Opinion ID: 503529
Heading Depth: 2
Heading Rank: 1

Heading: Colorado Medicaid Reimbursement Plan

Text: 3 The central issue is whether the State's decision to amend its Medicaid plan so as to eliminate the payment of the incentive allowance resulted in violation of the Medicaid standards mandated by the Boren Amendment. Codified within 42 U.S.C. 1396a(a)(13)(A)(1982), the Boren Amendment of 1980 requires that a state reimburse service providers under rates which are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide care and services in conformity with applicable state and Federal laws, regulations and quality and safety standards. Id. (Effective October 1, 1980). 1 4 Under the Colorado Medicaid plan, the State pays certified nursing homes for their services to qualified Medicaid patients on a daily rate, paid per patient per day (PPD). The Colorado Department of Social Services (DSS) is the State agency which administers the Medicaid program. DSS establishes a PPD rate for individual nursing homes. The rate is prospective and based on historical costs for all certified and participating nursing homes for the preceding reporting period of six months. The reimbursement rate is adjusted every six months. 5 The overall PPD rate for each participant provider is calculated and determined by two components: administration costs and health care costs. Administration costs which are reimbursable or allowable under state law include the expenses incurred with the administration of the nursing home, property, and room and board. Health care costs are not included in the calculation of the incentive allowance at issue. Colo.Rev.Stat. Sec. 26-4-103(4.5). 6 The administrative costs are the basis for the incentive allowance and are subject to a maximum reimbursement formula or ceiling. 2 This ceiling is statutorily defined within Reasonable cost of services as the actual costs of ... administration, property and room and board costs excluding food costs, to the ninetieth percentile of medicaid patients residing in participating facilities. Id. The reasonable cost or ninetieth percentile is based on the reported costs of medicaid patients in all participating nursing homes in the State. These costs are audited and reviewed in the sixmonths period being used to establish a new rate. 7 During the times material to this case, the incentive allowance was calculated on the difference between the ceiling rate of 90% and the nursing home's administration cost rate. This incentive factor was further limited in that it could not exceed twelve percent of the ceiling rate, that is, the ninetieth percentile. Added to this incentive allowance is the inflation allowance, based on the consumer price index, which takes into account the increases in costs that occur between the time the costs are incurred and the time the rate is paid. IV R. TR 103-104. The historical costs for administration and health care are subject to the statutory limits on components which will be recognized as reimbursable elements. 3 8 As to the administration cost, the calculation of that PPD rate can be stated as: 9 actual costs = PPD limited by statute k incentive k inflation (Per Patient rate allowance factor ------------------ ------------ patient days (if costs below (based on paid Daily to ----- ninetieth consumer service provider) percentile) price index) 10 If a nursing home's costs exceed the ninetieth percentile costs, then the DSS calculates the rate based upon the ninetieth percentile or reasonable costs rather than the nursing home's actual allowable costs. Colo.Rev.Stat. Sec. 26-4-103 (4.5), and Sec. 26-4-110(5)(a). If a nursing home's actual allowable costs are below the ninetieth percentile, the department will increase the nursing home's rate by adding an incentive allowance to their actual costs. At the times in question here, the incentive allowance was initially calculated as 50 percent and after 1984 as 25 percent 4 of the difference between the ninetieth percentile and the nursing home's actual costs. IV R. TR 51-104-106.