If you have ever felt like your Maryland skilled nursing facility cannot catch a break when it comes to the state’s Medicaid rates, you are not alone. Many facilities struggle to control costs and remain profitable, even at the current rates, especially as costs in areas like nursing and salary and benefits continue to rise. And even with the most recent 2% Medicaid rate increase, the big news facilities should be keeping their eye on is the upcoming rebasing of Maryland’s Medicaid rates.
As of July 1, 2018, Maryland intends to “rebase” (set a new base level for) the state’s Medicaid rates for fiscal year 2019, leaving many facilities uncertain as to whether their individual facility’s rates will drop (or rise) and, if so, by how much.
Why Is The Maryland Medicaid Rate Being Rebased?
When the current rate system was implemented, it was created with the expectation that the rate would be rebased every four years in each of the five Maryland regions, which include:
- Baltimore Metro (Baltimore City and County)
- Central (Anne Arundel, Carrol and Howard Counties)
- Washington Metro (Charles, Frederick, Montgomery and Prince George’s Counties)
- Western Maryland (Allegany, Garrett and Washington Counties)
- Non Metro (all remaining counties)
The rebasing process evaluates how average costs have changed from the rate base year (2012) to the present date, while also accounting for inflation. This will be the first time the rate has been rebased since the system’s implementation of the new reimbursement methodology effective January 1, 2015.
According to Michael Snarski – an expert in Maryland Medicaid cost reporting and owner of Snarski Consulting, LLC – rebasing will have a net zero impact statewide, but there will be individual facilities that could see significant changes in their rates.
What Factors Are Being Considered In The Rebasing?
Even with Medicaid’s Budget Adjustment Factor (BAF), facilities will most likely see modifications to their rates. Snarski says factors that could affect facilities include:
- A significant increase in a facility’s Case Mix Index (CMI) from the base year (2012), but a disproportionate, lower actual increase in actual nursing costs versus indexed nursing costs.
- The rebasing of regional geographic median costs for routine and administrative, and other patient care costs. If the region’s rebased median costs are less than the original base year costs as indexed forward, it could result in lower rates.
- The nursing “price” will also be rebased. The nursing “price” is adjusted, based on facility specific acuity, to set a nursing “floor” (which is then used to limit nursing profit to no more than 5% of nursing price). If a facility’s calculated nursing profit is above the 5% threshold, then the nursing rate is reduced.
- The BAF, as of July 1, 2017, is .90348. This factor is updated on a quarterly basis. This means facilities are currently paid at 90.348% of their calculated rate. Depending upon results of the rebasing, it is possible the BAF may increase by several points to perhaps .95000.
What Can I Do If The Rate Drops?
Trying to match total costs of care with Medicaid rates often puts facilities in a catch-22. If facilities can reduce their costs in order to beat the rate, and thereby increase their profits, the regional average cost begins to drop. And because the Medicaid rate is calculated by average regional costs, the rate then drops to accommodate the decrease in average cost.
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Since most facilities are already taking steps to rein in their costs, facilities will have to think out of the box when it comes to ensuring they stay profitable. If the rate does drop, nonprofit facilities can turn their focus to boosting their fundraising efforts, using donations to offset the loss of Medicaid dollars. Both nonprofit and for-profit facilities may need to take a critical look at their rates for their private patient mix and may need to consider increasing their own rates in order to remain profitable.
Snarski offers the following tips to skilled nursing facilities looking for new ways to maximize their Medicaid rate:
1. Nursing
Ensure your facility gets credit for all services. You should know the answers to questions like:
- Are your Medicaid CMI scores accurate?
- How are they trending?
- How does your trending compare with industry?
It is important to note that the statewide Medicaid CMI scores have increased from approximately 1.00 to 1.12 since January 2015.
2. Appraisal Valuations
Every three years Medicaid appraisers appraise your facility. Make sure that you are prepared for those tours and that the appraisal reports are reviewed for accuracy. Review prior reports in advance of scheduled tours so you can identify any undervalued items beforehand.
Appraisals are used to establish the Capital Cost Center Rate (which is approximately 10% of the overall Medicaid Rate.) The maximum allowable appraisal value is $110,000 per licensed bed. That means if your facility has been valued at or above $110,000, you are achieving the maximum allowable appraisal value.
Are There Any Other Medicaid Issues I Should Be Looking Out for?
It is worth noting, Snarski said, that Maryland’s utilization agent, Telligen, is performing audit verifications of facilities’ CMI data. The audits began in 2017, and if a facility fails the audit with more than 20% error rate, a follow up audit will be scheduled.
The 2017 audits are informational only, meaning there are no penalties for inaccuracies. However, take the audit process and its findings seriously. As of July 2017, Telligen has completed 135 MDS Validation Audits, 22 of which required an expanded audit, with 11 of those 22 having failed the expanded audit.
Beginning in 2018, facilities that fail the expanded audits will be subject to a penalty audit and potentially a penalty/reduction to the facility’s Medicaid rate. This penalty amount has yet to be determined.
What Should I Expect for Medicaid In the Coming Months?
With the unprecedented amount of uncertainty currently facing the healthcare industry, it’s hard to tell what the future holds. While the rebasing of Maryland’s Medicaid rates is important, if the federal funding of Medicaid is eliminated or reduced, as has been recently proposed by the current administration, rebasing will be the least of the industry’s problems.
In the case that federal Medicaid funding is cut, states would assume full responsibility of funding for their Medicaid programs. This could create a myriad of issues; namely, whether states like Maryland can afford to increase their Medicaid spending by 100% without the dollar for dollar match of the federal government.
Need Help?
Contact us online or call 800.899.4623 to discuss your Maryland skilled nursing facility.
