1. The Current Status of the Nursing Home Industry
Presented to the 2007 TSCPA Healthcare Conference
Cool Springs Marriott November 26, 2007

2. Learning Objectives Discuss changes affecting Medicare reimbursement
Discuss the changes in TennCare reimbursement for nursing home providers
Discuss ways to improve reimbursement
Discuss the alternatives to institutional care
Discuss options for financing care

3. What are the Current Trends
Genworth Financial commissions an annual survey performed by Care Scout
Continuum of care is expanding
Assisted living units are catering to private pay market
Increase in the number of adult day care programs
Patients can expect to pay approximately $10,000 more per year than they paid in 2004
Increased competition from home care and home and community-based programs

4. Changes Affecting Medicare
Nursing Home quality measures
Additional RUG categories
Change in market basket calculation
MDS 3.0

5. Quality Measures
QIO program was established by Part B of Title XI of the Social Act and was amended by the Peer Review Act of 1982
They are now in the 8th Scope of Work
Mission is to:
..to improve the effectiveness, efficiency, economy, and quality of services delivered to Medicare beneficiaries.

6. Quality Measures (continued)
Requirements of the QIO program:
Improve quality of care
Protect the integrity of the Medicare Trust Fund
Protect beneficiaries
Address complaints
Address provider-issued notices
And other QIO responsibilities

7. RUG Categories Increased from 44 to 53 in FFY 2007
New categories deal with increased patient acuity
RUX,RUL, RVX, RVL,RHX, RHL, RMX, RML
Look for more changes in the future

8. Change in Market Basket Methodology
From inception of SNF PPS have used 1997 data trended forward using inflation factor
For 2008 FFY, CMS will use 2004 data
Why is this important?

9. MDS 3.0
Currently providers use MDS 2.0 to evaluate patients clinically.
CMS is set to introduce MDS 3.0
Will collect additional data on patient condition and resource utilization

10. Changes affecting TennCare
Add-on payments to the rate
More dependence on Medicare Part D
More detailed review of cost reports
Schedule H
State budget concerns
Proposed rule changes

11. TennCare Rate Add-ons Cost Containment Incentive Sprinkler adjustment
Minimum wage adjustment
Bed tax pass-through

12. Medicare Part D Previous TennCare Pharmacy program
Seven scripts per month
Advocate lawsuits
Rising cost of prescription drugs
Federal Prescription Drug plan (MMA)
TennCare now requires all eligible patients to participate in Medicare Part D

13. More Detailed Cost Report Review
Now require all of the following be filed with cost report:
Working trial balance
Depreciation
Management contract
Leases
Detailed analysis of anything “other.”

14. More Detailed Cost Report Review (continued)
Adjustment of free meals
“Reasonableness” adjustments
Overhead (see Schedule H)
Possible future adjustments;
“Excessive” benefits
Certain types of benefits
Otherwise reasonable expenses
Things that the reviewer does not understand

15. Ways to Improve Reimbursement
Careful completion of the MDS
Accurate assignment of cost on the cost report
Push for a Nursing Home specific wage index
Accurate and complete bad debt logs
Appropriate charge structure

16. MDS Completion Involve an interdisciplinary team
Clinical members
Financial members
Capture all clinical data about the patient
Make sure all ADL and clinical needs are identified

17. Cost Report Assignment
Make sure all ancillary charges are captured
Assign cost to appropriate cost centers
Proper overhead allocations
Assign where overhead departments used
Do not assign if no overhead, e.g. Outside pharmacy

18. Wage Index SNFs currently use the hospital wage index
Rationale is that the nursing home data is not accurate
SNFs do not use the occupational mix portions of the hospital wage index
Wage disparities are not the same

19. Medicare Bad Debts Electronic maintenance of logs encouraged by CMS
Complete all required columns
Accumulate supporting documentation “as you go”
Apply collection policies consistently
Capture non-dual eligibles

20. Charge Structure
Appropriate routine charge has significant impact on TennCare Level I reimbursement
Allows for a more accurate distribution of cost to various payors
May have a positive bottom line effect

21. Alternatives to Traditional Services
Effect of increased patient acuity
Assisted living facilities
Residential housing
Adult day care services
Facility-based home care and private duty services

22. Methods of Financing Care
State budget constraints will limit increases in TennCare
Medicare will eventually curtail “cross subsidization” of TennCare patient cost
More affluent boomers coming into the nursing home age population will be more likely to have long-term care insurance.

23. Facility Specific Financing Concerns
HUD 242 loan guarantees to finance betterments and improvements
Form 990 changes
Funding of increased salaries

24. Questions and Contact Information
Questions???
Contact information:
William C. (Bill) Matheney FHFMA, CPA, MBA
6136 Shallowford Road Suite 101
Chattanooga, TN 37421
Phone ext 105