Infinity Healthcare Management of Indiana

1. Infinity Healthcare Management of Indiana Indiana Medicaid Rate Seminar May 25, 2017 Daniel S. Gaafar, CPA 201 S. Capitol Ave., Suite 700 Indianapolis, IN 46225 DanG@bradleycpa.com (317) 237-5500 Docs 194983

2. Firm Background Bradley Associates was established in 1983 with the primary goal of providing personalized consulting service to health care providers. Since then Bradley Associates has grown into one of the largest accounting firms that is dedicated solely to providing services to the health care industry. During the last twelve months Bradley Associates professionals provided over 53,000 hours of consulting, accounting and tax services to our health care clients. The size of Bradley Associates allows us to provide our health care clients with superior consulting, accounting and tax services. Bradley Associates services far exceed the expectation of our clients while fostering a working environment that promotes individual initiative and teamwork both at work and in the community.

3. Bradley Associates clients include: • Day Service Providers • Group Homes • Home Health Agencies • Hospitals • Integrated Delivery Systems • Medical Practices • Mental Health Centers • Nursing Homes • Physician Hospital Organizations (PHO) • Rehabilitation Facilities • Retirement Centers • Federally Qualified Health Centers • Rural Health Clinics

4. Agenda • Introduction • History of Medicaid Nursing Home Reimbursement • Medicaid Reimbursement Process and How It is Currently Working • Property Repair expense vs. Capitalization • Medicaid Rate Reconsideration and Appeal Process • Medicaid Audit Process • Nursing Home Strategies and Other Issues • Questions and Comments

5. Brief History of Indiana Nursing Home Medicaid Reimbursement • Medicaid reimbursement for nursing home services has gone through many changes over the years. • Originally, the Medicaid reimbursement rate just covered room & board services (no therapy, medical supplies or quality assessment), the rate was set off of a budget and was split between ICF & SNF.

6. Brief History of Indiana Nursing Home Medicaid Reimbursement • In 1994, the Medicaid rate was increased to include therapy services & all medical supplies. • In 1998, the distinction of ICF & SNF was terminated and all facilities are known as “NF” (Nursing Facilities).

7. Brief History of Indiana Nursing Home Medicaid Reimbursement • In 2003, Medicaid began the Quality Assessment Fee (QAF) to leverage more Federal dollars into the Medicaid budget. This change was accompanied by the establishment of major components of the rate (Direct, Therapy, Indirect, Administrative, and Capital)

8. HOW IT IS CURRENTLY WORKING?

9. How it works? • Medicaid Rate Calculation • The Medicaid rate, on the surface, is a simply calculation. By just dividing total allowable expenses by the patient days will result in a Medicaid rate. However, there are various limitations and incentives that affect this rate determination.

10. How it works? • Basic Nursing Home Medicaid Rate Calculation: Expenses Divided by patient days Medicaid Rate

11. Basic Methodology of Medicaid Rate Setting • Direct Care, subjected by CMI, medians and incentives • Therapy • Indirect Care, subjected by medians and incentives • Administrative, statewide median • Capital, subjected by median and incentives • Quality Add-on (previously Report Card Score Add-on) • QAF Add-on • SCU Add-on • 3% statutory reduction on “most” of the rate components

12. Basic Methodology of Medicaid Rate Setting • ISDH Report Card Scores are a critical component of the rate. • Majority part of an “add-on” to the Medicaid rate, outside of all other components • Majority of the basis for various “incentives” within the other components of the Medicaid rate

13. Basic Methodology of Medicaid Rate Setting

14. Basic Methodology of Medicaid Rate Setting • The Case Mix Index (CMI) is very critical for the Direct Care Component of the Medicaid rate. • CMI is determined from the MDS submissions. • A patient CMI is determined from the RUG IV - 48 group assigned. Note that 4 groups (PA1, PA2, PB1 and PB 2) are all decreased by Medicaid to encourage not to accept these low level patients.

15. Basic Methodology of Medicaid Rate Setting • Medicaid rate uses the FACILITY wide CMI for a historical period as a basis to normalize costs. • Each subsequent quarter is updated with the Medicaid CMI score to arrive at new Medicaid rates. • When the Medicaid CMI nears or exceeds the facility wide CMI, a facility receives a higher or more equal reimbursement for nursing expenses.

16. Basic Methodology of Medicaid Rate Setting • Recording of ALL therapy revenue and expense by type of therapy (PT, OT, ST) and by pay source (Medicaid, Medicare, etc.) may result in receiving a higher Medicaid rate.

17. Basic Methodology of Medicaid Rate Setting

18. Basic Methodology of Medicaid Rate Setting

19. Basic Methodology of Medicaid Rate Setting

20. Basic Methodology of Medicaid Rate Setting

21. Basic Methodology of Medicaid Rate Setting

22. Value Based Purchasing • VBP will reimburse for: • ISDH Report Card Scores • Nursing hours per day • Nursing Staff Turnover • Nursing Staff Retention • DON Years of Service • Administrator Years of Service

23. Value Based Purchasing

24. Value Based Purchasing • Starting in 7/1/18, the VBP percentages may again be adjusted to reflect a change of “quality” measures. Current discussion includes: • CMS Quality Measures (QM’s) (9 Long Stay) 60 points • ISDH Report Card Score 25 points • All Facility Retention Rate 10 points • Advanced Care Planning 5 points • Total 100 points

25. Some good news… • As part of the changes in the 7/1/12 rates, the State has agreed to allow the following as reimbursable expenses: • Medical Equipment rental for oxygen concentrators and negative support surfaces (max of $1.50/day) • Medical software lease fees • Cable TV • Pet supplies • Increased capitalization policy to $1,000

26. Property Repairs vs Capitalization

27. Property Repairs vs Capitalization • This is an accounting principle. Just means that is the expense supposed to be all recognized in one year (on the P&L) or is it supposed to be put on the property schedule (balance sheet) and depreciated over the life of the asset?

28. Property Repairs vs Capitalization • Property records include a listing of fixed assets, depreciation schedule and supporting invoices. Current Medicaid regulations require capitalizing an expenditure if: • …”a single asset or collection of like assets acquired in quantity, including permanent betterment or improvement, has at the time of acquisition an estimated useful life of at least three (3) years and a historical cost of at least five hundred dollars ($1000)…” • Key points: • $1000 or more • Permanent better or improvement • 3 year life

29. Property Repairs vs Capitalization • Entire section subject to auditor interpretation. Examples • $900 Table – Expense • $900 Table + $300 chair – Capitalize • $1,500 to fix broken sewer line – Expense • $2,500 to repair drainage in lot – Capitalize • $2,500 for new transmission - ???

30. Medicaid Rate Reconsideration and Appeal Process

31. Medicaid Rate Reconsideration and Appeal Process as the Result of Normal Cost Reporting Procedures • Process starts after the provider receives the Medicaid rate from the Medicaid Ratesetter (Myers & Stauffer). The provider has 45 days after the RELEASE of the rate computed by Myers & Stauffer to request a rate reconsideration. • Common reasons for requesting a rate reconsideration: • Mathematical error (either on the cost profile or capital return factor) • Incorrect application of a Medicaid audit adjustment • Incorrect reclassification/elimination of an expense item • Incorrect reclassification/adjustment of hours worked

32. Medicaid Rate Reconsideration and Appeal Process as the Result of Normal Cost Reporting Procedures (continued) • After the provider requests a rate reconsideration, Myers & Stauffer will send an acknowledgment of your issues. If no acknowledgment is received, re-file your request and ensure that you receive a signed receipt from Myers & Stauffer. • Myers & Stauffer will send a response to the rate reconsideration within 45 days of their receipt. If they agree with your issues, their letter will state that the revised rates will be issued. If they do not agree with your issues, no change will be made to the rates and you have to proceed with the appeal process.

33. Medicaid Rate Reconsideration and Appeal Process as the Result of Normal Cost Reporting Procedures (continued) • If you still disagree with Myers & Stauffer’s determination, you have 15 days from the receipt of the determination letter to file a petition for review (appeal) with the Family and Social Services Administration (FSSA). Note that this appeal must be signed by the provider not the consultant or the attorney. If FSSA agrees with Myers & Stauffer’s determination, then, in order to further proceed, a formal appeal must be filed with FSSA. • Once an appeal is filed with FSSA, an Administrative Law Judge (ALJ) is assigned to the case. The provider will receive notification of the assignment. At that point, the providers’ rights are protected.

34. Medicaid Rate Reconsideration and Appeal Process as the Result of an Audit Adjustment or Reportable Condition • If a provider receives notification of a Medicaid rate re-determination resulting from a Medicaid audit adjustment or reportable condition, the provider must request an “administrative reconsideration” with the Medicaid Audit Contractor (Myers & Stauffer). The same time requirements apply as appealing to Rate Setting issues with Myers & Stauffer. All other processes are the same.

35. Medicaid Audit Process

36. Medicaid Audit Process • Historically, the Medicaid Audit Contractor has audited every provider about once every three years. However, most large group home “chains” are audited every year. The following is a summary of the audit process:

37. Medicaid Audit Process (continued) 1. A Medicaid Scheduler will contact the provider to be audited and set up the audit date. 2. The Medicaid Audit Contractor will send a planning guide, a Consultant Checklist and a Financial Accountant Checklist. You need to ensure that your Consultant and Financial Accountant receive a copy of this checklist.

38. Medicaid Audit Process (continued) 3. When the audit date arrives, two or more representatives from Medicaid Audit Contractor will visit your agency. The amount of time they stay at your agency will depend on the size of your agency and the number of representatives from Medicaid Audit Contractor. During their audit, you need to ensure that they are receiving all the documents requested. (We recommend that you ask the lead auditor each day if they are missing any information. It has been our experience that audit adjustments are more likely to be prevented if the provider initiate communication with the auditors.)

39. Medicaid Audit Process (continued) • If the field audit indicates that the records are inadequate to support the data submitted OR THE ADDITIONAL REQUESTED DOCUMENTATION IS NOT PROVIDED PURSUANT TO THE AUDITOR’S REQUEST, the following will occur: • The Medicaid auditor will give written notice of all deficiencies in the documentation. • The provider will be allowed 30 days from the date of the notice to provide the documentation and correct the deficiencies. • Not later than 30 days from the date of the notice, the provide may seek an additional 30 day extension to respond to the notice.

40. Medicaid Audit Process (continued) • If the deficiencies are not correct within the time limit, the following will occur: • The current Medicaid rate will be cut by 10% on the 1st day of the month following the response due date. • The 10% cut will remain until the 1st day of the month following the receipt of the complete response. • If no response is received, the reduction expires in one year. • No rate increases will be allowed until the 1st day of the month following the receipt of the documentation or the expiration of the reduction. • No reimbursement for the difference between the rate that would have been otherwise been in place and the reduced rate is recoverable.

41. Medicaid Audit Process (continued) • If the event that the submitted documentation is deemed incomplete or inadequate, the following will occur: • Medicaid audit adjustments will be proposed. • Audit contractor will document reason for such adjustments in the finalized report. • The adjustments will be incorporated in the final audited rate.

42. Medicaid Audit Process (continued) 7. In the final stages of the audit, an exit conference is held. The timing of this exit conference is between the provider and the auditor. Some providers would like all audit adjustments and reportable conditions to go through “manager review” prior to the exit conference. During the exit conference, all proposed audit adjustments and reportable conditions will be discussed. You may wish to have your Medicaid Consultant with you during the exit conference. At the conclusion of the exit conference, The Medicaid Audit Contractor will request all parties present to sign an acknowledgment of attendance.

43. Medicaid Audit Process (continued) 8. Some time after the audit fieldwork, the audited provider will receive a “draft” of the audit adjustments and reportable conditions. Your Medicaid Consultant does not receive a copy. Providers have to forward a copy of the “draft” to their own consultant. The Medicaid Audit Contractor allows for a provider response within 30 days of the issuance of the “draft”. After the 30 day period, the audit is finalized, with or without a provider response.

44. Medicaid Audit Process (continued) 9. Copies of the final audit reports are distributed to the provider and FSSA, along with any revised Medicaid Rate letters. 10. If the provider has an unissued Medicaid rate, then Myers & Stauffer will request representation from the provider if conditions present in the audit period are also present in the open period. If these conditions are still present, Myers & Stauffer will reflect the same type of adjustment in the current open period rate.

45. Nursing Home Strategies and Other Issues

46. Strategies • Increase Report Card Scores • Manage Facility and Medicaid CMI’s • Manage turnover & retention • Capital purchases • IGT/UPL • Staffing

47. Questions????