New York Medicaid Change Could Cut Nursing Home Payments by Millions

The state of New York is proposing a change in the way it calculates the case mix that sets Medicaid reimbursements for skilled nursing facilities — with the goal of realizing $246 million in net savings.

If it is finalized, that could mean a significant cut in Medicaid reimbursements for nursing home providers in the Empire State, where the existing Medicaid shortfall is about $56 per patient per day, according to New York State Health Facilities Association (NYSHFA) president and CEO Stephen Hanse.

“The impact to nursing homes is potentially going to be significant,” he told Skilled Nursing News.


The change would lead to $246 million in gross budgetary savings, inclusive of federal funds for Medicaid, according to estimates from the New York Department of Health (DOH). For New York, the savings would be half that, or $123 million.

New York’s current system: SNF snapshots

New York’s current method of calculating SNF reimbursement for Medicaid patients uses an average case mix index (CMI) for each facility. To calculate that CMI, in January and July of each year, New York asks each SNF to submit a roster of the Medicaid residents in a facility as of the two dates.

SNFs have to submit patient acuity assessments to the federal government within 13 days of a patient’s admission and every 92 days thereafter, and the DOH uses those assessments to make case mix adjustments to reimbursement rates. The DOH uses the Minimum Data Sets (MDS) closest to the snapshot dates, using the Resource Utilization Group III (RUG-III) classification to sort residents into categories with associated CMI rates.


Based on those Medicaid resident snapshots, the state of New York calculates each SNF’s average CMI. The two snapshots are used to adjust the Medicaid rates twice a year to reflect Medicaid resident acuity.

For this year’s July rates, however, the DOH is proposing something different: using all MDS assessments submitted from August 8, 2018 through March 31, 2019.

This was done “to more appropriately account for the type of nursing care required by patients and reimbursement amount received by nursing homes,” DOH spokesperson Jill Montag said in a statement provided to SNN.

The proposed change stemmed from a provision in the final budget for State Fiscal Year (SFY) 2019-2020, which authorized a workgroup to discuss and make recommendations on the methodology used to calculate CMI adjustments for SNF rates.

“It really was, I think, differing interpretations of what was meant by the language that created the Nursing Home Acuity Workgroup,” Hanse told SNN. “I think providers and organized labor understood it as: The group would work in partnership with the state to look at case mix, and to make recommendations on changes to the case mix system, in contemplation of — among other things — [the Patient-Driven Payment Model] and other provisions. … The state obviously has interpreted it differently.”

Before the budget action, the DOH would use only one assessment per patient to measure the acuity of a nursing home’s Medicaid population for each rate update, Montag pointed out.

“However, it is clear that the use of one arbitrary assessment does not accurately represent and/or measure the acuity of a NH’s residents when more data is available,” she said in the statement provided to SNN.

What would change for SNFs

The proposal is not yet final, and providers are working with the state on the implications of the cut that would result from the calculation change, Hanse told SNN. That said, an update from LeadingAge New York dated June 14 suggests that the DOH is leaning toward finalizing rates for July of this year based on the new method.

“While open to discussing CMI calculations going forward, DOH has stated that the July 2019 methodology has been determined and that they do not have the authority to modify it,” the LeadingAge New York update said.

The change would not require SNFs to submit more patient assessments, but rather would see the DOH use all the assessments they submit during that six-month period, Montag said.

“The $246 million in gross savings is due to the fact that assessments vary drastically between the current method of using one assessment versus utilizing all available assessments,” she noted.

Both the NYSFHA and LeadingAge New York told SNN that this is due to several factors that come into play for Medicaid rates, beyond the assessments alone. For example, there are some add-ons to Medicaid rates, including additional reimbursement for bariatric patients or dementia patients, Dan Heim, executive vice president at LeadingAge New York, told SNN.

But the bigger change overall would be to workload; the expectation is that this would result in MDS work taking up more nurse time, he said.

“If this type of system is utilized, where all MDSs are used as the basis for calculating case mix as opposed to having two snapshots … that will mean facilities will have to be much more vigilant about completing an MDS every time an element changes on the assessment that could impact reimbursement,” Heim explained.

For instance, if intravenous antibiotics are administered for an infection that lasted for a 10-day period outside either of the snapshots, a SNF is unlikely under the current system to complete an MDS just to show that they were administered, he added.

But if the change proposed by the state takes effect, facilities will have to make sure they’re capturing any elements that could impact a Medicaid patient’s RUG-III score. That might include things like therapy, IV antibiotics, or oxygen therapy.

For SNFs, it’s easier to capture all the services they’re providing when they’re examining RUGs closely on a twice-a-year basis, Nancy Leveille, the executive director of the Foundation for Quality Care of the NYSHFA, told SNN.

“When you’re in a non-RUG setting time, the data you’re putting into the MDS is still the same, it’s correct,” she said. “It’s just not setting your reimbursement rate, so you’re not setting up all the other data points you would need for an audit … When it’s setting the RUGs reimbursement rate, you’re just looking much closer to ensure you capture those high-level expenses you have, because it’s the only time of year you’re going to get credit.”

Essentially by switching to using all assessments over a six-month period, the DOH may not be seeing all the services for which SNFs could get reimbursed, because of how time-consuming it is to pull all the other documentation into one place.

“It’s a lot more administrative time, and it causes more work for the clinical team, in addition to what they’re doing,” Leveille told SNN. “We’re trying to have [nurses] do not as much paperwork.”

Heim echoed this concern, noting that staffing is already a long-standing thorn in the side of SNFs. Increasing the administrative requirements could add to the challenges, he said.

Another stress related to workforce lies in the fact that several SNFs in the state work with organized labor, and had entered into negotiated bargaining agreements prior to the state budget was enacted, Hanse noted. Those deals did not factor in a multi-million reimbursement cut, and there’s potential for the contracts to be reopened.

What’s next

The Nursing Home Acuity Workgroup has its final meeting on Thursday, June 27, and it has to report recommendations no later than June 30. Both LeadingAge New York and NYSHFA are in talks with the state to learn more about the effect of the change, with Heim noting the need to learn more about how the state arrived at its estimated savings of $123 million for New York — which in turn leads to gross savings of $246 million with the loss of the federal Medicaid match.

Based on the proposed budgetary savings, the average decrease in Medicaid rates could be about 3.5% to 4%, though it would vary from facility to facility, Heim noted.

New York has 609 certified nursing facilities, according to a 2017 estimate from the Kaiser Family Foundation. And Heim estimates that about 75% of residents in nursing homes in the Empire State are covered by Medicaid fee-for-service or Medicaid managed care.

Though the ramifications are still opaque, it seems the majority of SNF providers would be negatively affected, Hanse said.

“Nursing homes cannot withstand a cut of this magnitude,” he said. “It will directly impact the provision of patient care.”