Indiana Medicaid Rate Update – VBP, 1/1/14 Rate Letters and the QAF

Medicaid Rates to be Reprocessed with VBP Methodology Starting This Week
As reported in prior newsletters, CMS has approved the Indiana State Plan Amendment to implement the Value Based Purchasing (VBP) methodology effective 7/1/13 (click here for last month’s report).  IHCA has been notified by Indiana Medicaid that the 7/1/13 rates will be reprocessed beginning this week in order to implement the rate changes under the VBP methodology.  It will take 4 weeks to reprocess the 7/1/13 rates with about 125 facilities per week being processed.  Once the 7/1/13 rates are completed, the 10/1/13 rates will be reprocessed next and that will also take 4 weeks.

1/1/14 Rate Letters and the QAF
The State has not yet issued new rate letters for 1/1/14 and will not do so until CMS approves the State Plan Amendment that was submitted to increase the Nursing Facility Medicaid rate by 2%.  Recall that Nursing Facility rates were cut by 5% in 2011, and last year after a focused advocacy effort led by the IHCA the Pence Administration started the process to restore 2% of the original 5% cut.
The timing of approval by CMS of the State Plan Amendment is not known at this time as Indiana Medicaid is preparing a response to several CMS requests for additional information.  One of those requests focuses on the Indiana Nursing Facility Quality Assessment Fee (QAF).

Indiana Nursing Facility Quality Assessment Fee (QAF)
Under Federal regulations, provider taxes used to generate Federal Medicaid matching funds have to be structured in a very specific way and certain deviations from that process are permitted under a “waiver”.  Indiana’s QAF was approved in 2005 under a waiver granted by CMS, and CMS has recently asked Indiana Medicaid for updated data concerning the “B1/B2” compliance test that is required under a waiver for a tax that is not uniformly applied to all nursing facilities, like Indiana’s QAF.  The B1/B2 test is a ratio of two separate linear regression analyses where a uniform tax structure is compared with the proposed non-uniform structure.  If the B1/B2 ratio is above 1.0, then the tax is approved.  Indiana is currently examining the QAF’s B1/B2 ratio and changes, such as the amount of QAF paid, may be necessary to meet the B1/B2 test.  IHCA is monitoring this issue closely and will report to membership when more information is available.