director of
Nursing shall include reasonable salary for one position and associated fringe
benefits, including child day care.
Section 6.6 Property and Related
(a) The following are Property and Related
costs:
(1) depreciation on buildings and fixed
equipment, major movable equipment, minor equipment, computers, motor vehicle,
land improvements, and amortization of leasehold improvements and capital
leases,
(2) interest on capital
indebtedness,
(3) real estate
leases and rents,
(4) real
estate/property taxes,
(5) all
equipment irrespective of whether it is capitalized, expensed, or
rented,
(6) fire and casualty
insurance,
(7) amortization of
mortgage acquisition costs.
(b) For a change in services, facility, or a
new health care project with projected property and related costs of $ 250,000
or more, providers shall give written notice to the Division no less than 60
days before the commencement of the project. Such notice shall include a
detailed description of the project and detailed estimates of the
costs.
Section 6.7
Ancillaries
(a) The following are ancillary
costs:
(1) All physical, speech,
occupational, respiratory, and IV therapy services and therapy supplies
(excluding oxygen) shall be considered ancillaries. Medicaid allowable costs
shall be based on the cost-to-charge ratio for these services. These therapy
services shall not be allowable for Medicaid reimbursement pursuant to this
subsection unless:
(i) the services are
provided pursuant to a physician's order,
(ii) the services are provided by a licensed
therapist or other State certified or registered therapy assistant, or
qualified IV professional, or other therapy aides,
(iii) the services are not reimbursable by
the Medicare program, and
(iv) the
provider records charges by payor class for all units of these
services.
(2) Medical
supplies, whether or not the provider customarily records charges.
(i) Medical supplies shall include, but are
not limited to: oxygen, disposable catheters, catheters, colostomy bags,
drainage equipment, trays and tubing.
(ii) Medical supplies shall not include
rented or purchased equipment, with the exception of rented or purchased oxygen
concentrators, which shall be included in medical supplies.
(3) Over-the-counter drugs. All
drug costs may be disallowed for providers commingling the costs of
prescription drugs (which are not allowable) and over-the-counter
drugs.
(4) Incontinent Supplies and
Personal Care Items: including adult diapers, chux and other disposable pads,
personal care items, such as toothpaste, shampoo, body powder, combs, brushes,
etc.
(5) Dialysis Transportation.
The costs of transportation for Medicaid residents receiving kidney dialysis
shall be included in the ancillary cost category. Allowable costs may include
contract or other costs, but shall not include employee salaries or wages or
cost associated with the use of provider-owned vehicles.
(6) Overhead costs related to ancillary
services and supplies are included in ancillary costs.
(b) [Repealed]
Part 7 CALCULATION OF COSTS,
LIMITS AND RATE COMPONENTS FOR NURSING FACILITIES
Section
7.1 Calculation of Per Diem Costs
Per diem costs for each cost category, excluding the Nursing
Care and Ancillary cost categories, are calculated by dividing allowable costs
for each case-mix category by the greater of actual bed days of service
rendered, including revenue generating hold/reserve days, or the number of
resident days computed using the minimum occupancy at 90 percent of the
licensed bed capacity during the cost period under review calculated pursuant
to subsection 5.7.
Section
7.2 Nursing Care Component
(a)
Case-Mix Weights.
There are 48 case-mix resident classes. Each case-mix class
has a specific case-mix weight as follows:
Display Table
|
Group Code
|
Case-Mix Weight
|
Description
|
|
ES3
|
3.00
|
Extensive Services
|
|
ES2
|
2.23
|
Extensive Services
|
|
ES1
|
2.22
|
Extensive Services
|
|
RAE
|
1.65
|
Rehabilitation
|
|
RAD
|
1.58
|
Rehabilitation
|
|
RAC
|
1.36
|
Rehabilitation
|
|
RAB
|
1.10
|
Rehabilitation
|
|
RAA
|
0.82
|
Rehabilitation
|
|
HE2
|
1.88
|
Special Care High
|
|
HE1
|
1.47
|
Special Care High
|
|
HD2
|
1.69
|
Special Care High
|
|
HD1
|
1.33
|
Special Care High
|
|
HC2
|
1.57
|
Special Care High
|
|
HC1
|
1.23
|
Special Care High
|
|
HB2
|
1.55
|
Special Care High
|
|
HB1
|
1.22
|
Special Care High
|
|
LE2
|
1.61
|
Special Care Low
|
|
LE1
|
1.26
|
Special Care Low
|
|
LD2
|
1.54
|
Special Care Low
|
|
LD1
|
1.21
|
Special Care Low
|
|
LC2
|
1.30
|
Special Care Low
|
|
LC1
|
1.02
|
Special Care Low
|
|
LB2
|
1.21
|
Special Care Low
|
|
LB1
|
0.95
|
Special Care Low
|
|
CE2
|
1.39
|
Clinically Complex
|
|
CE1
|
1.25
|
Clinically Complex
|
|
CD2
|
1.29
|
Clinically Complex
|
|
CD1
|
1.15
|
Clinically Complex
|
|
CC2
|
1.08
|
Clinically Complex
|
|
CC1
|
0.96
|
Clinically Complex
|
|
CB2
|
0.95
|
Clinically Complex
|
|
CB1
|
0.85
|
Clinically Complex
|
|
CA2
|
0.73
|
Clinically Complex
|
|
CA1
|
0.65
|
Clinically Complex
|
|
BB2
|
0.81
|
Behavioral Symptoms Plus Cognitive Performance
|
|
BB1
|
0.75
|
Behavioral Symptoms Plus Cognitive Performance
|
|
BA2
|
0.58
|
Behavioral Symptoms Plus Cognitive Performance
|
|
BA1
|
0.53
|
Behavioral Symptoms Plus Cognitive Performance
|
|
PE2
|
1.25
|
Reduced Physical Function
|
|
PE1
|
1.17
|
Reduced Physical Function
|
|
PD2
|
1.15
|
Reduced Physical Function
|
|
PD1
|
1.06
|
Reduced Physical Function
|
|
PC2
|
0.91
|
Reduced Physical Function
|
|
PC1
|
0.85
|
Reduced Physical Function
|
|
PB2
|
0.70
|
Reduced Physical Function
|
|
PB1
|
0.65
|
Reduced Physical Function
|
|
PA2
|
0.49
|
Reduced Physical Function
|
|
PA1
|
0.45
|
Reduced Physical Function
|
(b)
Average case-mix score
The Department of Disabilities, Aging and Independent
Living's Division of Licensing and Protection shall compute each facility's
average case-mix score.
(1) The
Division of Licensing and Protection shall periodically, but no less frequently
than quarterly, certify to the Division of Rate Setting the average case-mix
score for those residents of each facility whose room and board (excluding
resident share) is paid for solely by the Medicaid program.
(2) For the Base Year, the Division of
Licensing and Protection shall certify the average case-mix score for all
residents.
(c) Nursing
Care cost per case-mix point. Each facility's Nursing Care cost per case-mix
point will be calculated as follows:
(1) Using
each facility's Base Year cost report, the total allowable Nursing Care costs
shall be determined in accordance with Subsection 6.2.
(2) Each facility's Standardized Resident
Days shall be computed by multiplying total Base Year resident days by that
facility's average case-mix score for all residents for the four quarters of
the cost reporting period under review.
(3) The per diem nursing care cost per
case-mix point shall be computed by dividing total Nursing Care costs by the
Base Year Standardized Resident Days for that Base Year.
(d) Per diem limits on the Base Year
allowable Nursing Care rate per case-mix point:
(1) The Division shall array all nursing care
facilities' allowable Base Year per diem Nursing Care costs per case-mix point,
excluding those for state nursing facilities and nursing facilities that are no
longer in the Medicaid program at the time the limits are set, from low to
high. These costs shall be limited to the cost at the ninetieth percentile,
calculated using the percentile spreadsheet function.
(2) Each facility's Base Year Nursing Care
rate per case-mix point shall be the lesser of the limit in subparagraph (1) or
the facility's allowable Nursing Care cost per case-mix point.
Section 7.3 Resident
Care Base Year Rate
Resident Care Base Year rates shall be computed as
follows:
(a) Using each facility's
Base Year cost report, the provider's Base Year total allowable Resident Care
costs shall be determined in accordance with Subsection 6.3.
(b) The Base Year per diem allowable Resident
Care costs for each facility shall be calculated by dividing the Base Year
total allowable Resident Care costs by total Base Year resident days.
(c) The Division shall array all nursing
facilities' Base Year per diem allowable Resident Care costs, excluding those
for state nursing facilities and nursing facilities that are no longer in the
Medicaid program at the time the limits are set, from low to high and identify
the median.
(d) The per diem limit
shall be the median plus five percent.
(e) Each facility's Base Year Resident Care
per diem rate shall be the lesser of the limit set in paragraph (d) or the
facility's Base Year per diem allowable Resident Care costs.
Section 7.4 Indirect Base Year
Rate
Indirect Base Year rates shall be computed as follows:
(a) Using each facility's Base Year cost
report, each provider's Base Year total allowable Indirect costs shall be
determined in accordance with Subsection 6.4.
(b) The Base Year per diem allowable Indirect
costs for each facility shall be calculated by dividing the Base Year total
allowable Indirect costs by total Base Year resident days.
(c) The Division shall array all nursing
facilities' Base Year per diem allowable Indirect costs, excluding those for
state nursing facilities and nursing facilities that are no longer in the
Medicaid program at the time the limits are set, from low to high and identify
the median.
(d) The per diem limit
shall be set as follows:
(1) For special
hospital-based nursing facilities, the limit shall be 137 percent of the
median.
(2) For all other
privately-owned nursing facilities, the limit shall be the median plus five
percent.
(e) Each
provider's Base Year Indirect per diem rate shall be the lesser of the limit in
paragraph (d) or the facility's Base Year per diem allowable Indirect
costs.
Section 7.5
Director of Nursing Base Year Rate
The Director of Nursing Base Year per diem rates shall be
computed as follows:
(a) Using each
facility's Base Year cost report, total allowable Base Year Director of Nursing
costs shall be determined in accordance with Subsection 6.5.
(b) Each facility's Base Year per diem
allowable Director of Nursing costs shall be calculated by dividing the Base
Year total allowable Director of Nursing costs by total Base Year resident
days.
(c) The Director of Nursing
per diem rate shall be the facility's Base Year per diem allowable Director of
Nursing costs calculated pursuant to this subsection.
Section 7.6 Ancillary Services Rate
(a) The Ancillary per diem rate shall be
computed as follows:
(1) Medicaid Ancillary
costs shall be determined in accordance with subsection 6.7.
(2) Using each facility's most recently
settled cost report, the per diem Ancillary rate shall be the sum of the
following per diem costs calculated as follows:
(i) Costs for therapy services per diem,
including IV therapy, shall be calculated by dividing allowable Medicaid costs
by the number of related Medicaid resident days less Medicaid hold
days.
(ii) Dialysis transportation
costs per diem shall be calculated by dividing the allowable costs for Vermont
Medicaid residents by the number of Vermont Medicaid resident days less Vermont
Medicaid hold days.
(iii) Costs for
medical supplies, over-the-counter drugs, and incontinent supplies and personal
care items per diem shall be calculated by dividing allowable costs, by total
resident days less hold days.
(b) Any change to the Ancillary per diem rate
shall be implemented at the time of the first quarterly case-mix rate
recalculation after the cost report is settled.
Section 7.7 Property and Related Per Diem
The Property and Related per diem rate shall be computed as
follows:
(a) Using each facility's
most recently settled annual cost report, total allowable Property and Related
costs shall be determined in accordance with Subsection 6.6.
(b) Using each facility's most recently
settled cost report, the per diem property and related costs shall be
calculated by dividing allowable property and related costs by total resident
days. Any change to the property and related per diem rate shall be implemented
at the time of the first quarterly case-mix rate recalculation after the cost
report is settled.
Section
7.8 Limits Final
Once a final order has been issued for all facilities' Base
Year cost reports, notwithstanding any subsequent changes to the cost report
findings, resulting from a reopening, appeal, or other reason, the limits set
pursuant to sub sections 7.2(d)(2), 7.3(d), and 7.4(d) will not change until
nursing home costs are rebased pursuant to 5.6(b), except for annual adjustment
by the inflation factors or a change in law necessitating such a change.
Part 8 ADJUSTMENTS TO
RATES
Section 8.1 Change in Services
The Division, on application by a provider, may make an
adjustment to the prospective case-mix rate for additional costs which are
directly related to:
(a) a new health
care project previously approved under the provisions of
18 V.S.A. §
9434. Costs greater than those approved in
the Certificate of Need (as adjusted for inflation) will not be considered when
calculating such an adjustment,
(b)
a change in services, facility, or new health care project not covered under
the provisions of
18 V.S.A. §
9434, if such a change has previously been
approved by the Division, or
(c)
with the prior approval of the Division, a reduction in the number of licensed
beds.
Section 8.2 Change
in Law
The Division may make or a provider may apply for an
adjustment to a facility's prospective case-mix rate for additional costs that
are a necessary result of complying with changes in applicable federal and
state laws, and regulations, or the orders of a State agency that specifically
requires an increase in staff or other expenditures.
Section 8.3 Facilities in Receivership
(a) The Division, on application by a
receiver appointed pursuant to state or federal law, may make an adjustment to
the prospective case-mix rate of a facility in receivership for the reasonable
and necessary additional costs to the facility incurred during the
receivership.
(b) On the
termination of the receivership, the Division shall recalculate the prospective
case-mix rate to eliminate this adjustment.
Section 8.4 Efficiency Measures
The Division, on application by a provider, may make an
adjustment to a prospective case-mix rate for additional costs which are
directly related to the installation of energy conservation devices or the
implementation of other efficiency measures, if they have been previously
approved by the Division.
Section
8.5 Interest Rates
(a) A provider
may apply for an adjustment to the Property and Related rate, or the Division
may initiate an adjustment if there are cumulative interest rate increases or
decreases of more than one-half of one percentage point because of existing
financing agreements with a balloon payment or a refinancing clause that forces
a mortgage to be refinanced at a different interest rate, or because of a
variable rate of adjustable rate mortgages.
(b) A provider with an interest rate
adjustment shall notify the Division of any change in the interest rate within
10 days of its receipt of notice of that change. The Division may rescind all
interest rate adjustments of any facility failing to file a timely notification
pursuant to this subsection for a period of up to two years.
Section 8.6 Emergencies and
Unforeseeable Circumstances
(a) The Division,
on application by a provider, may make an adjustment to the prospective
case-mix rate under emergencies and unforeseeable circumstances, such as damage
from fire or flood.
(b) Providers
must carry sufficient insurance to address adequately such
circumstances.
Section
8.7 Procedures and Requirements for Rate Adjustments
(a) Application for a rate adjustment
pursuant to this section should be made as follows. Approval of any application
for a rate adjustment under this section is at the sole discretion of the
Director.
(b) Except for
applications made pursuant to subsection 4.11, no application for a rate
adjustment should be made if the change to the rate would be smaller than one
percent of the rate in effect at the time.
(c) Application for a Rate Adjustment shall
be made on a form prescribed by the Director and filed with the Division and
shall be accompanied by all documents and proofs determined necessary for the
Division to make a decision.
(d)
The burden of proof is at all times on the provider to show that the costs for
which the adjustment has been requested are reasonable, necessary and related
to resident care.
(e) The Division
may grant or deny the Application, or make an adjustment modifying the
provider's proposal. If the materials filed by the provider are inadequate to
serve as a basis for a reasonable decision, the Division shall deny the
Application, unless additional proofs are submitted.
(f) The Division shall not be bound in
considering other Applications, or in determining the allowability of reported
costs, by any prior decision made on any Application under this section. Such
decisions shall have no precedential value either for the applicant facility or
for any other facility. Principles and decisions of general applicability shall
be issued as a Division practice or procedure, pursuant to Section
1.8(d).
(g) For adjustments
requiring prior approval of the Division, such approval should be sought before
the provider makes any commitment to expenditures. An Application for Prior
Approval is subject to the same requirements as an Application for a Rate
Adjustment under this section.
(h)
Rate adjustments made under this section shall be effective from the first day
of the quarter following the date of the final order on the application or
following the date the assets are actually put into service, whichever is the
later, and may be continued, at the discretion of the Division, notwithstanding
a general rebase of costs. Costs which are the basis for a continuing rate
adjustment shall not be included in the cost categories used as the basis for
the other rate components.
(i) The
Division may require an applicant for a rate adjustment under this section or
under subsection 4.11 to file a budget cost report in support of its
application.
(j) When determined to
be appropriate by the Division, a budget rate may be set for the facility
according to the procedures in and subject to the provisions of subsection 5.9.
Appropriate cases may include, but are not limited to, changes in the number of
beds, an addition to the facility, or the replacement of existing
property.
(k) In calculating an
adjustment under this section and subsection 4.11, the Division may take into
account the effect of such changes on all the cost categories of the
facility.
(l) A revision may be
made prospectively to a rate adjustment under this section and subsection 4.11
based on a "look-back" which will be computed based on a provider's actual
allowable costs.
(m) in this
subsection "additional costs" means the incremental costs of providing resident
care directly and proximately caused by one of the events listed in this
section or subsection 4.11. Increases in costs resulting from other causes will
not be recognized. It is not intended that this section be used to effect a
general rebase in a facility's costs.
Section 8.8 Limitation on Availability of
Rate Adjustments
Providers may not apply for a rate adjustment under this
section for the sole reason that actual costs incurred by the facility exceed
the rate of payment.
Part 15 ADMINISTRATIVE REVIEW AND APPEALS
Section 15.1 Draft Findings and Decisions
(a) Before issuing findings on any Desk
Review, Audit of a Cost Report, or decision on any application for a rate
adjustment, the Division shall serve a draft of such findings or decision on
the affected provider. If the Division makes no adjustment to a facility's
reported costs or application for a rate adjustment, the Division's findings
shall be final and shall not be subject to appeal under this section.
(b) The provider shall review the draft upon
receipt. If it desires to review the Division's work papers, it shall file,
within 10 days, a written Request for Work Papers on a form prescribed by the
Director.
Section 15.2
Request for an Informal Conference on Draft Findings and Decisions
(a) Within 15 days of receipt of either the
draft findings or decision or requested work papers, whichever is the later, a
provider that is dissatisfied with the draft findings or decision issued
pursuant to Subsection 15.1(a) may file a written Request for an Informal
Conference with the Division's staff on a form prescribed by the
Director.
(b) Within 10 days of the
receipt of the Request, the Division shall contact the provider to arrange a
mutually convenient time for the informal conference, which shall be held
within 45 days of the receipt of the Request at the Division. The informal
conference may be held by telephone. At the conference, if necessary, a date
certain shall be fixed by which the provider may file written submissions or
other additional necessary information. Within 20 days thereafter, the Division
shall issue its official agency action.
(c) A Request for an Informal Conference must
be pursued before a Request for Reconsideration can be filed pursuant to
Subsection 15.3. Issues not raised in the Request for Informal Conference shall
not be raised at the informal conference or in any subsequent proceeding
arising from the same action of the Division, including appeals pursuant to
33 V.S.A. §
909.
(d) Should no timely Request for an Informal
Conference be filed within the time period specified in Subsection 15.2(a), the
Division's draft findings and/or decision are final and no longer subject to
administrative review or judicial appeal.
Section 15.3 Request for Reconsideration
(a) A provider that is aggrieved by an
official action issued pursuant to Subsection 15.2(b) may file a Request for
Reconsideration.
(b) A Request for
Reconsideration must be pursued before an appeal can be taken pursuant to 33
V.S.A. 909(a).
(c) The Request for
Reconsideration must be in writing, on a form prescribed by the Director, and
filed within 30 days of the provider's receipt of the official
action.
(d) Within 10 days of the
filing of a Request for Reconsideration, the provider must file the following:
(1) A request for a hearing, if
desired;
(2) A clear statement of
the alleged errors in the Division's action and of the remedy requested
including: a description of the facts on which the Request is based, a
memorandum stating the support for the requested relief in this rule, CMS-15,
or other authority for the requested relief and the rationale for the requested
remedy; and
(3) If no hearing is
requested, evidence necessary to bear the provider's burden of proof,
including, if applicable, a proposed revision of the Division's calculations,
with supporting work papers.
(e) Issues not raised in the Request for
Reconsideration shall not be raised later in this proceeding or in any
subsequent proceeding arising from the same action of the Division, including
appeals pursuant to
33 V.S.A. §
909.
(f) If a hearing is requested, within 10 days
of the receipt of the Request for Reconsideration, the Division shall contact
the provider to arrange a mutually agreeable time.
(g) The hearing shall be conducted by the
Director or her or his designee. The testimony shall be under oath and shall be
recorded either stenographically or on tape. If the provider so requests, the
Division staff involved in the official action appealed shall appear and
testify. The Director, or her or his designee, may hold the record open to a
date certain for the receipt of additional materials.
(h) The Director shall issue a Final Order on
Request for Reconsideration no later than 30 days after the record closes.
Pending the issuance of a final order, the official action issued pursuant to
subsection 15.2(b) shall be used as the basis for setting an interim rate from
the first day of the calendar quarter following its issuance. Final orders
shall be effective from the effective date of the official action.
(i) Proceedings under this section are not
subject to the requirements of 3 V.S.A. Chapter 25.
Section 15.4 Appeals from Final Orders of the
Division
(a) Within 30 days of the date
thereof, a nursing facility aggrieved by a Final Order of the Division may file
an appeal pursuant to
33 V.S.A. §
909(a) and Sub sections
15.5, 15.6 and 15.7 of this rule.
(b) Within 30 days of the date thereof, a
ICF/MR aggrieved by a Final Order of the Division may file an appeal using the
following procedures. Proceedings under this paragraph are not subject to the
requirements of 3 V.S.A. Chapter 25.
(1)
Request for Administrative Review by the Commissioner of Mental Health. The
Commissioner or a designee shall review a final order of the Division of Rate
Setting if a timely request is filed with the Director of the Division.
(i) Within 10 days of the receipt of the
Request, the Director shall forward to the Commissioner a copy of the Request
for Administrative Review and the materials that represent the documentary
record of the Division's action.
(ii) The Commissioner or the designee shall
review the record of the appeal and may request such additional materials as
they shall deem appropriate, and shall, if requested by the provider, convene a
hearing on no less than 10 days written notice to the provider and the
Division. Within 45 days after the close of the record, the Commissioner or the
designee shall issue a decision which shall be served on the provider and the
Division.
(2) Appeal to
the Secretary of Human Services. Within 20 days of the date of the date of
issuance, an ICF/MR aggrieved by the Commissioner's decision, may appeal to the
Secretary.
(i) The Notice of Appeal shall be
filed with the Commissioner, who, within 10 days of the receipt of the Notice,
shall forward to the Secretary a copy of the Notice and the record of the
Administrative Review.
(ii) The
Secretary or his designee shall review the record of the Administrative Review
and may, within their sole discretion, hold a hearing, request more documentary
information, or take such other steps to review the Commissioner's decision as
shall seem appropriate.
(iii)
Within 60 days of the filing of the Notice of Appeal or the closing of the
record, whichever is the later, the Secretary or the designee shall issue a
Final Determination.
(3)
Further review of the Final Determination is available only pursuant to Rule 75
of the Vermont Rules of Civil Procedure.
Section 15.5 Request for Administrative
Review to the Secretary of Human Services pursuant to 33 V.S.A Section
909(a)(3)
(a) No appeal may be taken under
this section when the remedy requested is retrospective relief from the
operation of a provision of this rule or such other relief as may be outside
the power of the Secretary to order. Such relief may be pursued by an appeal to
the Vermont Supreme Court or Superior Court pursuant to
33 V.S.A. §
909(a)(1) and
(2), or prospectively by a request for
rulemaking pursuant
3 V.S.A.
§
806.
(b) Appeals under this section shall be
governed by the relevant provisions of the Administrative Procedures Act, 3
V.S.A. §§ 809-815.
(c)
Proceedings under this section shall be initiated by filing two copies of a
written Request for Administrative Review with the Division, on forms
prescribed therefor.
(d) Within 5
days of receipt of the Request, the Director shall forward one copy to the
Secretary. Within 10 days thereafter, the Secretary shall designate an
independent appeals officer who shall be a registered or certified public
accountant. The Letter of Designation shall be served on all parties to the
appeal. All documents filed thereafter shall be filed directly with the
independent appeals officer and copies served on all parties.
(e) Within 10 days of the designation of an
independent appeals officer, the Division shall forward to him or her those
materials that represent the documentary record of the Division's
action.
(f) Within 30 days
thereafter, the independent appeals officer shall, on reasonable notice to the
parties, convene a prehearing conference (which may be held by telephone) to
consider such matters as may aid in the efficient disposition of the case,
including but not limited to:
(1) the
simplification of the issues,
(2)
the possibility of obtaining stipulations of fact and/or admissions of
documents which will avoid unnecessary proof,
(3) the appropriateness of prefiled
testimony,
(4) a schedule for the
future conduct of the case.
The independent appeals officer shall make an order which
recites the action taken at the conference, including any agreements made by
the parties.
(g)
The independent appeals officer shall hold a hearing, pursuant to
3 V.S.A. §
809, on no less than 10 days written notice
to the parties, according to the schedule determined at the prehearing
conference. The independent appeals officer shall have the power to subpoena
witnesses and documents and administer oaths. Testimony shall be under oath and
shall be recorded either stenographically or on tape. Prefiled testimony, if
admitted into evidence, shall be included in the transcript, if any, as though
given orally at the hearing. Evidentiary matters shall be governed by
3 V.S.A. §
810.
(h) The independent appeals officer may allow
or require each party to file Proposed Findings of Fact which shall contain a
citation to the specific part or parts of the record containing the evidence
upon which the proposed finding is based. The Proposed Findings shall be
accompanied by a Memorandum of Law which shall address each matter at
issue.
(i) Within 60 days after the
date of the hearing, or after the filing of Proposed Findings of Fact,
whichever is the later, the independent appeals officer shall file with the
Secretary a Recommendation for Decision, a copy of which shall be served on
each of the parties. The Recommendation for Decision shall include numbered
findings of fact and conclusions of law, separately stated, and a proposed
order. If a party has submitted Proposed Findings of Fact, the Recommendation
for Decision shall include a ruling upon each proposed finding. Each party's
Proposed Findings and Memorandum of Law shall accompany the
Recommendation.
(j) At the time the
independent appeals officer makes her or his Recommendation, she or he shall
transmit the docket file to the Secretary. The Secretary shall retain the file
for a period of at least one year from the date of the Final Determination in
the docket. In the event of an appeal of the Secretary's Final Determination to
the Vermont Supreme Court or to Superior Court, the Secretary shall make
disposition of the file as required by the applicable rules of civil and
appellate procedure.
(k) Any party
aggrieved by the Recommendation for Decision may file Exceptions, Briefs, and
if desired, a written Request for Oral Argument before the Secretary. These
submissions shall be filed with the Secretary within 15 days of the date of the
receipt of a copy of the Recommendation and copies served on all other
parties.
(l) If oral argument is
requested, within 20 days of the receipt of the Request for Oral Argument, the
Secretary shall arrange with the parties a mutually convenient time for a
hearing.
(m) Within 45 days of the
receipt of the Recommendation or the hearing on oral argument, whichever is the
later, the Secretary shall issue a Final Determination which shall be served on
the parties.
(n) A party aggrieved
by a Final Determination of the Secretary may obtain judicial review pursuant
to
33 V.S.A. §
909(a)(l) and
(2) and Sub sections 15.6 and 15.7 of this
Rule.
Section 15.6
Appeal to Vermont Supreme Court pursuant to 33 V.S.A Section 909(a)(1)
Proceedings under this section shall be initiated, pursuant
to the Vermont Rules of Appellate Procedure, as follows:
(a) by filing a Notice of Appeal from a Final
Order with the Division; or
(b) by
filing a Notice of Appeal from a Final Determination with the
Secretary.
Section 15.7
Appeal to Superior Court pursuant to 33 V.S.A Section 909(a)(2)
De novo review is available in the Superior Court of the
county where the nursing facility is located. Such proceedings shall be
initiated, pursuant to Rule 74 of the Vermont Rules of Civil Procedure, as
follows:
(a) by filing a Notice of
Appeal from a Final Order with the Division; or
(b) by filing a Notice of Appeal from a Final
Determination with the Secretary.
Section 15.8 Settlement Agreements
The Director may agree to settle reviews and appeals taken
pursuant to Sub sections 15.3 and 15.5, and, with the approval of the
Secretary, may agree to settle other appeals taken pursuant to
33 V.S.A. §
909 and any other litigation involving the
Division on such reasonable terms as she or he may deem appropriate to the
circumstances of the case.
Part 16 DEFINITIONS AND TERMS
For the purposes of these rules the following definitions and
terms are used:
Accrual Basis of Accounting: an accounting system in which
revenues are reported in the period in which they are earned, regardless of
when they are collected, and expenses are reported in the period in which they
are incurred, regardless of when they are paid.
Agency: the Agency of Human Services.
AICPA: American Institute of Certified Public
Accountants.
Allowable Costs or Expenses: costs or expenses that are
recognized as reasonable and related to resident care in accordance with these
rules.
Base Year: a calendar year for which the allowable costs are
the basis for the case-mix prospective per diem rate.
Case-Mix Weight: a relative evaluation of the nursing
resources used in the care of a given class of residents.
Centers for Medicare and Medicaid Services(CMS) (formerly
called the Health Care Financing Administration (HCFA)): Agency within the U.S.
Department of Health and Human Services (HHS) responsible for developing and
implementing policies governing the Medicare and Medicaid programs.
Certificate of Need (CON): certificate of approval for a new
institutional health service, issued pursuant to 18 V.S.A. § 2403.
Certified Rate: the rate certified by the Division of Rate
Setting to the Department of Vermont Health Access.
Common Control: where an individual or organization has the
power to influence or direct the actions or policies of both a provider and an
organization or institution serving the provider, or to influence or direct the
transactions between a provider and an organization serving the provider. The
term includes direct or indirect control, whether or not it is legally
enforceable.
Common Ownership: where an individual or organization owns or
has equity in both a facility and an institution or organization providing
services to the facility.
Companion Aide: a Licensed Nurse Aide (LNA) with specialized
training in person-centered dementia care.
Cost Finding: the process of segregating direct costs by cost
centers and allocating indirect costs to determine the cost of services
provided.
Cost Report: a report prepared by a provider on forms
prescribed by the Division.
Direct Costs: costs which are directly identifiable with a
specific activity, service or product of the program.
Director: the Director of Rate Setting.
Division: the Division of Rate Setting, Agency of Human
Services.
Donated Asset: an asset acquired without making any payment
in the form of cash, property or services.
Facility or nursing facility: a nursing home facility
licensed and certified for participation in the Medicaid Program by the State
of Vermont.
Fair Market Value: the price an asset would bring by bona
fide bargaining between well-informed buyers and sellers at the date of
acquisition.
FASB: Financial Accounting Standards Board.
Final Order of the Division: an action of the Division which
is not subject to change by the Division, for which no review or appeal is
available from the Division, or for which the review or appeal period has
passed.
Free standing facility: a facility that is not
hospital-affiliated.
Funded Depreciation: funds that are restricted by a
facility's governing body for purposes of acquiring assets to be used in
rendering resident care or servicing long term debt.
Fringe Benefits: shall include payroll taxes, workers'
compensation, pension, group health, dental and life insurances, profit
sharing, cafeteria plans and flexible spending plans, child care for employees,
employee parties, and gifts shared by all staff. Fringe benefits may include
tuition for college credit in a discipline related to the individual staff
member's employment or costs of obtaining a GED.
Generally Accepted Accounting Principles (GAAP): those
accounting principles with substantial authoritative support. In order of
authority the following documents are considered GAAP:
(1) FASB Standards and Interpretations,
(2) APB Opinions and
Interpretations,
(3) CAP Accounting
Research Bulletins,
(4) AICPA
Statements of Position,
(5) AICPA
Industry Accounting and Auditing Guides,
(6) FASB Technical Bulletins,
(7) FASB Concepts Statements,
(8) AICPA Issues Papers and Practice
Bulletins, and other pronouncements of the AICPA or FASB.
Generally Accepted Auditing Standards (GAAS): the auditing
standards that are most widely recognized in the public accounting
profession.
Health Care Cost Service: publication, by Global Insight,
Inc., of national forecasts of hospital, nursing home (NHMB), and home health
agency market baskets and regional forecasts of CPI (All Urban) for food and
commercial power and CPIU-All Items.
Hold Day: a day for which the provider is paid to hold a bed
open is counted as a resident day.
Hospital-affiliated facility: a facility that is a distinct
part of a hospital provider, located either at the hospital site or within a
reasonable proximity to the hospital.
Incremental Cost: the added cost incurred in alternative
choices.
Independent Public Accountant: a Certified Public Accountant
or Registered Public Accountant not employed by the provider.
Indirect Costs: costs which cannot be directly identified
with a particular activity, service or product of the program. Indirect costs
are apportioned among the program's services using a rational statistical
basis.
Inflation Factor: a factor that takes into account the actual
or projected rate of inflation or deflation as expressed in indicators such as
the New England Consumer Price Index.
Interim Rate: a prospective Case-Mix rate paid to nursing
facilities on a temporary basis.
Look-back: a review of a facility's actual costs for a
previous period prescribed by the Division.
Medicaid Resident: a nursing home resident for whom the
primary payor for room and board is the Medicaid program.
New England Consumer Price Index (NECPI-U): the New England
consumer price index for all urban consumers as published by the Health Care
Cost Service.
New Health Care Project: A project requiring a certificate of
need (CON) pursuant to
18 V.S.A.§
9434(a) or projects which
would require a CON except that their costs are lower than those required for
CON jurisdiction pursuant
18 V.S.A.§
9434(a).
OBRA 1987: the Omnibus Budget Reconciliation Act of
1987.
Occupancy Level: the number of paid days, including hold
days, as a percentage of the licensed bed capacity.
Paid feeding/dining assistants: persons (other than the
facility's administrator, registered nurses, licensed practical nurses,
certified or licensed nurse aides) who are qualified under state law pursuant
to
42 C.F.R.
§§483.35(h)(2),
483.160
and 488.301 and who are
paid to assist in the feeding of residents.
Per Diem Cost: the cost for one day of resident care.
Prescription Drugs: drugs for which a physician's
prescription is required by state-or federal law.
Person-Centered Dementia Care: care that includes the
following elements: an individualized approach to care planning that uses the
perspective of the person with dementia as the primary frame of reference;
values the personhood of the individual with dementia; and provides a social
environment that supports psychological needs.
Prospective Case-Mix Reimbursement System: a method of paying
health care providers rates that are established in advance. These rates take
into account the fact that some residents are more costly to care for than
others.
Provider Reimbursement Manual, CMS-15: a manual published by
the U.S. Department of Health and Human Services, Centers for Medicare and
Medicaid Services, used by the Medicare Program to determine allowable
costs.
Rate year: the State's fiscal year ending June 30.
Related organization or related party: an individual or
entity that is directly or indirectly under common ownership or control or is
related by family or other business association with the provider. Related
organizations include but are not restricted to entities in which an individual
who directly or indirectly receives or expects to receive compensation in any
form is also an owner, partner, officer, director, key employee, or lender,
with respect to the provider, or is related by family to such persons.
Resident Assessment Form: Vermont version of a federal form,
which captures data on a resident's condition and which is used to predict the
resource use level needed to care for the resident.
Resident Day: any day of services for which the facility is
paid. For example, a paid hold day is counted as a resident day.
Restricted Funds and Revenue: funds and investment income
earned from funds restricted for specific purposes by donors, excluding funds
restricted or designated by an organization's governing body.
RUG IV: A systematic classification of residents in nursing
facilities based upon a broad study of nursing care time required by groups of
residents exhibiting similar needs.
Secretary: the Secretary of the Agency of Human
Services.
Special hospital-based nursing facility: a facility that
meets the following criteria:
(a) is
physically integrated as part of a hospital building with at least one common
wall and a direct internal access between the hospital and the nursing home;
(b) is part of a single corporation
that governs both the hospital and the nursing facility; and
(c) files one Medicare cost report for both
the hospital and the nursing home.
Standardized Resident Days: Base Year resident days
multiplied by the facility's average Case-Mix score for the base year.
State nursing facilities: facilities owned and/or operated by
the State of Vermont.
Swing-Bed: a hospital bed used to provide nursing facility
services.
