Nursing home payment rates

AN ACT Relating to nursing home payment rates; amending RCW 1
74.46.561; creating a new section; and declaring an emergency.2
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:3
NEW SECTION. Sec. 1. Over the course of the last four years, 4
the legislature has recognized the importance of ensuring that 5
nursing home payment rates adequately keep pace with wages and 6
operating costs. The legislature also recognizes that in order to 7
sustain access to nursing home services, rates must be adjusted 8
annually and reflect the most recent historical cost data. Therefore, 9
beginning July 1, 2025, the legislature intends to modify the system 10
for establishing nursing home payment rates.11
Sec. 2. RCW 74.46.561 and 2023 c 475 s 942 are each amended to 12
read as follows: 13
(1) The legislature adopts a new system for establishing nursing 14
home payment rates beginning July 1, 2016. Any payments to nursing 15
homes for services provided after June 30, 2016, must be based on the 16
new system. The new system must be designed in such a manner as to 17
decrease administrative complexity associated with the payment 18
methodology, reward nursing homes providing care for high acuity 19
H-0513.1
HOUSE BILL 1555
State of Washington 69th Legislature 2025 Regular Session
By Representatives Stonier, Schmick, Goodman, Timmons, Cortes,
Bernbaum, Chase, Barkis, Waters, Dye, Davis, Leavitt, Caldier, Berry,
Kloba, Ryu, Parshley, Santos, Macri, and Hill
Read first time 01/23/25. Referred to Committee on Appropriations.
p. 1 HB 1555
residents, incentivize quality care for residents of nursing homes, 1
and establish minimum staffing standards for direct care.2
(2) Beginning July 1, 2025, nursing home payment rates must be 3
rebased annually to the most recent historical cost data.4
(3) The new system must be based primarily on industry-wide 5
costs, and have three main components: Direct care, indirect care, 6
and capital. 7
(((3))) (4)(a) The direct care component must include the direct 8
care and therapy care components of the previous system, along with 9
food, laundry, and dietary services. Except as provided in (b) of 10
this subsection, direct care must be paid at a fixed rate, based on 11
one hundred percent or greater of statewide case mix neutral median 12
costs, but shall be capped so that a nursing home provider's direct 13
care rate does not exceed 118 percent of its base year's direct care 14
allowable costs except if the provider is below the minimum staffing 15
standard established in RCW 74.42.360(2). Direct care must be 16
performance-adjusted for acuity every six months, using case mix 17
principles. Direct care must be regionally adjusted using countywide 18
wage index information available through the United States department 19
of labor's bureau of labor statistics. There is no minimum occupancy 20
for direct care. The direct care component rate allocations 21
calculated in accordance with this section must be adjusted to the 22
extent necessary to comply with RCW 74.46.421. 23
(b) Unless a nursing home provider is below the minimum staffing 24
standard established in RCW 74.42.360(2), a provider's direct care 25
rate relative to its base year's direct care allowable costs must be 26
capped as follows: 27
(i) For fiscal year 2023, the cap must not exceed 165 percent;28
(ii) For fiscal year 2024, the cap must not exceed 153 percent; 29
and 30
(iii) For fiscal year 2025, the cap must not exceed 142 percent.31
(((4))) (5)(a) The indirect care component must include the 32
elements of administrative expenses, maintenance costs, and 33
housekeeping services from the previous system. Except as provided in 34
(b) of this subsection, a minimum occupancy assumption of ninety 35
percent must be applied to indirect care. Indirect care must be paid 36
at a fixed rate, based on ninety percent or greater of statewide 37
median costs. The indirect care component rate allocations calculated 38
in accordance with this section must be adjusted to the extent 39
necessary to comply with RCW 74.46.421. 40
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(b) A minimum occupancy assumption must be applied to indirect 1
care as follows: 2
(i) For fiscal year 2023, the assumption must be 75 percent;3
(ii) For fiscal year 2024, the assumption must be 80 percent; and4
(iii) For fiscal year 2025, the assumption must be 80 percent.5
(((5))) (6) The capital component must use a fair market rental 6
system to set a price per bed. The capital component must be adjusted 7
for the age of the facility, and must use a minimum occupancy 8
assumption of ninety percent. 9
(a) Beginning July 1, 2016, the fair rental rate allocation for 10
each facility must be determined by multiplying the allowable nursing 11
home square footage in (c) of this subsection by the RSMeans rental 12
rate in (d) of this subsection and by the number of licensed beds 13
yielding the gross unadjusted building value. An equipment allowance 14
of ten percent must be added to the unadjusted building value. The 15
sum of the unadjusted building value and equipment allowance must 16
then be reduced by the average age of the facility as determined by 17
(e) of this subsection using a depreciation rate of one and one-half 18
percent. The depreciated building and equipment plus land valued at 19
ten percent of the gross unadjusted building value before 20
depreciation must then be multiplied by the rental rate at seven and 21
one-half percent to yield an allowable fair rental value for the 22
land, building, and equipment. 23
(b) The fair rental value determined in (a) of this subsection 24
must be divided by the greater of the actual total facility census 25
from the prior full calendar year or imputed census based on the 26
number of licensed beds at ninety percent occupancy.27
(c) For the rate year beginning July 1, 2016, all facilities must 28
be reimbursed using four hundred square feet. For the rate year 29
beginning July 1, 2017, allowable nursing facility square footage 30
must be determined using the total nursing facility square footage as 31
reported on the medicaid cost reports submitted to the department in 32
compliance with this chapter. The maximum allowable square feet per 33
bed may not exceed four hundred fifty. 34
(d) Each facility must be paid at eighty-three percent or greater 35
of the median nursing facility RSMeans construction index value per 36
square foot. The department may use updated RSMeans construction 37
index information when more recent square footage data becomes 38
available. The statewide value per square foot must be indexed based 39
on facility zip code by multiplying the statewide value per square 40
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foot times the appropriate zip code based index. For the purpose of 1
implementing this section, the value per square foot effective July 2
1, 2016, must be set so that the weighted average fair rental value 3
rate is not less than ten dollars and eighty cents per patient day. 4
The capital component rate allocations calculated in accordance with 5
this section must be adjusted to the extent necessary to comply with 6
RCW 74.46.421. 7
(e) The average age is the actual facility age reduced for 8
significant renovations. Significant renovations are defined as those 9
renovations that exceed two thousand dollars per bed in a calendar 10
year as reported on the annual cost report submitted in accordance 11
with this chapter. For the rate beginning July 1, 2016, the 12
department shall use renovation data back to 1994 as submitted on 13
facility cost reports. Beginning July 1, 2016, facility ages must be 14
reduced in future years if the value of the renovation completed in 15
any year exceeds two thousand dollars times the number of licensed 16
beds. The cost of the renovation must be divided by the accumulated 17
depreciation per bed in the year of the renovation to determine the 18
equivalent number of new replacement beds. The new age for the 19
facility is a weighted average with the replacement bed equivalents 20
reflecting an age of zero and the existing licensed beds, minus the 21
new bed equivalents, reflecting their age in the year of the 22
renovation. At no time may the depreciated age be less than zero or 23
greater than forty-four years. 24
(f) A nursing facility's capital component rate allocation must 25
be rebased annually, effective July 1, 2016, in accordance with this 26
section and this chapter. 27
(g) For the purposes of this subsection (((5))) (6), "RSMeans" 28
means building construction costs data as published by Gordian.29
(((6))) (7) A quality incentive must be offered as a rate 30
enhancement beginning July 1, 2016. 31
(a) An enhancement no larger than five percent and no less than 32
one percent of the statewide average daily rate must be paid to 33
facilities that meet or exceed the standard established for the 34
quality incentive. All providers must have the opportunity to earn 35
the full quality incentive payment. 36
(b) The quality incentive component must be determined by 37
calculating an overall facility quality score composed of four to six 38
quality measures. For fiscal year 2017 there shall be four quality 39
measures, and for fiscal year 2018 there shall be six quality 40
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measures. Initially, the quality incentive component must be based on 1
minimum data set quality measures for the percentage of long-stay 2
residents who self-report moderate to severe pain, the percentage of 3
high-risk long-stay residents with pressure ulcers, the percentage of 4
long-stay residents experiencing one or more falls with major injury, 5
and the percentage of long-stay residents with a urinary tract 6
infection. Quality measures must be reviewed on an annual basis by a 7
stakeholder work group established by the department. Upon review, 8
quality measures may be added or changed. The department may risk 9
adjust individual quality measures as it deems appropriate.10
(c) The facility quality score must be point based, using at a 11
minimum the facility's most recent available three-quarter average 12
centers for medicare and medicaid services quality data. Point 13
thresholds for each quality measure must be established using the 14
corresponding statistical values for the quality measure point 15
determinants of eighty quality measure points, sixty quality measure 16
points, forty quality measure points, and twenty quality measure 17
points, identified in the most recent available five-star quality 18
rating system technical user's guide published by the centers for 19
medicare and medicaid services. 20
(d) Facilities meeting or exceeding the highest performance 21
threshold (top level) for a quality measure receive twenty-five 22
points. Facilities meeting the second highest performance threshold 23
receive twenty points. Facilities meeting the third level of 24
performance threshold receive fifteen points. Facilities in the 25
bottom performance threshold level receive no points. Points from all 26
quality measures must then be summed into a single aggregate quality 27
score for each facility. 28
(e) Facilities receiving an aggregate quality score of eighty 29
percent of the overall available total score or higher must be placed 30
in the highest tier (tier V), facilities receiving an aggregate score 31
of between seventy and seventy-nine percent of the overall available 32
total score must be placed in the second highest tier (tier IV), 33
facilities receiving an aggregate score of between sixty and sixty-34
nine percent of the overall available total score must be placed in 35
the third highest tier (tier III), facilities receiving an aggregate 36
score of between fifty and fifty-nine percent of the overall 37
available total score must be placed in the fourth highest tier (tier 38
II), and facilities receiving less than fifty percent of the overall 39
available total score must be placed in the lowest tier (tier I).40
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(f) The tier system must be used to determine the amount of each 1
facility's per patient day quality incentive component. The per 2
patient day quality incentive component for tier IV is seventy-five 3
percent of the per patient day quality incentive component for tier 4
V, the per patient day quality incentive component for tier III is 5
fifty percent of the per patient day quality incentive component for 6
tier V, and the per patient day quality incentive component for tier 7
II is twenty-five percent of the per patient day quality incentive 8
component for tier V. Facilities in tier I receive no quality 9
incentive component. 10
(g) Tier system payments must be set in a manner that ensures 11
that the entire biennial appropriation for the quality incentive 12
program is allocated. 13
(h) Facilities with insufficient three-quarter average centers 14
for medicare and medicaid services quality data must be assigned to 15
the tier corresponding to their five-star quality rating. Facilities 16
with a five-star quality rating must be assigned to the highest tier 17
(tier V) and facilities with a one-star quality rating must be 18
assigned to the lowest tier (tier I). The use of a facility's five-19
star quality rating shall only occur in the case of insufficient 20
centers for medicare and medicaid services minimum data set 21
information. 22
(i) The quality incentive rates must be adjusted semiannually on 23
July 1 and January 1 of each year using, at a minimum, the most 24
recent available three-quarter average centers for medicare and 25
medicaid services quality data. 26
(j) Beginning July 1, 2017, the percentage of short-stay 27
residents who newly received an antipsychotic medication must be 28
added as a quality measure. The department must determine the quality 29
incentive thresholds for this quality measure in a manner consistent 30
with those outlined in (b) through (h) of this subsection using the 31
centers for medicare and medicaid services quality data.32
(k) Beginning July 1, 2017, the percentage of direct care staff 33
turnover must be added as a quality measure using the centers for 34
medicare and medicaid services' payroll-based journal and nursing 35
home facility payroll data. Turnover is defined as an employee 36
departure. The department must determine the quality incentive 37
thresholds for this quality measure using data from the centers for 38
medicare and medicaid services' payroll-based journal, unless such 39
data is not available, in which case the department shall use direct 40
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care staffing turnover data from the most recent medicaid cost 1
report. 2
(((7))) (8) Reimbursement of the safety net assessment imposed by 3
chapter 74.48 RCW and paid in relation to medicaid residents must be 4
continued. 5
(((8)))(9)(a) The direct care and indirect care components must 6
be rebased ((in even-numbered years )) annually, beginning with rates 7
paid on July 1, ((2016)) 2025. Rates paid on July 1, ((2016)) 2025, 8
must be based on the ((2014)) 2023 calendar year cost report. On a 9
percentage basis, after rebasing, the department must confirm that 10
the statewide average daily rate has increased at least as much as 11
the average rate of inflation, as determined by the skilled nursing 12
facility market basket index published by the centers for medicare 13
and medicaid services, or a comparable index. If after rebasing, the 14
percentage increase to the statewide average daily rate is less than 15
the average rate of inflation for the same time period, the 16
department is authorized to increase rates by the difference between 17
the percentage increase after rebasing and the average rate of 18
inflation. 19
(b) It is the intention of the legislature that direct and 20
indirect care rates paid in fiscal year 2022 will be rebased using 21
the calendar year 2019 cost reports. For fiscal year 2021, in 22
addition to the rates generated by (a) of this subsection, an 23
additional adjustment is provided as established in this subsection 24
(((8))) (9)(b). Beginning May 1, 2020, and through June 30, 2021, the 25
calendar year costs must be adjusted for inflation by a twenty-four 26
month consumer price index, based on the most recently available 27
monthly index for all urban consumers, as published by the bureau of 28
labor statistics. It is also the intent of the legislature that, 29
starting in fiscal year 2022, a facility-specific rate add-on equal 30
to the inflation adjustment that facilities received solely in fiscal 31
year 2021, must be added to the rate. For fiscal year 2024, the 32
direct care and indirect care components shall be rebased to the 2021 33
calendar year cost report plus a 4.7 percent adjustment for 34
inflation. For fiscal year 2025, the direct and indirect care 35
components shall be rebased to the 2022 calendar year cost report 36
plus a five percent adjustment for inflation. 37
(c) To determine the necessity of regular inflationary 38
adjustments to the nursing facility rates, by December 1, 2020, the 39
department shall provide the appropriate policy and fiscal committees 40
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of the legislature with a report that provides a review of rates paid 1
in 2017, 2018, and 2019 in comparison to costs incurred by nursing 2
facilities. 3
(((9))) (10) The direct care component provided in subsection 4
(((3))) (4) of this section is subject to the reconciliation and 5
settlement process provided in RCW 74.46.022(6). Beginning July 1, 6
2016, pursuant to rules established by the department, funds that are 7
received through the reconciliation and settlement process provided 8
in RCW 74.46.022(6) must be used for technical assistance, 9
specialized training, or an increase to the quality enhancement 10
established in subsection (((6))) (7) of this section. The 11
legislature intends to review the utility of maintaining the 12
reconciliation and settlement process under a price-based payment 13
methodology, and may discontinue the reconciliation and settlement 14
process after the 2017-2019 fiscal biennium. 15
(((10))) (11) Compared to the rate in effect June 30, 2016, 16
including all cost components and rate add-ons, no facility may 17
receive a rate reduction of more than one percent on July 1, 2016, 18
more than two percent on July 1, 2017, or more than five percent on 19
July 1, 2018. To ensure that the appropriation for nursing homes 20
remains cost neutral, the department is authorized to cap the rate 21
increase for facilities in fiscal years 2017, 2018, and 2019.22
(((11))) (12) It is the intent of the legislature that a rate 23
add-on be applied to the weighted average nursing facility payment 24
rate referenced in the omnibus operating appropriations act in an 25
amount necessary to ensure that the weighted average nursing facility 26
payment rate for fiscal year 2026 is equal to the weighted average 27
nursing facility payment rate for fiscal year 2025.28
NEW SECTION. Sec. 3. This act is necessary for the immediate 29
preservation of the public peace, health, or safety, or support of 30
the state government and its existing public institutions, and takes 31
effect immediately.32
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