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PA Bulletin, Doc. No. 14-2208



Nursing Facility Assessment Program for Fiscal Year 2014-2015

[44 Pa.B. 6857]
[Saturday, October 25, 2014]

 This notice announces the amount of the assessment that the Department of Public Welfare (Department) is implementing for Fiscal Year (FY) 2014-2015, provides an explanation of the assessment methodology that the Department is using in FY 2014-2015 and identifies the estimated aggregate impact on nursing facilities which will be subject to the assessment.


 Article VIII-A of the Public Welfare Code (code) (62 P. S. §§ 801-A—815-A) authorizes the Department to impose an annual monetary assessment on nursing facilities and county nursing facilities in this Commonwealth each fiscal year through FY 2015-2016. Under Article VIII-A of the code, the Department may impose the assessment only to the extent that the assessment revenues qualify as the State share of Medical Assistance (MA) Program expenditures eligible for Federal financial participation (FFP). See 62 P. S. § 803-A. To ensure receipt of FFP, Article VIII-A of the code requires the Department to seek a waiver from the Federal Centers for Medicare and Medicaid Services (CMS) if necessary to implement the Assessment Program. See 62 P. S. § 812-A.

 For each fiscal year that the Assessment Program is implemented, the code authorizes the Secretary of the Department (Secretary) to determine the aggregate amount of the assessment and the annual assessment rate in consultation with the Secretary of the Budget. See 62 P. S. § 804-A. The act specifies that annual assessment rates must be sufficient to generate at least $50 million in additional revenue, but not more than the maximum aggregate assessment amount that qualifies for Federal matching funds. See 62 P. S. § 804-A.

 The Secretary must publish a notice in the Pennsylvania Bulletin before imposing an annual assessment for a fiscal year. The notice must specify the amount of the assessment being proposed, explain the proposed assessment methodology, identify the estimated assessment amount and aggregate impact on nursing facilities subject to the assessment and provide interested persons a 30-day period to comment. See 62 P. S. § 805-A.

 After consideration of any comments received during the 30-day comment period, the Secretary must publish a second notice announcing the rate of assessment for the fiscal year. See 62 P. S. § 805-A. The annual aggregate assessment amount and assessment rate for the fiscal year must be approved by the Governor. See 62 P. S. § 804-A.

 The Secretary published a notice at 44 Pa.B. 3646 (June 14, 2014) announcing the proposed assessment rates, the aggregate amount and the impact for FY 2014-2015. The following is a summary of the comments that the Department received in response to the notice and the Department's responses to those comments.

Public Comment on the Proposed Assessment Program

 One commentator, which is a law firm representing Blough Healthcare, LLC (Blough), a licensed nursing facility, submitted comments in response to the Department's notice published at 44 Pa.B. 3646.


 The commentator stated that the Department did not provide sufficient advance notice regarding the change in the number of beds needed to qualify for the lower assessment rate. The commentator stated the Department of Health requires a 60-day advance notice for any decrease in bed compliment, and given that requirement, the earliest a facility can have a decrease in bed compliment is September 1, 2014.

 The commentator also stated this change will have a negative annual impact of about $190,000 on the facility that his firm represents, resulting in a significant hardship and negative impact on the facility's real estate value. The commentator also stated that the change will have an adverse impact on 37 of the 694 nursing facilities subject to the assessment (including Blough). In addition, the commentator states there is no rational basis for the decrease to 44 beds and that this change unfairly targets small operators.

 The commentator requests the Department defer the effective date of the change to 44 beds until the beginning of the second assessment quarter (October 1, 2014) to afford the current 50-bed providers an opportunity to continue to qualify for the lower rate or otherwise afford facilities that implement the bed reduction by September 1, 2014 retroactive qualification for the entire fiscal year. Also, the commentator requests the Department seek sufficient funding to keep the 50-bed rate in place.


 As previously stated, the Department may impose the assessment only to the extent that the assessment revenues qualify as the State share of MA Program expenditures eligible for FFP. Since the Commonwealth's Nursing Facility Assessment Program is neither broad based nor uniform, the Department is required to seek a waiver of the broad based and uniformity requirements under 42 CFR 433.68 (relating to permissible health care-related taxes) from the CMS to ensure receipt of FFP. When submitting the waiver request, the Department must demonstrate, among other things, that the assessment is generally redistributive using the statistical test (B1/B2) described in 42 CFR 433.68(e)(2). Generally, to meet the test a certain proportion of high MA utilization facilities must be exempt or assessed at a lower rate. Due to the number of former county nursing facilities that are now assessed at a higher rate because of a change of ownership from county ownership to a nonpublic nursing facility provider throughout State Fiscal Year (SFY) 2013-2014, the assessment methodology used in SFY 2013-2014 failed this statistical test for SFY 2014-2015. Without an immediate change in the assessment methodology, the Commonwealth would lose an estimated $1 billion (assessment revenue and FFP) in SFY 2014-2015 used to support MA payments to nursing facilities.

 Numerous options were discussed with the nursing facility trade associations. The proposal to maintain essentially the same assessment methodology that was used in SFY 2013-2014, but for an adjustment to the qualifications for the assessment rates was the result of three important considerations: (1) pass the delicately balanced B1/B2 statistical test previously referenced; (2) minimize the negative financial impact on nursing facilities, while generating a consistent level of revenue to support nursing home rates and supplemental payments; and (3) obtain CMS approval well in advance of the scheduled decrease in FFP.

 Deferring the change for one assessment quarter as suggested by the commentator would result in a failed B1/B2 statistical test and, therefore, a loss of approximately $1 billion used to support payments for medically necessary nursing facility services provided to MA recipients. In addition, of the 37 nursing facilities listed by the commentator, 8 of the nursing facilities will not be adversely impacted by this change since they will continue to be assessed at the lower rate as grandfathered Continuing Care Retirement Communities (CCRC) and another facility requested and was approved for a bed increase. Further, of the remaining 28 facilities on the commentator's list, 24 of them participate in the MA Program. As a result, the MA portion of their assessment cost will be reimbursed and they will also receive a supplemental payment which reflects their MA recipient population. Consequently, their combined allowable cost portion and supplemental payment may exceed their assessment cost if they provide medically necessary nursing facility services to a significant number of MA recipients.

Assessment Methodology and Rates for FY 2014-2015

 The following nursing facilities will continue to be exempt from the Assessment Program in FY 2014-2015:

 (1) State owned and operated nursing facilities.

 (2) Veteran's Administration nursing facilities.

 (3) Nursing facilities that have not been licensed and operated by the current or previous owner for the full calendar quarter prior to the calendar quarter in which an assessment is collected.

 (4) Nursing facilities that provide nursing facility services free of charge to all residents.

 The Department will assess nonexempt nursing facilities at two rates. One rate will apply to three categories of nursing facilities: county nursing facilities; nursing facilities that have 44 or fewer licensed beds; and certain CCRC nursing facilities. See 40 Pa.B. 7297 (December 18, 2010). The other rate will apply to all other nonexempt facilities, including nursing facilities that began participation in a CCRC on or after July 1, 2010. Using the applicable rate, the Department will calculate each nonexempt facility's quarterly assessment amount by multiplying its assessment rate by the facility's non-Medicare resident days during the calendar quarter that immediately preceded the assessment quarter. This rate structure is essentially the same structure that was used in FY 2013-2014, but for an adjustment to the qualifications for the assessment rates.

 Although the Department will maintain essentially the same basic rate structure for FY 2014-2015, the Department is decreasing the assessment rates for nonexempt nursing facilities from the rates in FY 2013-2014. For FY 2014-2015, the assessment rates for nonexempt nursing facilities will be as follows:

 (1) For county nursing facilities, for nursing facilities that have 44 or fewer licensed beds and for qualified CCRC nursing facilities, the assessment rate will be $8.01 per non-Medicare resident day.

 (2) For all other nonexempt nursing facilities, the assessment rate will be $29.46 per non-Medicare resident day.

 Assessment payments are due the last day of the Assessment quarter or 30 days after publication of this second notice, whichever is later.

 The Assessment Program due dates, along with supplemental payment dates, will be available on the Department's web site at

Aggregate Assessment Amounts and Fiscal Impact

 The Department estimates that the annual aggregate assessment fees for nonexempt nursing facilities will total $477.065 million. The Department will use the State revenue derived from the assessment fees and any associated Federal matching funds to support payments to qualified MA nursing facility providers in accordance with applicable laws and regulations.

Public Comment

 Interested persons are invited to submit written comments regarding the contents of this notice to the Department of Public Welfare, Office of Long-Term Living, Bureau of Policy and Regulatory Management, Attention: Marilyn Yocum, P. O. Box 8025, Harrisburg, PA 17105-8025. Comments received within 30 days will be reviewed and considered for any subsequent revision of the notice.

 Persons with a disability who require an auxiliary aid or service may submit comments using the Pennsylvania AT&T Relay Service at (800) 654-5984 (TDD users) or (800) 654-5988 (voice users).


Fiscal Note: 14-NOT-912. No fiscal impact; (8) recommends adoption.

[Pa.B. Doc. No. 14-2208. Filed for public inspection October 24, 2014, 9:00 a.m.]

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