S-1411.1
SUBSTITUTE SENATE BILL 5526
State of Washington 68th Legislature 2023 Regular Session
By Senate Health & Long Term Care (originally sponsored by Senators
Van De Wege, Muzzall, Cleveland, Hunt, Keiser, Liias, Pedersen,
Salomon, Shewmake, Valdez, and Warnick)
READ FIRST TIME 02/15/23.
1 AN ACT Relating to nursing facility rates; amending RCW 74.46.501
2 and 74.46.561; creating a new section; and declaring an emergency.
3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
4 Sec. 1. RCW 74.46.501 and 2021 c 334 s 992 are each amended to
5 read as follows:
6 (1) From individual case mix weights for the applicable quarter,
7 the department shall determine two average case mix indexes for each
8 medicaid nursing facility, one for all residents in the facility,
9 known as the facility average case mix index, and one for medicaid
10 residents, known as the medicaid average case mix index.
11 (2)(a) In calculating a facility's two average case mix indexes
12 for each quarter, the department shall include all residents or
13 medicaid residents, as applicable, who were physically in the
14 facility during the quarter in question based on the resident
15 assessment instrument completed by the facility and the requirements
16 and limitations for the instrument's completion and transmission
17 (January 1st through March 31st, April 1st through June 30th, July
18 1st through September 30th, or October 1st through December 31st).
19 (b) The facility average case mix index shall exclude all default
20 cases as defined in this chapter. However, the medicaid average case
21 mix index shall include all default cases.
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 1 (3) Both the facility average and the medicaid average case mix
2 indexes shall be determined by multiplying the case mix weight of
3 each resident, or each medicaid resident, as applicable, by the
4 number of days, as defined in this section and as applicable, the
5 resident was at each particular case mix classification or group, and
6 then averaging.
7 (4) In determining the number of days a resident is classified
8 into a particular case mix group, the department shall determine a
9 start date for calculating case mix grouping periods as specified by
10 rule.
11 (5) The cut-off date for the department to use resident
12 assessment data, for the purposes of calculating both the facility
13 average and the medicaid average case mix indexes, and for
14 establishing and updating a facility's direct care component rate,
15 shall be one month and one day after the end of the quarter for which
16 the resident assessment data applies.
17 (6)(a) Although the facility average and the medicaid average
18 case mix indexes shall both be calculated quarterly, the cost-
19 rebasing period facility average case mix index will be used
20 throughout the applicable cost-rebasing period in combination with
21 cost report data as specified by RCW 74.46.561, to establish a
22 facility's allowable cost per case mix unit. To allow for the
23 transition to minimum data set 3.0 and implementation of resource
24 utilization group IV for July 1, 2015, through June 30, 2016, the
25 department shall calculate rates using the medicaid average case mix
26 scores effective for January 1, 2015, rates adjusted under RCW
27 74.46.485(1)(a), and the scores shall be increased each six months
28 during the transition period by one-half of one percent. The July 1,
29 2016, direct care cost per case mix unit shall be calculated by
30 utilizing 2014 direct care costs, patient days, and 2014 facility
31 average case mix indexes based on the minimum data set 3.0 resource
32 utilization group IV grouper 57. Otherwise, a facility's medicaid
33 average case mix index shall be used to update a nursing facility's
34 direct care component rate semiannually.
35 (b) Except during the 2021-2023 fiscal biennium, the facility
36 average case mix index used to establish each nursing facility's
37 direct care component rate shall be based on an average of calendar
38 quarters of the facility's average case mix indexes from the four
39 calendar quarters occurring during the cost report period used to
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 1 rebase the direct care component rate allocations as specified in RCW
2 74.46.561.
3 (c) Except during the 2021-2023 fiscal biennium, the medicaid
4 average case mix index used to update or recalibrate a nursing
5 facility's direct care component rate semiannually shall be from the
6 calendar six-month period commencing nine months prior to the
7 effective date of the semiannual rate. For example, July 1, 2010,
8 through December 31, 2010, direct care component rates shall utilize
9 case mix averages from the October 1, 2009, through March 31, 2010,
10 calendar quarters, and so forth.
11 (d) The department shall establish a methodology to use the case
12 mix to set the direct care component (([rate])) rate in the 2021-2023
13 fiscal biennium.
14 (e) The department may adjust the calculation of case mix as
15 necessary in the event the federal department of health and human
16 services discontinues or changes the provision of the minimum data
17 set 3.0 for the purposes of calculating resource utilization groups
18 as referenced in this subsection.
19 Sec. 2. RCW 74.46.561 and 2022 c 297 s 966 are each amended to
20 read as follows:
21 (1) The legislature adopts a new system for establishing nursing
22 home payment rates beginning July 1, 2016. Any payments to nursing
23 homes for services provided after June 30, 2016, must be based on the
24 new system. The new system must be designed in such a manner as to
25 decrease administrative complexity associated with the payment
26 methodology, reward nursing homes providing care for high acuity
27 residents, incentivize quality care for residents of nursing homes,
28 and establish minimum staffing standards for direct care.
29 (2) The new system must be based primarily on industry-wide
30 costs, and have three main components: Direct care, indirect care,
31 and capital.
32 (3) The direct care component must include the direct care and
33 therapy care components of the previous system, along with food,
34 laundry, and dietary services. Direct care must be paid at a fixed
35 rate, based on ((one hundred)) 111 percent or greater of statewide
36 case mix neutral median costs, but for fiscal year 2023 shall be
37 capped so that a nursing home provider's direct care rate does not
38 exceed 165 percent of its base year's direct care allowable costs
39 except if the provider is below the minimum staffing standard
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 1 established in RCW 74.42.360(2). The legislature intends to remove
2 the cap on direct care rates by June 30, 2027. Direct care must be
3 performance-adjusted for acuity every six months, using case mix
4 principles. Direct care must be regionally adjusted using countywide
5 wage index information available through the United States department
6 of labor's bureau of labor statistics. There is no minimum occupancy
7 for direct care. The direct care component rate allocations
8 calculated in accordance with this section must be adjusted to the
9 extent necessary to comply with RCW 74.46.421.
10 (4) The indirect care component must include the elements of
11 administrative expenses, maintenance costs, and housekeeping services
12 from the previous system. A minimum occupancy assumption ((of ninety
13 percent)) equal to 105 percent of the statewide average occupancy of
14 the calendar year prior to the beginning of the fiscal year must be
15 applied to indirect care, except during fiscal year 2023 when the
16 minimum occupancy assumption must be 75 percent. Only facilities used
17 to calculate the median will be used to calculate the statewide
18 average occupancy. Indirect care must be paid at a fixed rate, based
19 on ((ninety)) 92 percent or greater of statewide median costs. The
20 indirect care component rate allocations calculated in accordance
21 with this section must be adjusted to the extent necessary to comply
22 with RCW 74.46.421.
23 (5) The capital component must use a fair market rental system to
24 set a price per bed. The capital component must be adjusted for the
25 age of the facility, and must use a minimum occupancy assumption of
26 ninety percent.
27 (a) Beginning July 1, 2016, the fair rental rate allocation for
28 each facility must be determined by multiplying the allowable nursing
29 home square footage in (c) of this subsection by the RSMeans rental
30 rate in (d) of this subsection and by the number of licensed beds
31 yielding the gross unadjusted building value. An equipment allowance
32 of ten percent must be added to the unadjusted building value. The
33 sum of the unadjusted building value and equipment allowance must
34 then be reduced by the average age of the facility as determined by
35 (e) of this subsection using a depreciation rate of one and one-half
36 percent. The depreciated building and equipment plus land valued at
37 ten percent of the gross unadjusted building value before
38 depreciation must then be multiplied by the rental rate at seven and
39 one-half percent to yield an allowable fair rental value for the
40 land, building, and equipment.
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 1 (b) The fair rental value determined in (a) of this subsection
2 must be divided by the greater of the actual total facility census
3 from the prior full calendar year or imputed census based on the
4 number of licensed beds at ninety percent occupancy.
5 (c) For the rate year beginning July 1, 2016, all facilities must
6 be reimbursed using four hundred square feet. For the rate year
7 beginning July 1, 2017, allowable nursing facility square footage
8 must be determined using the total nursing facility square footage as
9 reported on the medicaid cost reports submitted to the department in
10 compliance with this chapter. The maximum allowable square feet per
11 bed may not exceed four hundred fifty.
12 (d) Each facility must be paid at eighty-three percent or greater
13 of the median nursing facility RSMeans construction index value per
14 square foot. The department may use updated RSMeans construction
15 index information when more recent square footage data becomes
16 available. The statewide value per square foot must be indexed based
17 on facility zip code by multiplying the statewide value per square
18 foot times the appropriate zip code based index. For the purpose of
19 implementing this section, the value per square foot effective July
20 1, 2016, must be set so that the weighted average fair rental value
21 rate is not less than ten dollars and eighty cents per patient day.
22 The capital component rate allocations calculated in accordance with
23 this section must be adjusted to the extent necessary to comply with
24 RCW 74.46.421.
25 (e) The average age is the actual facility age reduced for
26 significant renovations. Significant renovations are defined as those
27 renovations that exceed two thousand dollars per bed in a calendar
28 year as reported on the annual cost report submitted in accordance
29 with this chapter. For the rate beginning July 1, 2016, the
30 department shall use renovation data back to 1994 as submitted on
31 facility cost reports. Beginning July 1, 2016, facility ages must be
32 reduced in future years if the value of the renovation completed in
33 any year exceeds two thousand dollars times the number of licensed
34 beds. The cost of the renovation must be divided by the accumulated
35 depreciation per bed in the year of the renovation to determine the
36 equivalent number of new replacement beds. The new age for the
37 facility is a weighted average with the replacement bed equivalents
38 reflecting an age of zero and the existing licensed beds, minus the
39 new bed equivalents, reflecting their age in the year of the
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 1 renovation. At no time may the depreciated age be less than zero or
2 greater than forty-four years.
3 (f) A nursing facility's capital component rate allocation must
4 be rebased annually, effective July 1, 2016, in accordance with this
5 section and this chapter.
6 (g) For the purposes of this subsection (5), "RSMeans" means
7 building construction costs data as published by Gordian.
8 (6) A quality incentive must be offered as a rate enhancement
9 beginning July 1, 2016.
10 (a) An enhancement no larger than five percent and no less than
11 one percent of the statewide average daily rate must be paid to
12 facilities that meet or exceed the standard established for the
13 quality incentive. All providers must have the opportunity to earn
14 the full quality incentive payment.
15 (b) The quality incentive component must be determined by
16 calculating an overall facility quality score composed of four to six
17 quality measures. For fiscal year 2017 there shall be four quality
18 measures, and for fiscal year 2018 there shall be six quality
19 measures. Initially, the quality incentive component must be based on
20 minimum data set quality measures for the percentage of long-stay
21 residents who self-report moderate to severe pain, the percentage of
22 high-risk long-stay residents with pressure ulcers, the percentage of
23 long-stay residents experiencing one or more falls with major injury,
24 and the percentage of long-stay residents with a urinary tract
25 infection. Quality measures must be reviewed on an annual basis by a
26 stakeholder work group established by the department. Upon review,
27 quality measures may be added or changed. The department may risk
28 adjust individual quality measures as it deems appropriate.
29 (c) The facility quality score must be point based, using at a
30 minimum the facility's most recent available three-quarter average
31 centers for medicare and medicaid services quality data. Point
32 thresholds for each quality measure must be established using the
33 corresponding statistical values for the quality measure point
34 determinants of eighty quality measure points, sixty quality measure
35 points, forty quality measure points, and twenty quality measure
36 points, identified in the most recent available five-star quality
37 rating system technical user's guide published by the centers for
38 medicare and medicaid services.
39 (d) Facilities meeting or exceeding the highest performance
40 threshold (top level) for a quality measure receive twenty-five
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 1 points. Facilities meeting the second highest performance threshold
2 receive twenty points. Facilities meeting the third level of
3 performance threshold receive fifteen points. Facilities in the
4 bottom performance threshold level receive no points. Points from all
5 quality measures must then be summed into a single aggregate quality
6 score for each facility.
7 (e) Facilities receiving an aggregate quality score of eighty
8 percent of the overall available total score or higher must be placed
9 in the highest tier (tier V), facilities receiving an aggregate score
10 of between seventy and seventy-nine percent of the overall available
11 total score must be placed in the second highest tier (tier IV),
12 facilities receiving an aggregate score of between sixty and sixty-
13 nine percent of the overall available total score must be placed in
14 the third highest tier (tier III), facilities receiving an aggregate
15 score of between fifty and fifty-nine percent of the overall
16 available total score must be placed in the fourth highest tier (tier
17 II), and facilities receiving less than fifty percent of the overall
18 available total score must be placed in the lowest tier (tier I).
19 (f) The tier system must be used to determine the amount of each
20 facility's per patient day quality incentive component. The per
21 patient day quality incentive component for tier IV is seventy-five
22 percent of the per patient day quality incentive component for tier
23 V, the per patient day quality incentive component for tier III is
24 fifty percent of the per patient day quality incentive component for
25 tier V, and the per patient day quality incentive component for tier
26 II is twenty-five percent of the per patient day quality incentive
27 component for tier V. Facilities in tier I receive no quality
28 incentive component.
29 (g) Tier system payments must be set in a manner that ensures
30 that the entire biennial appropriation for the quality incentive
31 program is allocated.
32 (h) Facilities with insufficient three-quarter average centers
33 for medicare and medicaid services quality data must be assigned to
34 the tier corresponding to their five-star quality rating. Facilities
35 with a five-star quality rating must be assigned to the highest tier
36 (tier V) and facilities with a one-star quality rating must be
37 assigned to the lowest tier (tier I). The use of a facility's five-
38 star quality rating shall only occur in the case of insufficient
39 centers for medicare and medicaid services minimum data set
40 information.
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 1 (i) The quality incentive rates must be adjusted semiannually on
2 July 1 and January 1 of each year using, at a