Nursing facility services under Medical Assistance (MA) are a package of room and board and nursing services. Acute care services such as hospitalization are paid for separately under MA; this is also usually the case for therapy and other ancillary services.
In order to be eligible for nursing facility care, an MA enrollee must:
- be screened by a long-term care consultation team; and
- be determined by the team to need nursing facility-level care.
The screening team assigns each nursing facility resident one of 48 case-mix classifications under the Resource Utilization Groups (RUGs) case-mix system.1 Each classification is assigned a weight that represents the amount of care needed. This weight is used in calculating reimbursement rates for nursing services.
MA recipients receiving care in nursing facilities are required to contribute most of their income towards the cost of care, except for a personal needs allowance of $97 as of January 1, 2016, and other allowed exclusions.
Nursing facilities are reimbursed by MA on a resident-per-day basis. The nursing home reimbursement levels are adjusted under the RUGS case-mix system to reflect the varying care needs of residents.
MA rates and private pay rates do not vary within a facility. This is due to Minnesota’s equalization law, which prohibits nursing facilities from charging private pay residents more than residents whose care is paid for by MA.
The 2015 Legislature authorized a new system for nursing facility reimbursement rates, which DHS calls the value-based reimbursement system. The 2016 rate year, which began on January 1, 2016, is the first year that DHS reimburses nursing facilities under the new system. Under the value based-system, DHS sets facility reimbursement rates based on the cost of providing care to residents. A nursing facility’s rate has five components: direct care, other care, other operating, internal fixed costs, and property. Although the new system ties a facility’s rate to its costs, DHS will not reimburse the facility for unlimited costs; a facility’s rate will only reflect its care-related costs up to a limit. If a facility’s care-related costs are greater than its limit, the facility’s rate would not reflect the portion of the costs in excess of the limit. As with previous systems, facilities’ rates are case-mix adjusted—facilities receive higher rates to care for more-resource intensive patients.
At a minimum, there is a 15-month lag between when a facility accrues a cost and when the cost is reflected in the facility’s rate. This is due both to the differences between the rate year and the reporting period, and the time it takes DHS to calculate facilities’ rates.
Nursing facilities in Minnesota must file a cost report with DHS by February 1 of each year. A facility’s cost report covers the previous reporting year, which runs from October 1 to September 30.DHS uses these cost reports to calculate a facility’s rate for the following rate year. The rate year runs from January 1 to December 31.
Because of this reporting cycle, a facility’s reimbursement rate will always reflect its historical costs, rather than its present costs. If a facility’s costs increase from one year to the next, its rates will lag behind the facility’s costs.
Under previous cost-based reimbursement systems, DHS adjusted facilities’ rates to account for this lag between reporting and rate setting. Rates were increased by multiplying a facility’s payment rate by the rate of inflation between when it submitted a cost report and when its rate took effect. The current value-based system does not include such an inflationary adjustment.
MA nursing facility statistics for fiscal year 2016:
- Total MA expenditures: $807.7 million
- Monthly average recipients: 14,625
- Average monthly payment per recipient: $4,602
- Average payment per day: $167.27
- RUGS classifies nursing facility residents into 48 groups based on information collected using the federally required minimum data set. There will also be penalty and default groups for a total of 50 RUG levels. The RUGS case-mix reimbursement system for nursing homes is described in Minnesota Statutes, sections 144.0724 and 256B.438.
The content of this and any related posts has been copied or adopted from the Minnesota House of Representatives Research Department’s Information Brief, Long-Term Care Services for the Elderly, written by legislative analyst Danyell Punelli.