Massachusetts Nursing Facility Direct Care Add-OnDecember 28, 2016
Shannon Crowley, CPA, MSA
The Commonwealth of Massachusetts’ FY17 budget includes $35.5M as a reimbursement add-on for wages, benefits and related employee costs of direct care staff at nursing homes. The new rates were effective October 1, 2016. The direct care add-on rate, including an annualization adjustment for the gap period between June 30, 2016 and October 1, 2016, are detailed on the last page of the rate letters issued by the Executive Office of Health and Human Services (EOHHS) in late September. While most nursing homes welcomed these additional funds, many facilities have questions and concerns regarding how to properly spend the funds without being subject to audit penalties or recoupments.
In an effort to address some of these questions, the EOHHS issued Administrative Bulletin 16-18, 101 CMR 206.00: Standard Payments to Nursing Facilities, which outlines the compliance criteria, penalty and required reporting related to the direct care add-on.
Eligible staff for the direct care add-on include CNAs, LPNs, RNs, dietary aides, housekeeping aides, laundry aides, activities staff and social workers. Some of the staff listed as not eligible are temporary nursing services, contract employees or DONs. At a related training session held by the EOHHS, they recommended that nursing homes review their cost report groupings for which employees are eligible. For example, MMQ and therapists each have their own grouping in the cost report and do not fall into the categories noted above and therefore are not eligible.
Eligible uses of the direct care add-on include increased wages, increased benefits, overtime pay and bonuses.
Each nursing home is required to file an interim compliance form by April 30, 2017 (for the period July 1, 2016 through March 31, 2017) and a final compliance form by September 30, 2017 (for the period July 1, 2016 through June 30, 2017).
The compliance form will allow the EOHHS to determine if the nursing home spent the entire add-on reimbursement in accordance with the requirements. This compliance will be determined by comparing the amount of direct care add-on reimbursement received to the sum of (1) the amount paid out in bonuses to eligible staff from July 1, 2016 through September 15, 2017 and (2) the amount of increased eligible spending in wages, benefits and overtime. This second category will be measured by multiplying the difference in the direct care per hour spending between the rate period (July 1, 2016 through June 30, 2017) and the base period (January 1, 2016 through June 30, 2016) by the number of direct care hours in the rate period.
It was mentioned during the EOHHS training session that the form must be completed in its entirety. Therefore, even if the nursing home is spending the entire add-on revenue as a one-time bonus, the second part of the equation above for the increased eligible spending is still required to be completed by September 30, 2017.
If the nursing home does not spend the full amount of the direct care add-on reimbursement according to the requirements as determined by the final compliance form due September 30, 2017, the facility has 60 days from the day of the notification to issue a one-time bonus to eligible employees for the unspent funds. If the nursing home fails to do this, the unspent funds plus a 25% penalty will be recouped by EOHHS.
What to do now?
There are several steps we recommend that nursing facilities follow related to the direct care add-on reimbursement. First, we recommend that nursing home management use the compliance form to estimate the add-on they will receive. This can be done by taking the add-on per diem plus the annualized adjustment add-on multiplied by the projected Medicaid fee for service days (including pending Medicaid days) from October 1, 2016 through June 30, 2017. Keep in mind that the actual calculation will be based on completed actual days and not estimated.
Second, nursing home management needs to determine how they are going to spend the estimated add-on in accordance with the requirements. This will include determining which employees will receive the funds, and whether the funds will be provided as a wage increase, benefit increase, overtime or bonus. Take into consideration if you are not going to give a bonus this add-on is not guaranteed to continue in FY18 and will need to be voted on each year as part of Massachusetts’ annual budget.
Third, nursing home management needs to familiarize themselves with the reporting requirements to ensure they meet all deadlines. This includes not only filing the required compliance form on time, but also making sure that all payroll records and other documentation are maintained should the nursing home be selected for a desk audit by the EOHHS. Administrative duties will be increased as a result of the reporting requirements so management should act now to ensure capacity within their administrative staff and determine who is going to be preparing and filing the interim and final compliance form.
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