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PA Bulletin, Doc. No. 05-2341



Nursing Facility Assessment Program for Fiscal Year 2005-2006

[35 Pa.B. 6845]

   This notice announces the amount of the assessment that the Department of Public Welfare (Department) is implementing for Fiscal Year (FY) 2005-2006, provides an explanation of the assessment methodology that the Department is using in FY 2005-2006 and identifies the estimated aggregate impact on nursing facilities which will be subject to the assessment.


   The act of September 30, 2003 (P. L. 169, No. 25) (Act 25)1, known as the Nursing Facility Assessment Law, directs the Department to ''implement a monetary assessment'' on nonpublic licensed nursing facilities beginning July 1, 2003, and ending June 30, 2007 (Assessment Program). See sections 802-A and 815-A of Act 25 (62 P. S. §§ 802-A and 815-A). Act 25 further specifies that the Department may implement an Assessment Program ''only to the extent that the revenues generated therefrom will qualify as the State share of [MA] program expenditures eligible for Federal financial participation.'' See section 803-A of Act 25 (62 P. S. § 803-A). To guarantee that the assessment amounts qualify for matching Federal funds, Act 25 directs the Department to seek such waivers from the Federal Centers for Medicare and Medicaid Services (CMS) as may be necessary to implement the Assessment Program in conformity with Federal law. See section 812-A of Act 25 (62 P. S. § 812-A). The Department submitted a waiver request to the CMS and the CMS subsequently granted the waiver and approved implementation of the Assessment Program.

   For each fiscal year that the Assessment Program is implemented, the Secretary of the Department (Secretary), in consultation with the Secretary of the Budget, must determine the aggregate amount of the assessment and the annual assessment rate. See section 804-A of Act 25 (62 P. S. § 804-A). The aggregate amount and rate of assessment must be approved by the Governor's Office. The annual assessment rates must be sufficient to generate at least $50 million in additional revenue, subject to the maximum aggregate assessment amount that qualifies for Federal matching funds. See section 804-A of Act 25.

   Before implementing the Assessment Program in a fiscal year, the Secretary must publish a notice in the Pennsylvania Bulletin that specifies the amount of the assessment being proposed, provides an explanation of the assessment methodology and assessment amount and identifies the aggregate impact on nursing facilities subject to the assessment. See section 805-A of Act 25 (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. Id.

   On June 25, 2005, the Secretary published a notice in the Pennsylvania Bulletin at 35 Pa.B. 3626 (June 25, 2005) announcing the proposed assessment rates, the aggregate amount and the impact for FY 2005-2006. 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

   Eight commentators submitted comments in response to the Department's notice published at 35 Pa.B. 3626. Six of the eight commentators were associated in some manner with one nursing facility. The Department also received comments from one of the major trade associations that represent nursing facility constituents.

   Comment. Several commentators raised general objections to the Assessment Program, asserting that nursing facilities inevitably will pass the cost of the assessment to private-pay nursing facility residents or their families. They suggested that the increased resident costs will result in a more rapid depletion of the resident's resources, which, in turn, will result in the residents qualifying earlier for MA.

   Response. The Department recognizes that the Assessment Program may ultimately result in some nursing facility residents qualifying for MA nursing facility services earlier if nursing facilities pass along the assessment costs to them through increased private pay rates. The Department does not expect, however, that the increased MA Program costs that may result from the earlier MA conversions will remotely approach the additional revenues and associated benefits to MA recipients that will be achieved through the Assessment Program.

   Comment. Several commentators asserted that the combination of the Assessment Program, proposed reductions in Medicaid spending in the Federal budget, and a proposed cap on the rate of increase in MA payments will result in financial hardship for nursing facilities and may cause those facilities to declare bankruptcy or to close. In general, those commentators stated that the Department's reimbursement rates are not adequate to cover the cost of the services and items needed to provide quality care to nursing facility residents.

   Response. The obligation of a provider to provide appropriate, high-quality care is a condition of participation in the MA Program; the obligation exists independent of the Assessment Program or of any particular payment rate or feature of the rate setting methodology. The Department has mechanisms in place for ensuring compliance with these requirements, including inspections, investigations of complaints and monitoring. In summary, the Department concludes that the Assessment Program alone or in combination with any changes to payment rates will not impair the quality of care provided by nursing facilities.

   Furthermore, by suggesting that nursing facilities might be forced to close, the commentators implied that the Assessment Program would create an access problem, whereby the MA Program would have insufficient nursing facility beds available for MA recipients in need of nursing facility services. The Department disagrees that the Assessment Program is likely to cause any problems related to access to care.

   Currently, there are approximately 630 nursing facilities, with approximately 84,600 licensed beds, participating in the MA Program. Based on the most recent occupancy information available to the Department, the overall occupancy rate for these facilities was approximately 90%. Thus, at any given time the MA Program had approximately 8,460 unoccupied and available beds. Because the MA Program possesses substantial unused capacity, the withdrawal of any particular nursing facility from the program would not present an access problem.

   From a programmatic standpoint, individual nursing facilities occasionally terminate their participation in the MA Program. Some remain in operation; others close. In the past, such terminations, whether voluntary or involuntary, have not served to create an access problem, even in areas of the Commonwealth where there were perceived shortages of nursing facility beds.

   Comment. One commentator expressed concern about certain statements in the proposed assessment notice relating to nursing facilities that participate in a Continuing Care Retirement Community (CCRC). In the proposed assessment notice, the Department clarified that a nursing facility that is owned or controlled by a CCRC that is planning to construct residential living units in the future, or is constructing residential living units, but that has no residential living units occupied or available for immediate occupancy, would not qualify for the CCRC assessment rate. The commentator stated that when a CCRC is certified by the Pennsylvania Department of Insurance and currently provides a continuum of care via contract to its residents, the status of current or planned expansions of residential living units is immaterial to the determination that a nursing facility qualifies for the CCRC rate.

   Response. The planned expansion of a CCRC's existing number of residential living units does not preclude its nursing facility from qualifying for the CCRC rate. As long as a CCRC-certified entity has any residential living units available for immediate occupancy as part of its continuum of care when the applicable nursing facility seeks the CCRC rate, then the nursing facility may qualify for the CCRC rate.

Assessment Methodology and Rates for FY 2005-2006

   The Secretary published a notice at 35 Pa.B. 3626 announcing the proposed nursing facility assessment methodology and rates for FY 2005-2006.

   The following nursing facilities will be exempt from the Assessment Program in FY 2005-2006:

   1.  Government owned and operated nursing facilities.

   2.  Veterans 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 for which an assessment is collected.

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

   As in the first 2 years of the Assessment Program, nonexempt nursing facilities will continue to be assessed on a quarterly basis during FY 2005-2006 based on the number of licensed beds in the facility, the nursing facility's CCRC status and the number of non-Medicare resident days during each calendar quarter immediately preceding the assessment quarter. During FY 2005-2006 the assessment rates for nonexempt facilities will be as follows:

   1.  The assessment rate for nonexempt nursing facilities that participate within a licensed CCRC or that have 50 licensed beds or less will be increased by $.04 to $1.54 per non-Medicare resident day.

   2.  The assessment rate for all other nonexempt nursing facilities will be increased by $.04 to $15.95 per non-Medicare resident day.

   For FY 2005-2006, the Department will consider a nursing facility to qualify for the CCRC assessment rate if the nursing facility satisfies the following criteria:

   1.  The nursing facility is owned or controlled by an entity that is certified as a CCRC by the Insurance Department (for purposes of this guideline, ''control'' means the power to direct or cause to direct the management and policies of the nursing facility, whether through equitable ownership of voting securities or otherwise).

   2.  The CCRC provides a continuum of care during the assessment period that includes residential living units that are either occupied or available for immediate occupancy.

   3.  The nursing facility is: (a) located on the same campus as the CCRC's residential living units; or (b) identified in the CCRC's Disclosure Statement and Resident Agreement under the Continuing-Care Provider Registration and Disclosure Act (40 P. S. §§ 3201--3225) and located no more than 30 miles from the campus on which the CCRC's residential living units are located.

   Under these criteria, a nursing facility that is owned or controlled by a CCRC which is planning to construct residential living units in the future, or is constructing residential units, but which has no residential units occupied or available for immediate occupancy, would not qualify for the CCRC assessment rate. Additionally, the residential living units must be occupied or available for immediate occupancy for the entire assessment period for the nursing facility to qualify for the CCRC rate for that assessment period.

   If a nonexempt nursing facility either satisfies the previously listed criteria after the commencement of the Assessment Program or does not satisfy the criteria but believes that it otherwise qualifies for the CCRC rate, then the nursing facility may submit a written request to the Department that it be assessed at the CCRC rate. The written request should include supporting documentation demonstrating that the nursing facility participates within a licensed CCRC. The Department will not unilaterally classify nursing facilities for the CCRC rate without a written request.

   All requests relating to CCRC designation should be submitted to the Department of Public Welfare, Bureau of Long Term Care Programs, P. O. Box 2675, Harrisburg, PA 17105, Attention: NH Assessment Unit.

   Assessment payments are due the last day of the Assessment quarter or the 30th day from the date of publication of this final notice, whichever is later.

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

Aggregate Assessment Amount and Fiscal Impact

   As a result of the implementation of the Assessment Program, the Department estimates that the annual aggregate assessment fees for nonexempt nursing facilities will total $279,552,809 for FY 2005-2006. All of the revenue derived from the assessment fees and associated Federal matching funds will be used to make payments to qualified MA nursing facility providers in accordance with applicable law and regulations.

Public Comment

   Interested persons are invited to submit written comments regarding this notice to the Department at the following address: Gail Weidman, Chief, Program Analysis and Review Section, Department of Public Welfare, Division of Long Term Care Client Services, P. O. Box 2675, Harrisburg, PA 17105. 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 AT&T Relay Service at (800) 654-5984 (TDD users) or (800) 654-5988 (voice users).


   Fiscal Note: 14-NOT-454 No fiscal impact; (8) recommends adoption. Implementation of these changes will result in a savings to the General Fund of approximately $279.553 million in FY 2005-2006.

1 Act 25 is codified in Article VIII-A of the Public Welfare Code, 62 P. S. §§ 801-A--815-A.

[Pa.B. Doc. No. 05-2341. Filed for public inspection December 16, 2005, 9:00 a.m.]

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