Indiana Medicaid Proposes RUGs IV for Nursing Facility Medicaid Rates

Indiana Medicaid and the Division of Aging recently re-opened discussions with the IHCA about transitioning from RUGs III to RUGs IV for purposes of calculating nursing facility Medicaid rates.  Continued use of RUGs III is becoming more complicated for Indiana Medicaid due to waning technical support from CMS on the RUGs III crosswalk and due to the substantial increase in nursing facilities that participate in the UPL program with a county hospital.  Indiana Medicaid’s rate setting contractor, Meyers & Stauffer, indicated that a transition to RUGs IV would spend approximately $22M more on nursing facility rates (based on Nov. 2012 modeling; combined state and federal dollars).  This is due to better recognition of costs due to clinical complexity in RUGs IV.

Meyers & Stauffer is now updating its modeling to determine overall cost to the State for the transition, and is specifically looking at which RUG IV grouper to use.  RUGs IV has three groupers that could be used, one that has 48 groups, one with 57 groups, and another with 66 groups.  Medicare uses the 66 group version, and Meyers & Stauffer is looking at that group and the 48 group version.  They are examining whether the increased number of groups from 48 to 66, which basically comes down to different rehabilitation categories, has a smaller financial impact on either the State or providers.

In order to make the transition, the State will be announcing training for MDS nurses/coordinators that will likely be held in early to mid-April 2014.  Several changes to the Supportive Documentation Guidelines will be made, as well as changes to the Time-Weighted Guidelines.   The State will also provide shadow-rates to each nursing facility throughout 2014 on a quarterly basis to show that provider what their rate would look like under RUGs IV.  This comparison will be critical for providers as they plan their 2015 budgets and operations, especially since the 7/1/15 Medicaid rate uses data from the current cost report period to set that future rate.

Lastly, the State will need to develop a plan on how to pay for the increased expenditure that is likely to result from RUGs IV.  If the expenditure is an additional $22M in state and federal funds, that equates to roughly $7M in state funds that must be found.  There has been some discussion about eliminating the Special Care Unit add-on to help pay for the transition, but IHCA and other trade associations have pressed hard against that idea.  Instead, IHCA has proposed that the State pay for this transition out of the money it keeps from the nursing home Quality Assessment Fee that isn’t spent on nursing facility rates.

IHCA will continue to be engaged in this important issue and keep members updated.