Southern California Chapter Healthcare Financial Management Association

1. Southern California ChapterHealthcare Financial Management Association Chapter Education Program # 3 March 18, 2008 Long Term Care Track

2. Skilled Nursing FacilityAB 1629 Reimbursement Update Darryl Nixon, CAHF Mike Harrold, DHCS Dan Giardinelli, DHCS

3. Presenter Contact Information Darryl Nixon, Director of Reimbursement and Data Systems, California Association of Health Facilities (CAHF), dnixon@cahf.org, 916-441-6400, ext. 112 Mike Harrold, Chief, Financial Audits Section-Fresno, mike.harrold@dhcs.ca.gov Dan Giardinelli, Chief, Financial Audits Section – Burbank, 1405 N. San Fernando Blvd., Room 203 Burbank, CA 91504, dan.giardinelli@dhcs.ca.gov, 818-295-2626

4. Overview/Historical Perspective • Public Policy Intent • Methodology Refresher • Fiscal Impact Summary • Reporting Issues • Ongoing • Supplemental Reporting • Other Issues • Rate Development Issues • QA fee Payment/Collection • Audits

5. Public Policy Intent • Reimbursement system needed reform because the flat rate system: • Did not promote quality. • Rewarded providers that kept or cut costs to absolute minimums. • Did not truly recognize the cost impact of new mandates or extraordinary cost increases (staffing, workers compensation, liability, energy). • Did not provide resources to improve the aging infrastructure.

6. Methodology Refresher • New reimbursement model • Facility-specific • Labor cost driven • Sum of cost components (actual projected cost subject to Caps) • Fair Rental Value for Property/Capital • 2 Year hold-harmless (Through 7/31/07) • Controlled by Gross Budget Caps

7. Fiscal Impact Summary Average Rates • 2003 = $118 + QAF $0 = $118 • 2004 = $125 +QAF $4 = $129 • 2005 = $135 + QAF $7 =$142 CAP $142 • 2006 = $141 + QAF $8 = $149 CAP $150 • 2007 = $144 + QAF $8 = $152 CAP $158 • 2008 = ? + QAF $9 = ? CAP $160

8. Reporting Issues • Cost Report Submission • Timeliness • Errors • Amended Reports • Supplemental Reports • Information Required • Timely Submission • Failure to Submit

9. Other Issues • Rate Development Issues • Rate Formula • Rate Review • QA fee Payment/Collection • Delinquency Follow up • Consequence • QA Fee – Legal Challenge • Audits

10. Follow Up Issues • 2007/08 Rates • Updating Rates • Retroactive Rate Adjustments • Collection of Overpayments • Share of Cost Corrections • February 20 EDS Notification • DHCS responses to Rate Issues • Subacute

11. Current Issues • 2008/09 Rates • Supplemental Schedules • Labor Supplemental • Rate Projection • Reauthorization of AB 1629 • Strategic Issues • Technical Issues • Audits

12. AB 1629 ReauthorizationStrategic Issues • Current Sunset Date Extension • Minimum 3 to 5 years • Funding • Global Rate CAP (s) • Improve Efficiency in Rate Determination • Cost Reporting • Rate Review (Include Audit Appeal) • Quality Award Rate Enhancement

13. AB 1629 Technical Issues - General • Current cost report doesn’t meet AB 1629 parameters, thus the supplemental reporting requirements. • AB 1629 Law, State Plan Amendment (SPA,) and Medi-Cal Provider bulletins don’t provide clear guidance. • Audit results impact AB 1629 rates therefore, policy guidance has to be clear.

14. AB 1629 ReauthorizationTechnical Issues • Resolved • Contract labor clarification • Proper classification of DON and MDS Nurse • Proper classification of Home Office capital costs • Recognition • Insurance issues • Cost Reporting • Unresolved • Liability insurance, Pharmacy consultant fees, FRVS –small item/equipment capitalization or expense.

15. Audits • Audit Organization • Process Overview • Provider Preparation • Provider Issues – Audit Perspective • Provider Rights • Ongoing communication • Exit conference • Audit appeal

16. Financial Audits Branch Organization Chart

17. Rate Setting Process Overview • A cost report is filed and accepted by OSHPD • OSHPD batches this data and sends it electronically to FAB • FAB performs audit • FAB transfers audit data electronically to Rate Development Branch (RDB) • RDB Calculates Rates • RDB forwards rates to EDS • EDS installs rate for specific rate year

18. Rate Changes as a Result of AppealOverview • Office of Hearings and Appeals issues a Report of Findings • If Report of Findings results in changes to the audit, FAB issues an appeal recomputation • FAB forwards appeal recomputation to RDB • RDB recalculates rate • RDB forwards new rate to EDS • EDS installs new rate and reprocesses claims for dates of service within rate year the audit effected

19. Provider Preparation • We try to accommodate scheduling problems, but we cannot always reschedule an audit because of issuance due dates imposed upon us, thus we will not always be able to agree to a requested rescheduling of the audit.

20. Provider Preparation • Review the entrance letter and gather the records and materials that are identified. The following are examples: • Financial Statements • General Ledger and Working Trial Balance • Cash Receipts and Disbursements Journal with Supporting Documents • Working Papers and Supporting Documentation Used in the Cost Report and/or OSHPD Report Preparation • Cost Report Grouping Schedule • Payroll Records

21. Provider Preparation • Census Report • Billing Records • Medi‑Cal Program Remittance Advice Details (RADs) • Billing Procedures for Share of Cost Charges • Chart of Accounts and, if the facility is not using the account numbers established by the Office of Statewide Health Planning and Development (OSHPD), a cross reference of the facility's account numbers to OSHPD's account numbers and vice versa

22. Provider Preparation • Please use the contact person identified on the entrance letter if there are any questions or problems; it will facilitate the audit if we can respond to questions or concerns before we go to the field • Timely submission of other requested information during the audit. • Identify contact person who will be available during the audit.

23. Provider Preparation • Incorporate prior year audit adjustments into current year’s filed cost report. • Freestanding Subacute facilities should properly identify the ancillary charges for the Subacute and SNF. • Provider being prepared for appeals.

24. Provider Issues • Reimbursement consultants and cost report preparers • You are responsible to ensure that records are made available to the auditors, not the consultants • If requested records are not made available the auditor will make an audit adjustment disallowing the relevant costs.

25. Provider Issues • The LTC Disclosure Report from OSHPD has not yet been revised to reflect the changes resulting from AB 1629 • Make the supplemental worksheets available to the auditors • The number of audit adjustments must go up to accommodate the AB1629 reclassifications • If possible review the audit adjustments prior to the exit conference • Carefully review the audit adjustments during the exit

26. Provider Issues • Cost Shifting From A&G to Skilled Nursing • Medical Directors • Admissions clerks • Software costs and other IT costs • Central Supply personnel • Telephone costs

27. Provider Issues • Quality Assurance Fees • Please segregate them so that they can be easily identified by the audit staff • Quality Assurance Fees are an add-on and therefore not reimbursed based on the cost report information • The objective of the audit is to segregate QAF fees from other reimbursable costs

28. Provider Issues • Liability insurance please keep the following things separately identified • Liability insurance • Trust Bonds • Legal Fees • Finance Charges associated with liability insurance • Losses and Deductibles

29. Provider Issues • Daily Rate Items • Please keep legend drugs separate • Please keep separately billable supplies separate • Only include things that are included in the rate

30. Provider Rights • Ongoing communication • Exit Conference • Title 22, Section 51021 The provider shall be afforded a reasonable opportunity to participate in an exit conference after the conclusion of any field audit or examination of records or reports of a provider…prior to the issuance of the Audit Report. • The provider must make available to the Department any records which were identified as unavailable for review or missing within 15 calendar days of the exit conference to be included in the Audit Report.

31. Provider Rights • Informal Appeal Title 22, Section 51022 • A written request (Statement of Disputed Issues) shall be filed with the Department within 60 calendar days of the receipt of the written notice of the audit or examination findings. • Usually does not involve lawyers, the provider and the DHCS staff interact freely to resolve issues and support positions

32. Provider Rights • Formal Audit AppealTitle 22, Section 51024 • An Institutional provider shall have 30 calendar days following the receipt of the written Report of Findings within which to file a request for formal hearing with the Director. • Usually but not always involves lawyers

33. Questions? And Answers