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SENATE BILL 2023
By Reeves
HOUSE BILL 1864
By Hicks G
HB1864
011917
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AN ACT to amend Tennessee Code Annotated, Title 71,
Chapter 5, Part 10, relative to medicaid
reimbursement for medicaid nursing facilities.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Section 71-5-1001, is amended by deleting
subdivision (10) and adding the following as new, appropriately designated subdivisions:
( ) "Budget adjustment factor" means the formula described in § 71-5-1011(d);
( ) "New base year period" or "rebase year" means the end product of the rebase
process that establishes new nursing facility cost components reflecting median costs
and prices that reflect the most recent purchases of goods and services used by nursing
homes to furnish care;
( ) "Nursing facility" means any entity defined as a nursing home under § 68-11-
201 and licensed under title 68 by the health facilities commission;
( ) "Rebase" or "rebasing" means the mathematical, objective process of
recalculating cost component medians and reimbursement rates by incorporating the
most recently audited or reviewed qualifying cost reports to establish a new base year
that reflects the most recent purchases of goods and services used by nursing homes to
furnish care;
SECTION 2. Tennessee Code Annotated, Section 71-5-1002, is amended by deleting in
subdivision (h)(1) the language "FY 2025-2026" and substituting instead the language "FY
2026-2027".
SECTION 3. Tennessee Code Annotated, Section 71-5-1002, is amended by deleting
the second sentence in subsection (i).
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SECTION 4. Tennessee Code Annotated, Section 71-5-1003, is amended by deleting in
subsection (c) the language "from July 1, 2025, through June 30, 2026" and substituting instead
the language "from July 1, 2026, through June 30, 2027".
SECTION 5. Tennessee Code Annotated, Section 71-5-1003, is amended by deleting in
subdivision (c)(1) the language "July 1, 2025" and substituting instead the language "July 1,
2026".
SECTION 6. Tennessee Code Annotated, Section 71-5-1003, is amended by deleting in
subdivision (c)(2) the language "July 1, 2025" and substituting instead the language "July 1,
2026".
SECTION 7. Tennessee Code Annotated, Section 71-5-1003, is amended by deleting in
subdivision (c)(3) the language "July 1, 2025" and substituting instead the language "July 1,
2026".
SECTION 8. Tennessee Code Annotated, Section 71-5-1003, is amended by deleting in
subdivision (c)(4) the language "after July 1, 2025, shall pay in FY 2025-2026" and substituting
instead the language "after July 1, 2026, shall pay in FY 2026-2027".
SECTION 9. Tennessee Code Annotated, Section 71-5-1003, is amended by deleting in
subdivision (c)(5) the language "from July 1, 2025, through June 30, 2026" and substituting
instead the language "from July 1, 2026, through June 30, 2027".
SECTION 10. Tennessee Code Annotated, Section 71-5-1004, is amended by deleting
subsection (b) and redesignating the remaining subsections accordingly.
SECTION 11. Tennessee Code Annotated, Section 71-5-1010, is amended by deleting
the language "June 30, 2026" and substituting instead the language "June 30, 2027".
SECTION 12. Tennessee Code Annotated, Title 71, Chapter 5, Part 10, is amended by
adding the following as a new section:
71-5-1011. Rebasing and annual reimbursement.
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(a) The base-year annualized medicaid resident day-weighted median costs and
prices must be rebased at an interval no longer than three (3) years after a new base
year period has been established. The new base year median costs and prices must be
established using the most recently audited or desk reviewed cost reports that have a
cost reporting period greater than six (6) months, with a cost report end date eighteen
(18) months or more before the start of the rebase period. This data must establish a
new base year for purposes of applying a market base adjustment during non-rebase
years.
(b) Cost reports issued a disclaimer of opinion during the audit process or cost
reports containing substantial issues, including incomplete filing, during the desk review
process, as solely determined by the comptroller of the treasury, must be excluded from
the median and price calculations.
(c) Only audited or reviewed cost reports available prior to the July 1 rate setting
may be considered in the median and price calculations.
(d) Budget adjustment factor (BAF). For the beginning of each state rate year
that is not a rebase year and except as prohibited in subsection (e), effective July 1 of
that year, the bureau of TennCare shall establish a nursing facility (NF) program budget
target and compare that to the annual expected medicaid expenditures on nursing
facility days for the upcoming rate year using established rate setting mechanics. The
bureau shall establish the BAF to adjust the annual expected medicaid expenditures to
meet the program's NF budget target. The BAF may be positive or negative and must
be applied as an across-the-board percentage adjustment to all provider reimbursement
rate components calculated according to this rule. The following is the detailed
calculation of the BAF:
(1) Rate system expected cost.
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(A) Projected July 1 provider reimbursement rates calculated
using all applicable reimbursement provisions specified within this chapter
prior to application of the BAF;
(B) X new cost report medicaid days from the most recent cost
report data reviewed by the comptroller of the treasury, or paid claims
data, if the bureau determines this data source to be more appropriate;
and
(C) Expected cost of NF reimbursement system.
(2) NF budget target.
(A) Prior to application of the BAF, projected July 1 provider
reimbursement rates calculated using all applicable reimbursement
provisions specified within this chapter;
(B) X new cost report medicaid days from the most recent cost
report data reviewed by the comptroller of the treasury, or paid claims
data, if the bureau determines this data source to be more appropriate;
(C) Target cost of NF reimbursement system prior to adjustments;
(D) Add or subtract state budgetary adjustments; and
(E) Determine the final budget target of the NF reimbursement
system.
(3) BAF calculation.
(A) NF budget target / rate system expected cost = BAF % to
apply to all provider rates;
(B) For each non-July 1 rate setting period, the bureau shall
recalculate the BAF to accommodate changes to the reimbursement
system from new case mix index (CMI), new facilities, statutory
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requirements, and other factors. The BAF is applied to all provider
reimbursement rate components, and must be adjusted to ensure the
state will continue to meet the NF budget target; and
(C) The BAF adjustment may be positive or negative depending
on circumstance.
(e) BAF prohibition. The bureau shall not apply any BAF or any other
computation that alters the median cost and price calculations in this section, except as
identified in subsections (a) and (b), when calculating a new base year period.
(f) Notice of adjustment or reduction.
(1) If the bureau reduces payments on a pro rata basis using a BAF in a
fiscal year, then the bureau shall provide notice on or before March 1 of the fiscal
year to the chair of the health and welfare committee of the senate and the chair
of the committee of the house of representatives having jurisdiction over health
matters prior to making any reduced payments. The notice must include and
delineate the amount of state general revenue dollars and nursing home provider
assessment fees used to support the year-over-year increase in medicaid rates.
(2) If the bureau is not able to fully fund rebased rates due to an overall
medicaid budget shortfall and reduces payments on a pro rata basis in a fiscal
year, then the bureau shall provide notice on or before March 1 of the fiscal year
to the chair of the health and welfare committee of the senate and the chair of the
committee of the house of representatives having jurisdiction over health matters
prior to making any reduced payments. The notice must include and delineate
the amount of state general revenue dollars and nursing home provider
assessment fees used to support the year-over-year increase in medicaid rates.
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(g) The bureau is authorized to promulgate rules necessary to effectuate this
section, subject to the following limitations:
(1) Any rules promulgated by the bureau pursuant to this section must be
developed in consultation with the comptroller of the treasury and the Tennessee
Health Care Association (THCA);
(2) The rules must be promulgated in accordance with the Uniform
Administrative Procedures Act, compiled in title 4, chapter 5, and may be
promulgated as emergency rules pursuant to § 4-5-208; and
(3) Any rules must be in effect no later than December 31, 2026.
SECTION 13. The headings in this act are for reference purposes only and do not
constitute a part of the law enacted by this act. However, the Tennessee Code Commission is
requested to include the headings in any compilation or publication containing this act.
SECTION 14. For the purpose of promulgating rules, this act takes effect upon
becoming a law, the public welfare requiring it. For all other purposes, this act takes effect July
1, 2026, the public welfare requiring it.