Opinion ID: 598999
Heading Depth: 2
Heading Rank: 3

Heading: IDPA'S Findings

Text: 27 IDPA admits it does not identify specific nursing homes that are 'efficiently and economically' operated. Illinois Health Care Ass'n, 776 F.Supp. at 419. Nor has the state explicitly defined the terms efficient and economic. Instead, the state argues that the identification and determination of economically and efficiently operated facilities can be implicit in the rate setting methodology. Brief of Defendant-Appellant at 27. 28 In support of this argument, Defendant points to Folden v. Washington State Department of Social & Health Services, 744 F.Supp. 1507 (W.D.Wash.1990). In this pre-Wilder case, a district court upheld Washington's Medicaid reimbursement rate even though the state had not explicitly identified efficiently and economically operated nursing homes. According to the court, In Washington's system, rate-setting and the identification of efficiently and economically operated facilities are all part of the same process.... Washington's Medicaid system does what is required by the Amisub opinion, even though the system does it in one step rather than in three separate distinct steps. Id. at 1533. 29 We take the Folden court at its word and will not speculate whether in light of Wilder that court would reach the same judgment. We will, however, examine IDPA's claim that as with its Washington counterpart, [a] finding identifying and determining efficiently and economically operated facilities is implicit in IDPA's rate-setting methodology. Brief of Defendant-Appellant at 27. This necessarily entails a brief foray into the thorny thickets of Medicaid methodology. 30 As the district court explained in Illinois Health Care, 776 F.Supp. at 415-16, the IDPA reimbursement plan employs a prospective, cost-based, case-mix methodology. In essence, this means the reimbursement rates are based on projections of what the rate is expected to be during a specific period. 31 Three components make up this reimbursement rate--the capital rate, support rate, and nursing rate. Each component is calculated separately for each facility and then combined into a per diem rate which is paid to that facility for each day of nursing home care it provides to Medicaid beneficiaries. 32 The capital rate purports to reimburse providers for ownership and rental costs for buildings and equipment and accounts for a minor portion of the overall reimbursement rate. The support rate is designed to cover costs such as food, laundry, housekeeping, maintenance, insurance, utilities, and office expenses. In calculating this rate, IDPA divides nursing facilities into seven groups and then identifies the 75th percentile for each group. All facilities whose support costs exceed the 75th percentile for their group nonetheless receive only the 75th percentile rate. Why this percentile rate was chosen over some other is not apparent. 33 The third component, the nursing rate, covers direct care costs, including staff salaries, therapy fees, and nursing supply costs. This rate accounts for almost half the total reimbursement rate and most of the controversy in this case. According to IDPA, the nursing rate is comprised of these six elements: variable time reimbursement; training time reimbursement; fixed time reimbursement; fringe benefit reimbursement; reimbursement for allowable costs of supplies, consultants, medical and nursing directors; and reimbursement for therapies. Brief of Defendant-Appellant at 7-8. 34 Of these six elements, the key to determining the nursing rate is the variable time reimbursement. The other five elements are calculated in reference to the variable time calculation. Basically, variable time recognizes that each nursing home resident has individualized needs and abilities; thus the amount of time and skill it takes a nursing home to meet those needs will vary from resident to resident. A nursing home, therefore, is compensated for the time it takes to care for the patients in its facility. This means that two nursing homes with the same number of Medicaid beneficiaries may receive different reimbursements. 35 The variable time calculation starts with an annual survey the IDPA takes of every Medicaid nursing home resident. This survey, or assessment, is designed to classify each resident's medical and personal needs. Depending on a resident's needs in such categories as eating, bathing/grooming, medication monitoring, and injections, a resident is assigned a number from zero to four. 36 For each number in each IDPA-designated category, IDPA assigns a certain amount of time. An example: For a resident who is classified as being totally dependent when it comes to eating, the nursing home is given a total of thirty-nine minutes per day to both prepare and feed that patient--or thirteen minutes per meal (which gives a new meaning to the term fast food). 37 After the assessments are completed on each Medicaid patient in a nursing home, the total minutes for all categories for all patients in that facility are added up. IDPA then looks at nursing homes' cost reports and computes how much it costs per minute to provide nursing care in that region; this is known as the average regional wage per minute. The accuracy of the methodology for computing this rate is also disputed. Regardless, having determined this rate, the next step is to calculate the average per diem cost of a Medicaid patient. To do so, IDPA (1) multiplies the total number of minutes by the average regional wage per minute, and then (2) divides this figure by the number of Medicaid patients in that facility. 38 Now that the IDPA has calculated what it costs to reimburse a nursing home for each day of caring for an average Medicaid patient, the IDPA takes that per diem cost and using various formulas, tacks on the other five elements to arrive at the total nursing rate. In turn, this nursing rate is added to the support rate and the capital rate to provide the total Medicaid reimbursement rate. 39 Defendant, as mentioned above, claims this methodology implicitly identifies the economic and efficient nursing homes, and thus complies with the Amendment's procedural requirements. The record convinces us otherwise. Looking at the nursing rate, and specifically at the variable time component, we ask where did IDPA get the thirteen-minute meal? Defendant claims the variable time figures were developed in the early 1980s in reference to time and motion studies performed in other states. Yet before the district court and again before our court, Defendant has been unable to produce a copy of those studies. If the studies ever existed, they apparently do not now. 40 IDPA, moreover, over the years has changed the times, added new categories, and redetermined the level of care patients need. These changes were made without apparent reference to the original time and motion studies and IDPA has not conducted new studies in their stead. This is not to say a state must conduct new studies every year; all the Boren Amendment requires is annual findings. See Multicare Medical Center v. Washington, 768 F.Supp. 1349, 1392 (W.D.Wash.1991). Those findings can be based on past studies so long as doing so will result in the accuracy that Wilder demands. See Wilder, 496 U.S. at 514, 110 S.Ct. at 2520. In this case though, there are no extant studies--old or new, on which to base findings. 41 IDPA, as the district court pointed out, does not know if the variable time methodology accurately reflects the amount of time required to efficiently and economically provide for a Medicaid patient. The agency, in addition, has made no finding that the list of needs assessed encompasses the complete range of tasks for which nursing time might be required. 42 The fixed time reimbursement component of the nursing rate is also suspect. This component encompasses time spent that does not vary with resident condition and includes such things as staff meetings, supervision, and checking physicians' orders. IDPA's rate for this component is calculated in reference to the variable time component and together they may not surpass a certain amount. Thus, when variable time in 1983 rose higher than the ceiling, IDPA announced that fixed time reimbursement would be negative for that period. The state Medicaid statute was subsequently amended to prevent fixed time from being a negative number. Yet except for one year, IDPA has set the fixed time reimbursement at zero for both skilled and intermediate care facilities. Fixed time, therefore, is recognized by IDPA as a necessary component of total nursing time but it is not reimbursed. 43 Similar criticism can be leveled at IDPA's support rate. As mentioned earlier, IDPA reimburses nursing homes at the 75th percentile for the support rate. Yet Defendant has made no findings, and presented no evidence, that IDPA found any nexus between its chosen percentiles and the costs of operating an efficient and economical facility. Illinois Health Care, 776 F.Supp. at 419. In other words, IDPA does not even know whether the method by which it calculates costs reflects actual costs, and by definition it cannot know whether averages or percentiles based on those costs are related in any way to the costs of running an economical and efficient facility. Id. at 420. 44 Without admitting its prior findings were erroneous, IDPA points to two recent studies it commissioned on the profitability of Illinois nursing homes. We agree with IDPA that the timing of the studies is irrelevant; a finding can be based on studies conducted before or during litigation. Moreover, this appeal concerns a declaratory judgment as to the validity of Illinois's plan today. A current study, therefore, could be invaluable. We disagree with IDPA, though, as to the validity of findings based on these studies. 45 Profitability alone is not a gauge to the adequacy of a state's Medicaid reimbursement rate, nor an excuse for noncompliance with the Amendment's procedural requirements. A nursing home, for example, may be profitable because it has a large number of patients who pay their own way. Furthermore, it is not inconceivable that a nursing home may be both profitable and yet not provide care and services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. 42 U.S.C. § 1396a(a)(13)(A). A finding, therefore, that a reimbursement rate is adequate and reasonable merely because a number of nursing homes are profitable does not constitute a finding in compliance with the Amendment. 46 We can envision a situation as in Folden where a rate setting methodology does indeed implicitly determine economical and efficient nursing homes. We cannot envision, however, that Illinois's system falls into this category. Given IDPA's failure to determine what it would consider to be an efficient and economical nursing facility, run in compliance with state and federal regulations, we believe Defendant could not make findings that establish a nexus between the costs of operating such facilities and its reimbursement rates. The state must have reasonable freedom to choose its own methodologies and in particular to define efficient as a relative rather than an absolute concept. The state needs to revisit this difficult area to redetermine for itself the most reasonable and practical means to meet the requirements.V. CONCLUSION 47 For the foregoing reasons, the judgment of the district court is affirmed. 48 AFFIRMED.