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YELLOW SHEET Office of the State Auditor of Missouri |
March 28, 2001
Report No. 2001-27
Missouri nursing home Medicaid rates need to be rebased more frequently using more current and actual nursing home cost report data.
This audit
reviewed the financial status of Missouri�s nursing home industry in relation
to the state�s Medicaid Reimbursement Program. Our audit determined the funding increase and projected effect
on the industry if Medicaid reimbursement rates are adjusted (rebased),
evaluated varying reimbursement methods, reviewed possible funding sources, and studied
how the industry fared nationally. The
following highlights our results:
Medicaid
rates based on old cost data
Missouri
Medicaid rates are adjusted (rebased) using actual nursing home cost data less
often then other states. Missouri
uses trend factors to annually adjust nursing home Medicaid rates, but
these rates are based on nearly decade-old cost report data for many homes. In 1998, only one
other state�s nursing home Medicaid
rates were based on cost data older than the 1992 cost data used in Missouri. In
addition, a national study reported 33 other states used cost report data that
was no more than two years old to set 1998 rates. Rate adjustments based on more
current cost report data would allow Medicaid rates to more accurately reflect
actual operating costs for each nursing home. (See
page 10)
Nursing
home industry is overbuilt.
Missouri�s average occupancy rate for its nursing homes (80 percent) is
one of the lowest in the nation and continues to decline. Nursing
homes with low occupancy rates receive lower reimbursements and
cannot fully recover administrative and capital costs under the current rate
structure. In addition, the large number of unoccupied beds indicates
more nursing homes are open than what is needed, which increase the costs for
the Medicaid program. (See page 12)
Rebase
cost lowest if Medicaid rates are capped at costs.
The
additional funding needed to rebase Medicaid rates using the most current
cost data range from $57 million to $132 million depending on the specific rate
computation used. This audit
reviewed various methods including those using current state regulations and
methods if state regulations changed. If
the state rebases using current regulations, our analysis showed it would cost
as much as $132 million. But it
could cost less than half that amount ($57 million) if the state capped
reimbursement rates at allowable costs.
(See page 15)
Missouri may receive up to $436 million
in additional funding in the next two calendar years through federal approval to
participate in a Medicaid legislation �loophole.� This money, known as the Intergovernmental Transfer Program (IGT),
can be used by the state for any purpose. The current plan for the money calls for �one-time
efficiency grants� to the nursing homes of up to $196 million over the next
two fiscal years. These grants
would replace the annual trend factor increases in each nursing home�s rate. This
funding would be in addition to $60 million in IGT monies already distributed to
nursing homes in fiscal year 2001. These
grants provide funding equally to financially-distressed and profitable nursing
homes. (See page 18)
A �hold
harmless� provision would cost state more.
After
rebasing, the new Medicaid rate for some homes may be less than the home�s
current rate. The Department of
Social Services in the department�s initial budget request for fiscal year
2002 asked the General Assembly to
institute a �hold harmless� provision. Such
a provision would allow facilities whose rate might decrease as a result of
rebasing to retain the higher current rate.
This provision, which is currently not allowed under state regulation,
would cost the state at least an additional $2 million. (See page 16)
