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2016 Indiana HFMA Spring Institute
Supplemental Payments: Hot Topic for Hospitals
and Nursing Facilities
Leah Mannweiler, Esq.
Meghan Linvill McNab, CPA, Esq.
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SUPPLEMENTAL PAYMENTS
HISTORY
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Supplemental Payments and the UPL
• Upper Payment Limit (“UPL”) for inpatient services provided by Hospitals, NFs, and ICFs/IID. 42 CFR 447.272
• UPL is a reasonable estimate of the amount Medicare will pay for the same or similar service.
• “Supplemental Payments” are generally paid as the difference between the UPL and the amount Medicaid has already paid for the services. In addition to regular Medicaid reimbursement
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Supplemental Payments
• Consist of two (2) portions:
1. Non-Federal Share:
• Generally paid through an intergovernmental transfer
of funds (IGT) by the NSGO entity or via provider tax
• States can fund up to 60% of non-federal share of
Medicaid payments with non-state governmental
monies
2. Federal Share: paid by federal government
• Indiana FY2016 FMAP: 66.6%
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UPL
• 3 UPL categories
State-owned governmental facilities
Private facilities
Non-state governmental facilities
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UPL - NSG
• To be considered a NSGO NF and Eligible for NSGO NF UPL:
1. NF must be able to make an IGT payment to the State (either directly or indirectly through a governmental owner or operator or other arrangement);
Public entity
2. The governance structure of the NF must demonstrate governmental involvement; and
3. A non-state governmental entity must retain ultimate liability for the NF it operates.
Change of Ownership
NSGO entity is Operator and Licensee
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INDIANA’S
NSGO NF
SUPPLEMENTAL PAYMENT
PROGRAM
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Indiana NSGO NF Supplemental Payment
Program
• Began in 2001
• Revisions to HHC Statute and County Hospital
Governing Board Statute
• Authorized under Indiana Medicaid State Plan
Originally Proportionate Share Pool
Revised in 2012 to Facility-Specific Basis
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Indiana NSGO NF Supplemental Payment
Program
• Meet Federal requirements for NSGO NF, by:
IGT: NSGO entity, such as county hospital, becomes
owner/operator of NF and makes IGT
Governance: County hospital governs the NF, as
owner/operator
Ultimate Liability: County Hospital becomes licensee
and operator of NF through a CHOW
• License and provider agreements reflect County
Hospital, with limited exceptions
• Management Checklist to Myers & Stauffer
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Indiana NSGO NF Supplemental Payment
Program
• Agreements that support County Hospital
Owner/Operator Status and Ultimate Liability:
Lease Agreement
Intangible Property License Agreement
Management Agreement
Other
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Amount of Supplemental Payment
• Participating NSGO NF receives a supplemental
payment in an amount equal to the difference
between the Medicaid rate and approximate
Medicare equivalent rate.
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Growth of Indiana’s Program
• As of January 2016, 413 of the 475 Indiana Medicaid Certified Nursing Facilities are participating.
• Participating Indiana County Hospitals, include:
Adams
Columbus
Daviess
Dearborn
Decatur
Floyd
Good Samaritan
Greene
Hancock
Hendricks
Henry
HHC
Jackson
Jasper
Johnson
Logansport
Major
Perry
Pulaski
Putnam
Riverview
Rush
Witham
Woodlawn
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Growth of Indiana’s Program
• County Hospitals acquiring NFs from other
Hospitals already in the Program
• M&S SFY 2015 NSGNF Payment Amounts
Total UPL Distribution, Net of Provider IGT for all
participating facilities: $278,253,248 (based on 428
NFs)
• PER MD DAY: $69.85
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Recent Changes to Indiana’s Program – Funds
Flow Requirements
• 6/2/15: OMPP notified NSGO NFs that M&S would be conducting additional compliance review procedures to ensure compliance with Supplemental Payment agreements.
• 9/3/15: Memo from OMPP setting forth Supplemental Payment Use Requirements.
• 10/16/15: OMPP amended 9/3/15 memo, based on comments/questions.
• 1/7/15: M&S responded to IHCA’s four questions regarding the Requirements.
• 1/12/15: M&S issued a FAQ responding to 17 questions from various sources.
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Recent Changes to Indiana’s Program – Funds
Flow Requirements
• Key Requirements: Supplemental Payments deposited into operating account(s)
accessible to NSGO NF for allowable operating expenses until end of FY in which payment received.
“NF” must:• Have access to 100% of the supplemental payment funds (even the
portion related to the IGT);
• Be the owner of each operating account;
• Have signatory authority of the account; and
• Be ultimately responsible for the maintenance of operating accounts.
Non-operating expenses: non-patient care related capital expenditures, dividend distributions, loans, bonus payments, transfers to mgmt companies or other parties other than mgmt fees for operation of NF, or other non-operating purposes.
• Supplemental Payment Funds can’t be used for intangible royalty fees
• Issue of “allowable under the rate setting regulations”
NO IGT Recycling during FY.
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Recent Changes to Indiana’s Program – Funds
Flow Requirements
• Source of Requirements: At the Program’s inception, OMPP and CMS agreed that the supplemental
payments would not be made to a general (non-NF) operating account of the hospital, and that the payments would be used to pay the operating expenses of that NF. Also agreed that supplemental payments would not be transferred to general account until year end,
Current IGT/Supplemental Payment Agreement requires payment to be deposited into operating accounts of each NSGO’s NF, and retained in those accounts for purpose of paying the NF’s operating expenses, until the close of the NSGO NF’s current fiscal year.
OMPP/M&S expanded upon these underlying requirements in the additional requirements
• What Happens if a County Hospital/NSGO NF doesn’t comply? Terminated from NSGO NF Program?
Recoup prior supplemental payments paid during non-compliant period?
• Key Takeaway Talk with your accountant and lawyer to make sure your agreements and
practices comply with the requirements.
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Recent Changes to Indiana’s Program – 5-8 Year
Plan
• In 2015, FSSA approached trade associations with goal of rebalancing LTSS spending to achieve 55% institutional/45% HCBS balance by FFY 2023.
• Trade Associations are working with FSSA to set forth a proposal to help FSSA accomplish this goal. Proposal is likely to include various moving pieces, such as: Postponing moving LTSS into managed care
Adding a quality component to the NSGO NF Supplemental Payment Program
Nursing Facility Closure Incentive
Bed moratorium
Etc.
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OTHER STATES
NSGO NF
SUPPLEMENTAL PAYMENT
PROGRAM
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Other States
• Texas (moving into managed care)
• Utah
• Georgia
• Louisiana (pending)
• Virginia (moving into managed care)
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FUTURE OF SUPPLEMENTAL
PAYMENT PROGRAMS
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Movement to Managed Care
• Many States are moving LTSS into managed
care.
• Supplemental payment programs can continue
within managed care programs.
• More hoops to jump through.
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Proposed Medicaid Managed Care Rule
• 80 Fed. Reg. 31097 (June 1, 2015)
• Seeks to revise current language regarding
payments made outside the capitated rate and
directed payments, by adding ways that a state
may set parameters on how expenditures under
the contract are made by the MCO, such as
through value-based purchasing, performance
improvement initiatives, and minimum fee
schedules or uniform fee increases.
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Proposed Medicaid Managed Care Rule
• Adds requirements for States that elect to Direct Payments: 1. Based on the utilization and delivery of services;
2. Directs expenditures equally, and using the same terms of performance, for all public and private providers providing the service under the contract;
3. Expects to advance at least one of the goals and objectives in the comprehensive quality strategy proposed in §438.340;
4. Evaluation plan that measures the degree to which the arrangement advances at least one of the goals and objectives in the comprehensive quality strategy;
5. Does not condition provider participation on IGTs;
6. Not renewed automatically;
7. Make participation in the initiative available, using the same terms of performance, to all public and private providers providing services under the contract related to the reform or improvement initiative; and
8. Common set of performance measures across all of the payers and providers.
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Proposed Medicaid Managed Care Rule
• If finalized, as proposed, would allow Supplemental
Payments to continue under Medicaid Managed
Care, but would require additional assurances and
elements not currently incorporated into many
states’ programs.
• Substantial number of comments received from
stakeholders and interested parties.
• CMS has to review and consider all the comments
received, which has delayed finalization.
• Expected to be finalized by Summer 2016.
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Future Supplemental Payment Rule
• In 2015, OMB published notification that CMS would be releasing a separate proposed rule regarding supplemental payments:1. Require all supplemental payments be distributed
proportional to the volume or cost of services delivered or be tied to meeting performance benchmarks;
2. Place a time limit on all supplemental payments; and
3. Require States to report additional details regarding supplemental payments when submitting claims of State Medicaid expenditures for Federal financial participation to provide a consistent and comprehensive data source by which the benefit or the value added to the Medicaid program can be assessed.
• Rule delayed a year, but expected in Summer 2016.
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THANK YOU!
Leah Mannweiler, Esq.
Partner
One Indiana Square
Indianapolis, Indiana
317-238-6222
Meghan Linvill McNab, CPA, Esq.
Associate
One Indiana Square
Indianapolis, Indiana
317-808-5863
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