Nursing home rate rebase

AN ACT Relating to delaying the rebasing of the nursing home 1
payment rates to 2028; and amending RCW 74.46.561. 2
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:3
Sec. 1. RCW 74.46.561 and 2023 c 475 s 942 are each amended to 4
read as follows: 5
(1) The legislature adopts a new system for establishing nursing 6
home payment rates beginning July 1, 2016. Any payments to nursing 7
homes for services provided after June 30, 2016, must be based on the 8
new system. The new system must be designed in such a manner as to 9
decrease administrative complexity associated with the payment 10
methodology, reward nursing homes providing care for high acuity 11
residents, incentivize quality care for residents of nursing homes, 12
and establish minimum staffing standards for direct care.13
(2) The new system must be based primarily on industry-wide 14
costs, and have three main components: Direct care, indirect care, 15
and capital. 16
(3)(a) The direct care component must include the direct care and 17
therapy care components of the previous system, along with food, 18
laundry, and dietary services. Except as provided in (b) of this 19
subsection, direct care must be paid at a fixed rate, based on one 20
hundred percent or greater of statewide case mix neutral median 21
Z-0210.1
SENATE BILL 5407
State of Washington 69th Legislature 2025 Regular Session
By Senators Riccelli, Robinson, and Nobles; by request of Office of
Financial Management
Read first time 01/21/25. Referred to Committee on Ways & Means.
p. 1 SB 5407
costs, but shall be capped so that a nursing home provider's direct 1
care rate does not exceed 118 percent of its base year's direct care 2
allowable costs except if the provider is below the minimum staffing 3
standard established in RCW 74.42.360(2). Direct care must be 4
performance-adjusted for acuity every six months, using case mix 5
principles. Direct care must be regionally adjusted using countywide 6
wage index information available through the United States department 7
of labor's bureau of labor statistics. There is no minimum occupancy 8
for direct care. The direct care component rate allocations 9
calculated in accordance with this section must be adjusted to the 10
extent necessary to comply with RCW 74.46.421. 11
(b) Unless a nursing home provider is below the minimum staffing 12
standard established in RCW 74.42.360(2), a provider's direct care 13
rate relative to its base year's direct care allowable costs must be 14
capped as follows: 15
(i) For fiscal year 2023, the cap must not exceed 165 percent;16
(ii) For fiscal year 2024, the cap must not exceed 153 percent; 17
and 18
(iii) For fiscal year 2025, the cap must not exceed 142 percent.19
(4)(a) The indirect care component must include the elements of 20
administrative expenses, maintenance costs, and housekeeping services 21
from the previous system. Except as provided in (b) of this 22
subsection, a minimum occupancy assumption of ninety percent must be 23
applied to indirect care. Indirect care must be paid at a fixed rate, 24
based on ninety percent or greater of statewide median costs. The 25
indirect care component rate allocations calculated in accordance 26
with this section must be adjusted to the extent necessary to comply 27
with RCW 74.46.421. 28
(b) A minimum occupancy assumption must be applied to indirect 29
care as follows: 30
(i) For fiscal year 2023, the assumption must be 75 percent;31
(ii) For fiscal year 2024, the assumption must be 80 percent; and32
(iii) For fiscal year 2025, the assumption must be 80 percent.33
(5) The capital component must use a fair market rental system to 34
set a price per bed. The capital component must be adjusted for the 35
age of the facility, and must use a minimum occupancy assumption of 36
ninety percent. 37
(a) Beginning July 1, 2016, the fair rental rate allocation for 38
each facility must be determined by multiplying the allowable nursing 39
home square footage in (c) of this subsection by the RSMeans rental 40
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rate in (d) of this subsection and by the number of licensed beds 1
yielding the gross unadjusted building value. An equipment allowance 2
of ten percent must be added to the unadjusted building value. The 3
sum of the unadjusted building value and equipment allowance must 4
then be reduced by the average age of the facility as determined by 5
(e) of this subsection using a depreciation rate of one and one-half 6
percent. The depreciated building and equipment plus land valued at 7
ten percent of the gross unadjusted building value before 8
depreciation must then be multiplied by the rental rate at seven and 9
one-half percent to yield an allowable fair rental value for the 10
land, building, and equipment. 11
(b) The fair rental value determined in (a) of this subsection 12
must be divided by the greater of the actual total facility census 13
from the prior full calendar year or imputed census based on the 14
number of licensed beds at ninety percent occupancy.15
(c) For the rate year beginning July 1, 2016, all facilities must 16
be reimbursed using four hundred square feet. For the rate year 17
beginning July 1, 2017, allowable nursing facility square footage 18
must be determined using the total nursing facility square footage as 19
reported on the medicaid cost reports submitted to the department in 20
compliance with this chapter. The maximum allowable square feet per 21
bed may not exceed four hundred fifty. 22
(d) Each facility must be paid at eighty-three percent or greater 23
of the median nursing facility RSMeans construction index value per 24
square foot. The department may use updated RSMeans construction 25
index information when more recent square footage data becomes 26
available. The statewide value per square foot must be indexed based 27
on facility zip code by multiplying the statewide value per square 28
foot times the appropriate zip code based index. For the purpose of 29
implementing this section, the value per square foot effective July 30
1, 2016, must be set so that the weighted average fair rental value 31
rate is not less than ten dollars and eighty cents per patient day. 32
The capital component rate allocations calculated in accordance with 33
this section must be adjusted to the extent necessary to comply with 34
RCW 74.46.421. 35
(e) The average age is the actual facility age reduced for 36
significant renovations. Significant renovations are defined as those 37
renovations that exceed two thousand dollars per bed in a calendar 38
year as reported on the annual cost report submitted in accordance 39
with this chapter. For the rate beginning July 1, 2016, the 40
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department shall use renovation data back to 1994 as submitted on 1
facility cost reports. Beginning July 1, 2016, facility ages must be 2
reduced in future years if the value of the renovation completed in 3
any year exceeds two thousand dollars times the number of licensed 4
beds. The cost of the renovation must be divided by the accumulated 5
depreciation per bed in the year of the renovation to determine the 6
equivalent number of new replacement beds. The new age for the 7
facility is a weighted average with the replacement bed equivalents 8
reflecting an age of zero and the existing licensed beds, minus the 9
new bed equivalents, reflecting their age in the year of the 10
renovation. At no time may the depreciated age be less than zero or 11
greater than forty-four years. 12
(f) A nursing facility's capital component rate allocation must 13
be rebased annually, effective July 1, 2016, in accordance with this 14
section and this chapter. 15
(g) For the purposes of this subsection (5), "RSMeans" means 16
building construction costs data as published by Gordian.17
(6) A quality incentive must be offered as a rate enhancement 18
beginning July 1, 2016. 19
(a) An enhancement no larger than five percent and no less than 20
one percent of the statewide average daily rate must be paid to 21
facilities that meet or exceed the standard established for the 22
quality incentive. All providers must have the opportunity to earn 23
the full quality incentive payment. 24
(b) The quality incentive component must be determined by 25
calculating an overall facility quality score composed of four to six 26
quality measures. For fiscal year 2017 there shall be four quality 27
measures, and for fiscal year 2018 there shall be six quality 28
measures. Initially, the quality incentive component must be based on 29
minimum data set quality measures for the percentage of long-stay 30
residents who self-report moderate to severe pain, the percentage of 31
high-risk long-stay residents with pressure ulcers, the percentage of 32
long-stay residents experiencing one or more falls with major injury, 33
and the percentage of long-stay residents with a urinary tract 34
infection. Quality measures must be reviewed on an annual basis by a 35
stakeholder work group established by the department. Upon review, 36
quality measures may be added or changed. The department may risk 37
adjust individual quality measures as it deems appropriate.38
(c) The facility quality score must be point based, using at a 39
minimum the facility's most recent available three-quarter average 40
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centers for medicare and medicaid services quality data. Point 1
thresholds for each quality measure must be established using the 2
corresponding statistical values for the quality measure point 3
determinants of eighty quality measure points, sixty quality measure 4
points, forty quality measure points, and twenty quality measure 5
points, identified in the most recent available five-star quality 6
rating system technical user's guide published by the centers for 7
medicare and medicaid services. 8
(d) Facilities meeting or exceeding the highest performance 9
threshold (top level) for a quality measure receive twenty-five 10
points. Facilities meeting the second highest performance threshold 11
receive twenty points. Facilities meeting the third level of 12
performance threshold receive fifteen points. Facilities in the 13
bottom performance threshold level receive no points. Points from all 14
quality measures must then be summed into a single aggregate quality 15
score for each facility. 16
(e) Facilities receiving an aggregate quality score of eighty 17
percent of the overall available total score or higher must be placed 18
in the highest tier (tier V), facilities receiving an aggregate score 19
of between seventy and seventy-nine percent of the overall available 20
total score must be placed in the second highest tier (tier IV), 21
facilities receiving an aggregate score of between sixty and sixty-22
nine percent of the overall available total score must be placed in 23
the third highest tier (tier III), facilities receiving an aggregate 24
score of between fifty and fifty-nine percent of the overall 25
available total score must be placed in the fourth highest tier (tier 26
II), and facilities receiving less than fifty percent of the overall 27
available total score must be placed in the lowest tier (tier I).28
(f) The tier system must be used to determine the amount of each 29
facility's per patient day quality incentive component. The per 30
patient day quality incentive component for tier IV is seventy-five 31
percent of the per patient day quality incentive component for tier 32
V, the per patient day quality incentive component for tier III is 33
fifty percent of the per patient day quality incentive component for 34
tier V, and the per patient day quality incentive component for tier 35
II is twenty-five percent of the per patient day quality incentive 36
component for tier V. Facilities in tier I receive no quality 37
incentive component. 38
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(g) Tier system payments must be set in a manner that ensures 1
that the entire biennial appropriation for the quality incentive 2
program is allocated. 3
(h) Facilities with insufficient three-quarter average centers 4
for medicare and medicaid services quality data must be assigned to 5
the tier corresponding to their five-star quality rating. Facilities 6
with a five-star quality rating must be assigned to the highest tier 7
(tier V) and facilities with a one-star quality rating must be 8
assigned to the lowest tier (tier I). The use of a facility's five-9
star quality rating shall only occur in the case of insufficient 10
centers for medicare and medicaid services minimum data set 11
information. 12
(i) The quality incentive rates must be adjusted semiannually on 13
July 1 and January 1 of each year using, at a minimum, the most 14
recent available three-quarter average centers for medicare and 15
medicaid services quality data. 16
(j) Beginning July 1, 2017, the percentage of short-stay 17
residents who newly received an antipsychotic medication must be 18
added as a quality measure. The department must determine the quality 19
incentive thresholds for this quality measure in a manner consistent 20
with those outlined in (b) through (h) of this subsection using the 21
centers for medicare and medicaid services quality data.22
(k) Beginning July 1, 2017, the percentage of direct care staff 23
turnover must be added as a quality measure using the centers for 24
medicare and medicaid services' payroll-based journal and nursing 25
home facility payroll data. Turnover is defined as an employee 26
departure. The department must determine the quality incentive 27
thresholds for this quality measure using data from the centers for 28
medicare and medicaid services' payroll-based journal, unless such 29
data is not available, in which case the department shall use direct 30
care staffing turnover data from the most recent medicaid cost 31
report. 32
(7) Reimbursement of the safety net assessment imposed by chapter 33
74.48 RCW and paid in relation to medicaid residents must be 34
continued. 35
(8)(a) ((The)) Except as provided in (c) of this subsection, the 36
direct care and indirect care components must be rebased in even-37
numbered years, beginning with rates paid on July 1, 2016. Rates paid 38
on July 1, 2016, must be based on the 2014 calendar year cost report. 39
On a percentage basis, after rebasing, the department must confirm 40
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that the statewide average daily rate has increased at least as much 1
as the average rate of inflation, as determined by the skilled 2
nursing facility market basket index published by the centers for 3
medicare and medicaid services, or a comparable index. If after 4
rebasing, the percentage increase to the statewide average daily rate 5
is less than the average rate of inflation for the same time period, 6
the department is authorized to increase rates by the difference 7
between the percentage increase after rebasing and the average rate 8
of inflation. 9
(b) It is the intention of the legislature that direct and 10
indirect care rates paid in fiscal year 2022 will be rebased using 11
the calendar year 2019 cost reports. For fiscal year 2021, in 12
addition to the rates generated by (a) of this subsection, an 13
additional adjustment is provided as established in this subsection 14
(8)(b). Beginning May 1, 2020, and through June 30, 2021, the 15
calendar year costs must be adjusted for inflation by a twenty-four 16
month consumer price index, based on the most recently available 17
monthly index for all urban consumers, as published by the bureau of 18
labor statistics. It is also the intent of the legislature that, 19
starting in fiscal year 2022, a facility-specific rate add-on equal 20
to the inflation adjustment that facilities received solely in fiscal 21
year 2021, must be added to the rate. For fiscal year 2024, the 22
direct care and indirect care components shall be rebased to the 2021 23
calendar year cost report plus a 4.7 percent adjustment for 24
inflation. For fiscal year 2025, the direct and indirect care 25
components shall be rebased to the 2022 calendar year cost report 26
plus a five percent adjustment for inflation. 27
(c) ((To determine the necessity of regular inflationary 28
adjustments to the nursing facility rates, by December 1, 2020, the 29
department shall provide the appropriate policy and fiscal committees 30
of the legislature with a report that provides a review of rates paid 31
in 2017, 2018, and 2019 in comparison to costs incurred by nursing 32
facilities.)) The direct and indirect care rates calculations in 33
fiscal year 2027 using the calendar year 2025 cost reports shall go 34
into effect the following fiscal biennium, beginning in fiscal year 35
2028. The 2024 direct and indirect care rates and the one-time rate 36
add on in the 2025-2027 fiscal biennium shall remain in effect until 37
fiscal year 2028.38
(9) The direct care component provided in subsection (3) of this 39
section is subject to the reconciliation and settlement process 40
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provided in RCW 74.46.022(6). Beginning July 1, 2016, pursuant to 1
rules established by the department, funds that are received through 2
the reconciliation and settlement process provided in RCW 3
74.46.022(6) must be used for technical assistance, specialized 4
training, or an increase to the quality enhancement established in 5
subsection (6) of this section. The legislature intends to review the 6
utility of maintaining the reconciliation and settlement process 7
under a price-based payment methodology, and may discontinue the 8
reconciliation and settlement process after the 2017-2019 fiscal 9
biennium. 10
(10) Compared to the rate in effect June 30, 2016, including all 11
cost components and rate add-ons, no facility may receive a rate 12
reduction of more than one percent on July 1, 2016, more than two 13
percent on July 1, 2017, or more than five percent on July 1, 2018. 14
To ensure that the appropriation for nursing homes remains cost 15
neutral, the department is authorized to cap the rate increase for 16
facilities in fiscal years 2017, 2018, and 2019. 17
(11) It is the intent of the legislature that a rate add-on be 18
applied to the weighted average nursing facility payment rate 19
referenced in the omnibus operating appropriations act in an amount 20
necessary to ensure that the weighted average nursing facility 21
payment rate for fiscal year 2026 is equal to the weighted average 22
nursing facility payment rate for fiscal year 2025.23
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