Florida’s New Medicaid Math Creates Nursing Home Winners, Losers

Florida’s new Medicaid prospective payment system for nursing homes, which took effect in October of last year, has created winners and losers among properties across the state, according to a new analysis by the USA Today Network — Florida.

The PPS is designed to incentivize and reward skilled nursing facilities that make improvements in care quality, Florida Health Care Association (FHCA) director of communications Kristen Knapp said in an e-mail to Skilled Nursing News.

But the USA Today analysis found that several of the best-performing nursing homes in the state could lose millions in funding when the PPS changes are fully implemented, while low-rated ones could receive more. The analysis identified nursing home care quality over time by averaging the quarterly ratings of nursing homes between 2013 and 2017 from the Centers for Medicare & Medicaid Services (CMS).

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Approximately one in four homes averaging four to five stars during the time period are projected to lose more than $15 million combined, according to USA Today’s analysis. Fifty-three nursing homes that averaged two stars or fewer in that timeframe could receive an additional $25 million.

The analysis did not go into details about why a nursing home might receive more or less Medicaid funding under the PPS, though it noted that the new prospective model decreases disparities by pushing payments toward the median.

However, not all top-rated nursing homes have lost money, while not all poorly rated facilities saw gains, the analysis noted; in addition, a “hold harmless” provision for the first three years ensures that no building will see any actual Medicaid funding cuts for the first three years of the program, FHCA director of reimbursement Tom Parker said.

Behind the math

The new rates have five major components, Parker explained.

There’s a direct care and indirect care component, both of which require SNF providers to spend at a certain level to receive the full-freight base rate. There’s an operating component, a flat rate for all providers within a peer group. A quality component currently accounts for 8.5% of funds: Centers that earn that quality payment will gain an additional $21.09 per Medicaid day for providing quality care, as defined by such factors as staffing rate, CMS star rating and other metrics, Knapp noted.

However, in the 2018 legislative session, Florida provided a one-time Medicaid funding increase of $138 million — an amount that was not renewed in the 2019 session. Instead, the Legislature’s 2019-2020 fiscal year budget includes a total Medicaid rate increase of $23.5 million, or $1.47 per patient day on average, Knapp said.

Because of that decrease in funds, the quality component will shift to account for 6.5% of funds, rather than 8.5%, Parker noted.

There is also a component for property expenses, which includes taxes, insurance, and a fair rental value that serves as a proxy appraisal — based on the square footage per bed, the adjusted age of the building based upon renovations, and upgrades that have been completed.

What causes changes

Florida’s nursing home trade groups had a bumpy road to reach the PPS overhaul; the law was signed in 2017, and it had drawn wildly varying reactions from LeadingAge Florida, which did not support the payment structure, and the FHCA, which largely applauded the system and worked to make adjustments to the initial plan that included time for providers to adapt to the new model.

Yearly changes to the quality and property components will adjust provider rates, and the direct, indirect, and operating component are scheduled to be rebased every four years, Parker noted.

“As we shift from a cost-based model to a pricing model some providers experienced rate gains and others rate losses,” he told SNN.

And Knapp emphasized that the implementation of the PPS in October 2018 has led to some advances by Florida nursing centers, which improved in seven of eight CMS quality measures, and reductions of 13% and 33% in the number of residents using using antipsychotic medications and experiencing pressure ulcers, respectively.

“It encourages centers to continue achieving quality goals aimed at improving staffing and other measures focused on better health outcomes for seniors,” she said. “Payments are calculated annually according to a center’s quality measure score from the previous year. We believe this is good for Florida seniors and the centers that care for them, as payments are tied to quality improvements.”