TITLE 405 OFFICE OF THE SECRETARY OF FAMILY AND SOCIAL SERVICES

Amends 405 IAC 1-12-1 to clarify policy language regarding payment for services rendered by intermediate care facilities for individuals with intellectual disabilities (ICFs/IID) and community residential facilities for the developmentally disabled (CRFs/DD). Amends 405 IAC 1-12-2 to add a definition for the department head position. Amends 405 IAC 1-12-3 to clarify provider responsibility to substantiate that their costs are related to patient care. Amends 405 IAC 1-12-4 to clarify the penalty for untimely cost report filings. Amends 405 IAC 1-12-5 to add a penalty for untimely filing of the Checklist of Management Representations. Amends 405 IAC 1-12-7 to clarify the criteria for excluding a provider from the average allowable cost of the median patient day computations. Amends 405 IAC 1-12-20 to update language. Amends 405 IAC 1-12-21 to revise the reimbursement rate for comprehensive rehabilitative management needs facilities (CRMNF) pursuant with state law. Amends 405 IAC 1-14.6-1 to clarify policy language regarding payment for services rendered to members by nursing facilities. Amends 405 IAC 1-14.6-2 to update definitions to reflect the change from the resource utilization group, version III (RUG-III), to RUG-IV, update the minimum data set resident assessment (MDS), version 2.0 to MDS version 3.0, and to clarify and add several definitions. Amends 405 IAC 1-14.6-3 to clarify the information required on the Medicaid cost report form, to require financial records or supporting documentation to be made available to the office, add penalty for failure to submit requested information, and to clarify compliance review scheduling procedures, and clarify provider responsibility to substantiate that their costs are related to patient care. Amends 405 IAC 1-14.6-4 to clarify the information required by providers with their annual cost report submission, and to make other changes as a result of the change to RUG-IV. Amends 405 IAC 1-14.6-6 to update and clarify language regarding rate reviews. Amends 405 IAC 1-14.6-7 to add the case mix index (CMI) table for RUG-IV and to make other changes as a result of the change to RUG-IV. Amends 405 IAC 1-14.6-9 to clarify the calendar quarters utilized in determining a facility's CMI. Amends 405 IAC 1-14.6-10 to clarify certain costs as not allowable. Amends 405 IAC 1-14.6-11 to clarify the reporting of costs incurred by parties defined by the rule to be related to the Medicaid certified nursing facilities. Amends 405 IAC 1-14.6-12 to clarify what costs are included in the fair rental value allowance. Amends 405 IAC 1-14.6-21 to clarify that changes to the allocation of reported costs due to prior period audit findings are authorized by OMPP. Amends 405 IAC 1-14.6-22 to update and clarify language regarding MDS review processes. Amends 405 IAC 1-14.6-24 to clarify how the quality assessment fee (QAF) is determined. Amends 405 IAC 1-15-1 to clarify and update MDS electronic transmission requirements for nursing facilities. Amends 405 IAC 1-15-2 to modify the Medicaid rule for the electronic transmission of the MDS to reflect the change from RUG-III to RUG-IV, and MDS 2.0 to MDS 3.0. Amends 405 IAC 1-15-4 to clarify scope of review by OMPP of nursing facility MDS resident assessment data, and to reflect the change from RUG-III to RUG-IV. Amends 405 IAC 1-15-5 to clarify scope of review of MDS resident assessments. Repeals 405 IAC 1-14.5, 405 IAC 1-15-3, and 405 IAC 1-15-6. Effective 30 days after filing with the Publisher.

SECTION 1. 405 IAC 1-12-1 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 6-8.1-10-1; IC 12-13-7-3; IC 12-15-13-4

Sec. 1. (a) This rule sets forth procedures for payment for services rendered to Medicaid members by duly certified nonstate-operated ICFs/IID, nonstate-operated CRMNFs, and nonstate-operated CRFs/DD. Reimbursement for facilities operated by the state is governed by 405 IAC 1-17. All payments referred to within this rule for the provider groups and levels of care are contingent upon the following:

(b) The procedures described in this rule set forth methods of reimbursement that promote quality of care, efficiency, economy, and consistency. These procedures recognize level and quality of care, establish effective accountability over Medicaid expenditures, provide for a regular review mechanism for rate changes, and compensate providers for reasonable, allowable costs. The system of payment outlined in this rule is a prospective system. Cost limitations are contained in this rule which establish parameters regarding the allowability of ordinary patient or member related costs and define reasonable allowable costs.

(c) Retroactive repayment will be required by providers when an audit verifies overpayment due to discounting, intentional misrepresentation, billing or payment errors, or misstatement of historical financial or historical statistical data which caused a higher rate than would have been allowed had the data been true and accurate. Upon discovery that a provider has received overpayment of a Medicaid claim from the office, the provider must complete the appropriate Medicaid billing adjustment form as prescribed by the office and reimburse the office for the amount of the overpayment, or the office shall make a retroactive payment adjustment, as appropriate.

(d) The office may implement Medicaid rates and recover overpayments from previous rate reimbursements, either through deductions of future payments or otherwise, without awaiting the outcome of the administrative appeal process, in accordance with IC 12-15-13-4(e).

(e) Providers must pay interest on all overpayments, consistent with IC 12-15-13-4. The interest charge shall not exceed the percentage set out in IC 6-8.1-10-1(c). The interest shall accrue from the date of the overpayment to the provider and shall apply to the net outstanding overpayment during the periods in which such overpayment exists.

SECTION 2. 405 IAC 1-12-2 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 2. (a) The definitions in this section apply throughout this rule.

(b) "All-inclusive rate" means a per diem rate that, at a minimum, reimburses for all nursing or resident:

(c) "Allowable cost" determination" means a computation performed by the office to determine the per patient day cost based on a review of an annual financial report and supporting information by applying this rule.

(d) "Allowable per patient or per resident day cost" means a ratio between total allowable costs and patient or resident days.

(e) "Annualized" means restating an amount to an annual value. This computation is performed by multiplying an amount applicable to a period of less or greater than three hundred sixty-five (365) days, by a ratio determined by dividing the number of days in the reporting period by three hundred sixty-five (365) days, except in leap years, in which case the divisor shall be three hundred sixty-six (366) days.

(f) "Annual or historical financial report" refers to a presentation of financial data, including appropriate supplemental data and accompanying notes derived from accounting records and intended to communicate the provider's economic resources or obligations at a point in time, or changes therein for a period of time in compliance with the reporting requirements of this rule, which shall constitute a comprehensive basis of accounting.

(g) "Average historical cost of property of the median bed" means the allowable resident-related property per bed for facilities that are not acquired through an operating lease arrangement, when ranked in numerical order based on the allowable resident-related historical property cost per bed that shall be updated each calendar quarter. Property shall be considered allowable if it satisfies the conditions of section 16(a) of this rule.

(h) "Average inflated allowable cost of the median patient day" means the inflated allowable per patient day cost of the median patient day from all providers when ranked in numerical order based on average inflated allowable cost. The average inflated allowable cost shall be maintained by the office and revised four (4) times per year effective April 1, July 1, October 1, and January 1 and shall be computed on a statewide basis for like levels of care, with the exceptions noted in this subsection, as follows:

(i) "Change of provider status" means a bona fide sale, lease, or termination of an existing lease that for reimbursement purposes is recognized as creating a new provider status that permits the establishment of an initial interim rate. Except as provided under section 17(f) of this rule, the term includes only those transactions negotiated at arm's length between unrelated parties.

(j) "Cost center" means a cost category delineated by cost reporting forms prescribed by the office.

(k) "DDRS" means the Indiana division of disability and rehabilitative services.

(l) "Debt" means the lesser of the original loan balance at the time of acquisition and original balances of other allowable loans or eighty percent (80%) of the allowable historical cost of facilities and equipment.

(m) "Department head" means an individual(s) responsible for the supervision and management of an ICF/IID or CRF/DD department. Home office personnel responsible for the supervision and oversight of facility department heads qualify as general line personnel.

(m) (n) "Desk review" means a review and application of these regulations to a provider submitted financial report including accompanying notes and supplemental information.

(n) (o) "Equity" means allowable historical costs of facilities and equipment, less the unpaid balance of allowable debt at the provider's reporting year-end.

(o) (p) "Fair rental value allowance" means a methodology for reimbursing extensive support needs residences for adults for the use of allowable facilities and equipment, based on establishing a rental rate, and a rental valuation on a per bed basis of the facilities and equipment.

(p) (q) "Field audit" means a formal official verification and methodical examination and review, including the final written report of the examination of original books of accounts by auditors.

(q) (r) "Forms prescribed by the office" means:

(r) (s) "General line personnel" means management personnel above the department head level who perform a policymaking or supervisory function impacting directly on the operation of the facility.

(s) (t) "Generally accepted accounting principles" or "GAAP" means those accounting principles as established by the American Institute of Certified Public Accountants. designated authority that governs the preparation of financial statements based on whether an entity is government or nongovernment owned, or whether it is governed by the requirements of the state board of accounts.

(t) (u) "Like levels of care" means care:

(u) (v) "Non-rebasing year" means the year during which nonstate operated ICFs/IID and CRFs/DD annual Medicaid rate is not established based on a review of their annual financial report covering their most recently completed historical period. The annual Medicaid rate effective during a non-rebasing year shall be determined by adjusting the Medicaid rate from the previous year by an inflation adjustment. The following years shall be non-rebasing years:

(v) (w) "Ordinary patient or resident-related member-related costs" means costs of services and supplies that are necessary in delivery of patient or resident care by similar providers within the state.

(w) (x) "Patient or resident/member care" means those Medicaid program services delivered to a Medicaid enrolled member by a provider.

(x) (y) "Profit add-on" means an additional payment to providers in addition to allowable costs as an incentive for efficient and economical operation.

(y) (z) "Reasonable allowable costs" means the price a prudent, cost conscious buyer would pay a willing seller for goods or services in an arm's length transaction, not to exceed the limitations set out in this rule.

(z) (aa) "Rebasing year" means the year during which nonstate operated ICFs/IID and CRFs/DD Medicaid rate is based on a review of their annual financial report covering their most recently completed historical period. The following years shall be rebasing years:

(aa) (bb) "Related party/organization" means that the provider:

(bb) (cc) "Routine medical and nonmedical supplies and equipment" includes those items generally required to assure adequate medical care and personal hygiene of patients or residents by providers of like levels of care.

(cc) (dd) "Unit of service" means all patient or resident care at the appropriate level of care included in the established per diem rate required for the care of a patient or resident for one (1) day (twenty-four (24) hours).

(dd) (ee) "Use fee" means the reimbursement provided to fully amortize both principal and interest of allowable debt under the terms and conditions specified in this rule, for all providers, except for providers of extensive support needs residences for adults.

SECTION 3. 405 IAC 1-12-3 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 3. (a) The basis of accounting used under this rule is a comprehensive basis of accounting other than generally accepted accounting principles. GAAP. All cost and charges reported on the provider's cost report must also be recorded on the provider's financial statements. Costs must be reported in the cost report in accordance with the following authorities, in the hierarchical order listed:

(b) Each provider must maintain financial records for a minimum period of three (3) years after the date of submission of financial reports to the office. Copies of any financial records or supporting documentation must be provided to the office upon request. The accrual basis of accounting shall be used in all data submitted to the office except for government operated providers that are otherwise required by law to use a cash system. The provider's accounting records must establish an audit trail from those records to the financial reports submitted to the office.

(c) The auditor shall schedule the field audit visit with the provider. If the auditor and provider are unable to reach an agreement on a scheduled field audit date, the auditor will assign a date for the field audit to begin no earlier than sixty (60) days after the date that the provider was initially contacted to schedule the field visit.

(c) (d) When a field audit indicates that the provider's records are inadequate to support data submitted to the office or the additional requested documentation is not provided pursuant to the auditor's request, and the auditor is unable to complete the audit, the following actions shall be taken:

(d) (e) In the event that the deficiencies in documentation are not corrected within the time limit specified in subsection (c), (d), the following actions shall be taken:

(e) (f) In the event that the documentation submitted is inadequate or incomplete, the following additional actions shall be taken:

(f) (g) If a provider has business enterprises other than those reimbursed by Medicaid under this rule, the revenues, expenses, and statistical and financial records for such enterprises shall be clearly identifiable from the records of the operations reimbursed by Medicaid. If a field audit establishes that records are not maintained so as to clearly identify Medicaid information, none of the commingled costs shall be recognized as Medicaid allowable costs and the provider's rate shall be adjusted to reflect the disallowance effective as of the date of the most recent rate change.

(g) (h) When multiple facilities or operations are owned by a single entity with a central office, the central office records shall be maintained as a separate set of records with costs and revenues separately identified and appropriately allocated to individual facilities. Each central office entity shall file an annual or historical financial report coincidental with the time period for any type of rate review for any individual facility that receives any central office allocation. Allocation of central office costs shall be reasonable, conform to GAAP, and be consistent between years. Any change of central office allocation bases must be approved by the office prior to the changes being implemented. Proposed changes in allocation methods must be submitted to the office at least ninety (90) days prior to the reporting period to which the change applies. Such costs are allowable only to the extent that the central office is providing services related to patient or resident care and the provider can demonstrate that the central office costs improved efficiency, economy, and quality of member care. The burden of demonstrating that costs are patient or resident related lies with the provider.

(i) The burden of substantiating that costs are patient or resident related lies with the provider.

SECTION 4. 405 IAC 1-12-4 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 4. (a) Each provider shall submit an annual financial report to the office not later than ninety (90) days after the close of the provider's reporting year. The annual financial report shall coincide with the fiscal year used by the provider to report federal income taxes for the operation unless the provider requests in writing that a different reporting period be used. Such a request shall be submitted within sixty (60) days after the initial enrollment of a provider. This option may be exercised only one (1) time by a provider. If a reporting period other than the tax year is established, audit trails between the periods are required, including reconciliation statements between the provider's records and the annual financial report.

(b) The provider's annual financial report shall be submitted using forms prescribed by the office. All data elements and required attachments shall be completed so as to provide full financial disclosure and shall include the following as a minimum:

(c) Extension of the ninety (90) day filing period shall not be granted unless the provider substantiates to the office circumstances that preclude a timely filing. Requests for extensions shall be submitted to the office prior to the date due, with full and complete explanation of the reasons an extension is necessary. The office shall review the request timely requests for extension and notify the provider of approval or disapproval within ten (10) days of receipt. If the request for extension is disapproved, the report shall be due twenty (20) days from the date of receipt of the disapproval from the office. or its representatives. Untimely requests for an extension will not result in a change to the original due date, nor will it alleviate the provider from the penalty provision in subsection (d).

(d) Failure to submit an annual financial report within the time limit required shall result in the following actions:

SECTION 5. 405 IAC 1-12-5 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 5. (a) Rate requests to establish initial interim rates for a new operation, a new type of certified service, a new type of licensure for an existing group home, or a change of provider status shall be filed by submitting an initial rate request to the office on or before thirty (30) days after notification of the enrollment date or establishment of a new service or type of licensure. Initial interim rates will be set at the greater of:

(b) Until the identified threshold number of homes is obtained, the fiftieth percentile rates shall be determined as follows:

(c) The provider shall file a nine (9) month historical financial report within sixty (60) days following the end of the first nine (9) months of operation. The nine (9) months of historical financial data shall be used to determine the provider's base rate. The base rate shall be effective from the first day of the tenth month of enrolled operation until the next regularly scheduled annual review. An annual financial report need not be submitted until the provider's first fiscal year-end that occurs after the rate effective date of a base rate. In determining the base rate, limitations and restrictions otherwise outlined in this rule, except the annual rate limitation, shall apply. For purposes of this subsection, in determining the nine (9) months of the historical financial report, if the first day of enrollment falls on or before the fifteenth day of a calendar month, then that calendar month shall be considered the provider's first month of operation. If the first day of enrollment falls after the fifteenth day of a calendar month, then the immediately succeeding calendar month shall be considered the provider's first month of operation.

(d) The provider's historical financial report shall be submitted using forms prescribed by the office. All data elements and required attachments shall be completed so as to provide full financial disclosure and shall include the following at a minimum:

(e) Extension of the sixty (60) day filing period shall not be granted unless the provider substantiates to the office circumstances that preclude a timely filing. Requests for extensions shall be submitted to the office prior to the date due, with full and complete explanation of the reasons an extension is necessary. The office shall review the request and notify the provider of approval or disapproval within ten (10) days of receipt. If the extension is disapproved, the report shall be due twenty (20) days from the date of receipt of the disapproval from the office.

(f) If the provider fails to submit the nine (9) months of historical financial data within ninety (90) days following the end of the first nine (9) months of operation and an extension has not been granted, the initial interim rate shall be reduced by ten percent (10%), effective on the first day of the tenth month after certification and shall so remain until the first day of the month after the delinquent annual financial report is received by the office. Reimbursement lost because of the penalty cannot be recovered by the provider. The effective date of the base rate calculated utilizing the delinquent historical financial report shall be the first day of the month after the delinquent historical financial report is received by the office. All limitations in effect at the time of the original effective date of the base rate review shall apply.

(g) Except as provided in section 17(f) of this rule, neither an initial interim rate nor a base rate shall be established for a provider whose change of provider status was a related party transaction as established in this rule.

(h) In the event of a change in provider ownership, ownership structure (including mergers, exchange of stock, etc.), provider, operator, lessor/lessee, or any change in control, the new provider shall submit a completed Checklist of Management Representations Concerning Change in Ownership to the office within thirty (30) days following the date the Checklist of Management Representations request is sent to the provider. The completed checklist shall include all supporting documentation. No Medicaid rate adjustments for the facility shall be performed until the completed checklist is submitted to the office. If the completed Checklist of Management Representations has not been submitted within ninety (90) days following the date the Checklist of Management Representations request is sent to the provider, the Medicaid rate currently being paid to the provider shall be reduced by ten percent (10%), effective on the first day of the month following the end of the ninety (90) day period. The penalty shall remain until the first day of the month after the completed Checklist of Management Representations is received by the office. Reimbursement lost because of the penalty cannot be recovered by the provider.

SECTION 6. 405 IAC 1-12-7 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 7. (a) Rate setting during rebasing years shall be based on the provider's annual or historical financial report for the most recent completed year. In determining prospective allowable costs during rebasing years, each provider's costs from the most recent completed year will be adjusted for inflation by the office using the following methodology. All allowable costs of the provider, except for:

(b) For purposes of determining the average allowable cost of the median patient day as applicable during rebasing years, each provider's costs from their most recent completed year will be adjusted for inflation by the office using the following methodology. Providers whose most recently completed rate is an initial interim rate shall be excluded from the determination of the average allowable cost of the median patient day. All allowable costs of the provider, except for:

	Median Effective Date	Midpoint Quarter
	January 1, Year 1	July 1, Year 1
	April 1, Year 1	October 1, Year 1
	July 1, Year 1	January 1, Year 2
	October 1, Year 1	April 1, Year 2

(c) For ICFs/IID and CRFs/DD, allowable costs per patient or resident day shall be determined based on an occupancy level equal to the greater of actual occupancy, or ninety-five percent (95%) for ICFs/IID and ninety percent (90%) for CRFs/DD, for certain fixed facility costs. The fixed costs subject to this minimum occupancy level standard include the following:

SECTION 7. 405 IAC 1-12-20 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 20. (a) Compensation for owner, related party, individuals within management, general line personnel, and consultants who perform management functions, or any individual or entity rendering services above the department head level shall be subject to the annual limitations described in this section. All compensation received by the parties as described in this subsection shall be reported and separately identified on the financial report form even though such payment may exceed the limitations. This compensation is allowed to cover costs for all administrative, policy making, decision making, and other management functions above the department head level. This includes wages, salaries, and fees for owner, administrator, assistant administrator, individuals within management, contractors, and consultants who perform management functions, as well as any other individual or entity performing such tasks.

(b) The maximum amount of owner, related party, management compensation for the parties identified in subsection (a) shall be the lesser of the amount under subsection (d), as updated by the office on July 1 of each year by determining the average rate of change of the most recent twelve (12) quarters of the Gross National Product Implicit Price Deflator, or the amount of patient or resident related wages, salaries, or fees actually paid or withdrawn which were properly reported to the Internal Revenue Service as wages, salaries, fringe benefits, expenses, or fees. If liabilities are established, they shall be paid within seventy-five (75) days after the end of the accounting period or such costs shall be disallowed.

(c) In addition to wages, salaries, and fees paid to owners under subsection (b), the office will allow up to twelve percent (12%) of the appropriate schedule for fringe benefits, business expenses charged to an operation, and other assets actually withdrawn that are patient or resident related. These expenses include fringe benefits that do not meet nondiscriminatory requirements of the Internal Revenue Code, entertainment, travel, or continuing education. Other assets actually withdrawn include only those items that were actually accrued and subsequently paid during the cost reporting period in which personal services were rendered and reported to the Internal Revenue Service as fringe benefits, expenses, or fees. If liabilities are established, they shall be paid within seventy-five (75) days after the end of the accounting period or such costs shall be disallowed.

(d) The owner, related party, and management compensation and expense limitation per operation effective July 1, 1993, shall be as follows:

Owner and Management Compensation		Owner's Expense
Beds	Allowance	(12% × bed allowance)
10	$18,527	$2,223
20	$24,717	$2,966
30	$30,887	$3,706
40	$37,049	$4,446
50	$43,241	$5,189
60	$46,948	$5,634
70	$50,657	$6,079
80	$54,362	$6,523
90	$58,055	$6,967
100	$61,763	$7,412
110	$66,731	$8,007
120	$71,663	$8,600
130	$76,628	$9,195
140	$81,546	$9,786
150	$86,496	$10,380
160	$91,427	$10,971
170	$96,378	$11,565
180	$101,313	$12,157
190	$106,262	$12,751
200	$111,196	$13,343
200 and over	$111,196 plus $225 per bed over 200	$13,343 plus $27 per bed over 200

SECTION 8. 405 IAC 1-12-21 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 21. (a) The procedures described in this section are applicable to ICFs/IID with nine (9) or more beds only, notwithstanding the application of standards and procedures set forth in sections 1 through 20 of this rule.

(b) The per diem rate for ICFs/IID is an all-inclusive rate. The per diem rate includes all services provided to patients by the facility.

(c) Costs related to staffing shall be limited to seven (7) hours worked per patient day.

(d) Any ICFs/IID ICF/IID that is licensed as a CRMNF will be paid at a rate of six hundred twenty-six dollars and twenty-six cents ($626.26) six hundred thirty-nine dollars and eighteen cents ($639.18) per resident day. This per diem rate is available only upon certification as a Medicaid ICF/IID and licensure by the division of disability and rehabilitative services. DDRS. ICFs/IID that are licensed as CRMNFs are not subject to other rate adjustments identified in this rule except for 405 IAC 1-12-27 [405 IAC 1-12-27 was voided by P.L.12-2016, SECTION 10, effective July 1, 2016.] and will not receive a base rate nor be subject to the base rate reporting requirements at section 5 of this rule.

SECTION 9. 405 IAC 1-14.6-1 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 6-8.1-10-1; IC 12-13-7-3; IC 12-15-13-4; IC 24-4.6-1-101

Sec. 1. (a) This rule sets forth payment procedures for payment for services rendered to Medicaid members who are not in managed care and covered by the Indiana health coverage program (IHCP) by nursing facilities. All payments referred to within this rule are contingent upon the following:

(b) The procedures described in this rule set forth methods of reimbursement that promote quality of care, access, efficiency, economy, and consistency. These procedures recognize level and quality of care, access, establish effective accountability over Medicaid expenditures, provide for a regular review mechanism for rate changes, and, only to the extent the state is required to by state law, compensate providers for reasonable, allowable costs which must be incurred by efficiently and economically operated facilities. The system of payment outlined in this rule is a prospective system. Cost limitations are contained in this rule that establish parameters regarding the allowability of ordinary patient-related costs and define reasonable allowable costs.

(c) Retroactive payment or repayment will be required when an audit verifies an underpayment or overpayment due to intentional misrepresentation, billing or payment errors, or misstatement of historical financial or historical statistical data, or resident assessment data which caused a lower or higher rate than would have been allowed had the data been true and accurate. Upon discovery that a provider has received overpayment of a Medicaid claim from the office, the provider must complete the appropriate Medicaid billing adjustment form prescribed by the office and reimburse the office for the amount of the overpayment, or the office shall make a retroactive payment adjustment, as appropriate.

(d) The office may implement Medicaid rates and recover overpayments from previous rate reimbursements, either through deductions of future payments or otherwise, without awaiting the outcome of the administrative appeal process, in accordance with IC 12-15-13-4(e).

(e) Providers must pay interest on all overpayments, consistent with IC 12-15-13-4. The interest charge shall not exceed the percentage set out in IC 6-8.1-10-1(c). The interest shall:

SECTION 10. 405 IAC 1-14.6-2 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 2. (a) The definitions in this section apply throughout this rule.

(b) "Administrative component" means the portion of the Medicaid rate that shall reimburse providers for allowable administrative services and supplies, including prorated employee benefits based on salaries and wages. Administrative services and supplies include the following:

(c) "Allowable per patient day cost" means a ratio between allowable variable cost and patient days using each provider's actual occupancy from the most recently completed desk reviewed annual financial report, plus a ratio between allowable fixed costs and patient days using the greater of:

(d) "Allowed profit add-on payment" means the portion of a facility's tentative profit add-on payment that, except as may be limited by application of the overall rate ceiling as defined in this rule, shall be included in the facility's Medicaid rate, and is based on the facility's total quality score.

(e) "Annual financial report" refers to a presentation of financial data, including appropriate supplemental data and accompanying notes, derived from accounting records and intended to communicate the provider's economic resources or obligations at a point in time, or changes therein for a period of time in compliance with the reporting requirements of this rule.

(f) "Average allowable cost of the median patient day" means the allowable per patient day cost (including any applicable inflation adjustment) of the median patient day from all providers when ranked in numerical order based on average allowable cost. The average allowable variable cost (including any applicable inflation adjustment) shall be computed on a statewide basis using each provider's actual occupancy from the most recently completed desk reviewed annual financial report. The average allowable fixed costs (including any applicable inflation adjustment) shall be computed on a statewide basis using an occupancy rate equal to the greater of:

(g) "Average historical cost of property of the median bed" means the allowable patient-related property cost per bed for facilities that are not acquired through an operating lease arrangement, when ranked in numerical order based on the allowable patient-related historical property cost per bed that shall be updated each calendar quarter. Property shall be considered allowable if it satisfies the conditions of section 14(a) of this rule.

(h) "Calendar quarter" means a three (3) month period beginning January 1, April 1, July 1, or October 1.

(i) "Capital component" means the portion of the Medicaid rate that shall reimburse providers for the use of allowable capital-related items. Such capital-related items include the following:

(j) "Case mix index" or "CMI" means a numerical value score that describes the relative resource use for each resident within the groups under the resource utilization group (RUG-III) IV) classification system prescribed by the office based on an assessment of each resident. The facility CMI shall be based on the resident CMI, calculated on a facility-average, time-weighted basis for the following:

(k) "Children's nursing facility" means a nursing facility that, as of January 1, 2009, has:

(l) "Cost center" means a cost category delineated by cost reporting forms prescribed by the office.

(m) "Delinquent MDS resident assessment" means an assessment that is greater than one hundred thirteen (113) days old, as measured by the date defined by CMS for determining delinquency or an assessment that is not completed within the time prescribed in the guidelines requirement for use in determining the time-weighted CMI under section 9(e) of this rule. This determination is made on the fifteenth day of the second month following the end of a calendar quarter.

(n) "Department head" means an individual(s) responsible for the supervision and management of a nursing facility department. Home office personnel responsible for the supervision and oversight of facility department heads qualify as general line personnel.

(n) (o) "Desk review" means a review and application of these regulations to a provider submitted annual financial report including accompanying notes and supplemental information.

(o) (p) "Direct care component" means the portion of the Medicaid rate that shall reimburse providers for allowable direct patient care services and supplies, including prorated employee benefits based on salaries and wages. Direct care services and supplies include all of the following:

(p) (q) "Fair rental value allowance" means a methodology for reimbursing nursing facilities for the use of allowable facilities and equipment, based on establishing a rental valuation on a per bed basis of such facilities and equipment, and a rental rate.

(q) (r) "Field audit" means a formal official verification and methodical examination and review, including the final written report of the examination of original books of accounts and resident assessment data and its supporting documentation by auditors.

(r) (s) "Fixed costs" means the portion of each rate component that shall be subjected to the minimum occupancy requirements as contained in this rule. The following percentages shall be multiplied by total allowable costs to determine allowable fixed costs for each rate component:

Rate Component	Fixed Cost Percentage
Direct Care	25%
Indirect Care	37%
Administrative	84%
Capital	100%

(s) (t) "Forms prescribed by the office" means either of the following:

(t) (u) "General line personnel" means management personnel above the department head level who perform a policymaking or supervisory function impacting directly on the operation of the facility.

(u) (v) "Generally accepted accounting principles" or "GAAP" means those accounting principles as established by the American Institute of Certified Public Accountants. Financial Accounting Standards Board.

(v) "Incomplete MDS resident assessment" means an assessment that is not printed by the nursing facility provider upon request by the office.

(w) "Indirect care component" means the portion of the Medicaid rate that shall reimburse providers for allowable indirect patient care services and supplies, including prorated employee benefits based on salaries and wages. Indirect care services and supplies include the following:

(x) "Medical and nonmedical supplies and equipment" includes those items generally required to assure adequate medical care and personal hygiene of patients.

(y) "Minimum data set" or "MDS" means a core set of screening and assessment elements, including common definitions and coding categories, that form the foundation of the comprehensive assessment for all residents of long-term care facilities certified to participate in Medicaid. The items in the MDS standardize communication about resident problems, strengths, and conditions within facilities, between facilities, and between facilities and outside agencies. Version 2.0 (9/2000) is the most current form to the minimum data set (MDS 2.0). The Indiana system will employ the MDS 2.0 3.0 or subsequent revisions as approved by CMS.

(z) "Normalized allowable cost" means total allowable direct patient care costs for each facility divided by that facility's average CMI for all residents.

(aa) "Nursing home report card score" means a numerical score developed and published by ISDH that quantifies each facility's key survey results.

(bb) "Ordinary patient-related costs" means costs of allowable services and supplies that are necessary in delivery of patient care by similar providers within the state.

(cc) "Patient/member care" means those Medicaid program services delivered to a Medicaid enrolled member by a provider.

(dd) "Reasonable allowable costs" means the price a prudent, cost-conscious buyer would pay a willing seller for goods or services in an arm's-length transaction, not to exceed the limitations set out in this rule.

(ee) "Related party/organization" means that the provider:

(ff) "Routine care" means care that does not treat or ameliorate a specific defect or specific physical or mental illness or condition.

(gg) "RUG III IV resident classification system" means the resource utilization group used to classify residents. When a resident classifies into more than one (1) RUG III IV group, the RUG III IV group with the greatest CMI will be utilized to calculate the facility-average CMI for all residents and facility-average CMI for Medicaid residents.

(hh) A nursing facility with a "special care unit (SCU) for Alzheimer's disease or dementia" means a nursing facility that meets all of the following:

(ii) "Tentative profit add-on payment" means the profit add-on payment calculated under this rule before considering a facility's total quality score.

(jj) "Therapy component" means the portion of each facility's direct costs for therapy services, including any employee benefits prorated based on total salaries and wages, rendered to Medicaid residents that are not reimbursed by other payors, as determined by this rule.

(kk) "Total quality score" means the sum of the quality points awarded to each nursing facility for all eight (8) quality measures as determined in section 7(n)(1) 7(m)(1) through 7(n)(8) 7(m)(8) of this rule.

(ll) "Unit of service" means all patient care included in the established per diem rate required for the care of an inpatient for one (1) day (twenty-four (24) hours).

(mm) "Unsupported MDS resident assessment" means an assessment where one (1) or more data items that are required to classify a resident pursuant to the RUG-III IV resident classification system:

SECTION 11. 405 IAC 1-14.6-3 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 3. (a) The basis of accounting under this rule is a comprehensive basis of accounting other than generally accepted accounting principles. GAAP. All cost and charges reported on the provider's cost report must also be recorded on the provider's financial statements. Costs and charges must be reported in on the cost report in accordance with the following authorities, in the hierarchal order listed:

(b) Each provider must maintain financial records for a minimum period of three (3) years after the date of submission of financial reports to the office. Copies of any financial records or supporting documentation must be provided to the office upon request. The accrual basis of accounting shall be used in all data submitted to the office except for government operated providers that are otherwise required by law to use a cash system. The provider's accounting records must establish an audit trail from those records to the financial reports submitted to the office.

(c) The auditor shall schedule the field audit visit with the provider. If the auditor and provider are unable to reach an agreement on a scheduled field audit date, the auditor will assign a date for the field audit to begin no earlier than sixty (60) days after the date that the provider was initially contacted to schedule the field visit.

(c) (d) When a field audit indicates that the provider's records are inadequate to support data submitted to the office, or when the additional requested documentation is not provided pursuant to the auditor's request, and the auditor is unable to complete the audit, the following actions shall be taken:

(d) (e) In the event that the deficiencies in documentation are not corrected within the time limit specified in subsection (c), (d), the following actions shall be taken:

(e) (f) In the event that the documentation submitted is inadequate or incomplete or the 10% reduction has expired, the following additional actions shall be taken:

(f) (g) If a provider has business enterprises or activities other than those reimbursed by Medicaid under this rule, the revenues, expenses, and statistical and financial records for such enterprises or activities shall be clearly identifiable from the records of the operations reimbursed by Medicaid. If a field audit or desk review establishes that records are not maintained so as to clearly identify Medicaid information, none of the commingled costs shall be recognized as Medicaid allowable costs.

(g) (h) When multiple facilities or operations are owned by a single entity with a central office, the central office records shall be maintained as a separate set of records with costs and revenues separately identified and appropriately allocated to individual facilities. Each central office entity shall file an annual financial report coincidental with the time period for any individual facility that receives any central office allocation. Allocation of central office costs shall be reasonable, conform to GAAP, and be consistent between years. Any change of central office allocation bases must be approved by the office prior to the changes being implemented. Proposed changes in allocation methods must be submitted to the office at least ninety (90) days prior to the reporting period to which the change applies. Such costs are allowable only to the extent that the central office is providing services related to patient care and the provider can demonstrate that the central office costs improved efficiency, economy, and quality of member care. The burden of demonstrating that costs are patient-related lies with the provider.

(i) The burden of substantiating that costs are patient-related lies with the provider.

SECTION 12. 405 IAC 1-14.6-4 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 4. (a) Each provider shall submit an annual financial report to the office not later than the last day of the fifth calendar month after the close of the provider's reporting year. The annual financial report shall coincide with the fiscal year used by the provider to report federal income taxes for the operation unless the provider requests in writing that a different reporting period be used. Such a request shall be submitted within sixty (60) days after the initial enrollment of a provider. This option:

(b) The first annual Financial Report for Nursing Facilities for a provider that has undergone a change of provider ownership or control through an arm's length transaction between unrelated parties shall coincide with that provider's first fiscal year end in which the provider has a minimum of six (6) full calendar months of actual historical financial data. The provider shall submit their first annual financial report to the office not later than the last day of the fifth calendar month after the close of the provider's reporting year or thirty (30) days following notification that the change of provider ownership has been reviewed by the office. Nursing facilities that are certified to provide Medicare-covered skilled nursing facility services are required to submit a written copy of their Medicare cost report that covers their most recently completed historical reporting period.

(c) The provider's annual financial report shall be completed in accordance with applicable instructions and submitted using forms prescribed by the office. All data elements and required attachments shall be completed so as to provide full financial disclosure and shall include the following as a minimum:

(d) An extension of the five (5) month filing period shall not be granted.

(e) Failure to submit an annual financial report or Medicare cost report by nursing facilities that are certified to provide Medicare-covered skilled nursing facility services within the time limit required shall result in the following actions:

(f) Nursing facilities are required to electronically transmit MDS resident assessment information in a complete, accurate, and timely manner. MDS resident assessment information for a calendar quarter must be transmitted by the fifteenth day of the second month following the end of that calendar quarter. An extension of the electronic MDS assessment transmission due date may be granted by the office to a new operation attempting to submit MDS assessments for the first time if the:

(g) Residents discharged prior to completing an initial assessment that is not preceded by a Medicare assessment or a regularly scheduled assessment will be classified in one (1) of the following RUG-III IV classifications:

(h) If the office determines that a nursing facility has incomplete MDS resident assessments, then, for purposes of determining the facility's CMI, the assessment or assessments shall be assigned the CMI associated with the RUG-III group "BC1 - Unclassifiable".

(i) (h) If the office determines that a nursing facility has delinquent MDS resident assessments, then, for purposes of determining the facility's CMI, the assessment or assessments shall be assigned the CMI associated with the RUG-III IV group "BC2 "BC1 - Delinquent".

(j) (i) If the office determines due to an MDS field audit review that a nursing facility has unsupported MDS resident assessments, then the following procedures shall be followed in applying any corrective remedy:

(k) (j) Based on findings from the MDS audit review the office shall make adjustments or revisions to all MDS data items that are required to classify a resident pursuant to the RUG-III IV resident classification system that are not supported according to the MDS supporting documentation guidelines requirements as set forth in 405 IAC 1-15. Such adjustments or revisions to MDS data transmitted by the nursing facility will be made in order to reflect the resident's highest functioning level that is supported according to the MDS supporting documentation guidelines requirements as set forth in 405 IAC 1-15. The resident assessment will then be used to reclassify the resident pursuant to the RUG-III IV resident classification system by incorporating any adjustments or revisions made by the office.

(l) (k) Upon conclusion of an MDS audit review, the office shall recalculate the facility's CMI. If the recalculated CMI results in a change to the established Medicaid rate:

(m) (l) The Employee Turnover report (Schedule X) and the Special Care Unit report (Schedule Z) shall be completed by all providers based on the calendar year (January 1 through December 31) reporting period. Schedules X and Z must be submitted to the office not later than March 31 following the end of each calendar year. Reports submitted after March 31 will not be considered in the determination of the subsequent annual rate review.

SECTION 13. 405 IAC 1-14.6-6 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 6. (a) The: While performing a provider's annual rate review the office shall determine the following for each provider:

(b) The: While performing a provider's annual rate review the office shall determine the following for each provider:

(c) Beginning October 1, 2007, the rate effective date of the annual rate review shall be the first October 1 that falls after the first calendar quarter following the provider's reporting year-end. Beginning July 1, 2008, the rate effective date of the annual rate review shall be the first July 1 that falls after the first calendar quarter following the provider's reporting year-end. The rate effective date of the annual rate review for all providers shall be July 1 of each year thereafter.

(d) Subsequent to the annual rate review, the direct care component of the Medicaid rate will be adjusted quarterly to reflect changes in the provider's case mix index for Medicaid residents. If the facility has no Medicaid residents during a quarter, the facility's average case mix index for all residents will be used in lieu of the case mix index for Medicaid residents. This adjustment will be effective on the first day of each of the following three (3) calendar quarters beginning after the effective date of the annual rate review.

(e) The case mix index for Medicaid residents in each facility shall be:

(f) All rate-setting parameters and components used to calculate the annual rate review, except for the case mix index for Medicaid residents in that facility, shall apply to the calculation of any change in Medicaid rate that is authorized under subsection (d).

(g) When the number of nursing facility beds licensed by ISDH is changed after the annual reporting period, the provider may request in writing before the effective date of their next annual rate review an additional rate review effective on the first day of the calendar quarter on or following the date of the change in licensed beds. This additional rate review shall be determined using all rate-setting parameters in effect at the provider's latest annual rate review, except that the number of beds and associated bed days available for the calculation of the rate-setting limitations shall be based on the newly licensed beds.

SECTION 14. 405 IAC 1-14.6-7 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15-13-6

Sec. 7. (a) For purposes of determining the average allowable cost of the median patient day and a provider's annual rate review, each provider's cost from the most recent completed year will be adjusted for inflation by the office using the methodology in this subsection. All allowable costs of the provider, except for mortgage interest on facilities and equipment, depreciation on facilities and equipment, rent or lease costs for facilities and equipment, and working capital interest shall be adjusted for inflation using the CMS Nursing Home without Capital Market Basket index as published by DRI/WEFA. IHS. The inflation adjustment shall apply from the midpoint of the annual financial report period to the midpoint prescribed as follows:

Effective Date	Midpoint Quarter
January 1, Year 1	July 1, Year 1
April 1, Year 1	October 1, Year 1
July 1, Year 1	January 1, Year 2
October 1, Year 1	April 1, Year 2

(b) Notwithstanding subsection (a), beginning July 1, 2017, the inflation adjustment determined as prescribed in subsection (a) shall be reduced by an inflation reduction factor equal to three and three-tenths percent (3.3%). The resulting inflation adjustment shall not be less than zero (0). Any reduction or elimination of the inflation reduction factor shall be made effective no earlier than permitted under IC 12-15-13-6(a).

(c) In determining prospective allowable costs for a new provider that has undergone a change of provider ownership or control through an arm's-length transaction between unrelated parties, when the first fiscal year end following the change of provider ownership or control is less than six (6) full calendar months, the previous provider's most recently completed annual financial report used to establish a Medicaid rate for the previous provider shall be utilized to calculate the new provider's first annual rate review. The inflation adjustment for the new provider's first annual rate review shall be applied from the midpoint of the previous provider's most recently completed annual financial report period to the midpoint prescribed under subsection (a).

(d) Allowable fixed costs per patient day for direct care, indirect care, and administrative costs shall be computed based on the following minimum occupancy levels:

(e) Notwithstanding subsection (d), the office shall reestablish a provider's Medicaid rate effective on the first day of the quarter following the date that the conditions specified in this subsection are met, by applying all provisions of this rule, except for the applicable minimum occupancy requirement described in subsection (d), if both of the following conditions can be established to the satisfaction of the office:

(f) Allowable fixed costs per patient day for capital-related costs shall be computed based on an occupancy rate equal to the greater of ninety-five percent (95%) or the provider's actual occupancy rate from the most recently completed historical period.

(g) Except as provided for in subsection (h), the CMIs contained in this subsection shall be used for purposes of determining each resident's CMI used to calculate the facility-average CMI for all residents and the facility-average CMI for Medicaid residents.

RUG-III Group	RUG-III Code	CMI Table
Rehabilitation	RAD	2.02
Rehabilitation	RAC	1.69
Rehabilitation	RAB	1.50
Rehabilitation	RAA	1.24
Extensive Services	SE3	2.69
Extensive Services	SE2	2.23
Extensive Services	SE1	1.85
Special Care	SSC	1.75
Special Care	SSB	1.60
Special Care	SSA	1.51
Clinically Complex	CC2	1.33
Clinically Complex	CC1	1.27
Clinically Complex	CB2	1.14
Clinically Complex	CB1	1.07
Clinically Complex	CA2	0.95
Clinically Complex	CA1	0.87
Impaired Cognition	IB2	0.93
Impaired Cognition	IB1	0.82
Impaired Cognition	IA2	0.68
Impaired Cognition	IA1	0.62
Behavior Problems	BB2	0.89
Behavior Problems	BB1	0.77
Behavior Problems	BA2	0.67
Behavior Problems	BA1	0.54
Reduced Physical Functions	PE2	1.06
Reduced Physical Functions	PE1	0.96
Reduced Physical Functions	PD2	0.97
Reduced Physical Functions	PD1	0.87
Reduced Physical Functions	PC2	0.83
Reduced Physical Functions	PC1	0.76
Reduced Physical Functions	PB2	0.73
Reduced Physical Functions	PB1	0.66
Reduced Physical Functions	PA2	0.56
Reduced Physical Functions	PA1	0.50
Unclassifiable	BC1	0.48
Delinquent	BC2	0.48

RUG – IV Group	RUG – IV Code	CMI Table
Extensive Services	ES3	3.00
Extensive Services	ES2	2.23
Extensive Services	ES1	2.22
Rehabilitation	RAE	1.65
Rehabilitation	RAD	1.58
Rehabilitation	RAC	1.36
Rehabilitation	RAB	1.10
Rehabilitation	RAA	0.82
Special Care High	HE2	1.88
Special Care High	HE1	1.47
Special Care High	HD2	1.69
Special Care High	HD1	1.33
Special Care High	HC2	1.57
Special Care High	HC1	1.23
Special Care High	HB2	1.55
Special Care High	HB1	1.22
Special Care Low	LE2	1.61
Special Care Low	LE1	1.26
Special Care Low	LD2	1.54
Special Care Low	LD1	1.21
Special Care Low	LC2	1.30
Special Care Low	LC1	1.02
Special Care Low	LB2	1.21
Special Care Low	LB1	0.95
Clinically Complex	CE2	1.39
Clinically Complex	CE1	1.25
Clinically Complex	CD2	1.29
Clinically Complex	CD1	1.15
Clinically Complex	CC2	1.08
Clinically Complex	CC1	0.96
Clinically Complex	CB2	0.95
Clinically Complex	CB1	0.85
Clinically Complex	CA2	0.73
Clinically Complex	CA1	0.65
Behavior / Cognitive	BB2	0.81
Behavior / Cognitive	BB1	0.75
Behavior / Cognitive	BA2	0.58
Behavior / Cognitive	BA1	0.53
Reduced Physical Function	PE2	1.25
Reduced Physical Function	PE1	1.17
Reduced Physical Function	PD2	1.15
Reduced Physical Function	PD1	1.06
Reduced Physical Function	PC2	0.91
Reduced Physical Function	PC1	0.85
Reduced Physical Function	PB2	0.70
Reduced Physical Function	PB1	0.65
Reduced Physical Function	PA2	0.49
Reduced Physical Function	PA1	0.45
Delinquent	BC1	0.43

(h) In place of the CMIs contained in subsection (g), the CMIs contained in this subsection shall be used for purposes of determining the facility-average CMI for Medicaid residents that meet all the following conditions:

(i) The office shall provide each nursing facility with the following:

(j) The office will increase Medicaid reimbursement to nursing facilities that provide inpatient services to more than eight (8) ventilator-dependent residents. Additional reimbursement shall be made to the facilities at a rate of eleven dollars and fifty cents ($11.50) per Medicaid resident day. The additional reimbursement shall:

(k) Beginning October 1, 2011, through June 30, 2013, the office will increase Medicaid reimbursement to nursing facilities to encourage improved quality of care to residents based on the nursing home report card score. For purposes of determining the nursing home report card score rate add-on the office shall determine each nursing facility's report card score based on the latest published data as of the end of the state fiscal year. The nursing home report card score rate add-on shall be computed as described in the following table:

Nursing Home Report Card Score	Nursing Home Report Card Score Rate Add-On
0 – 82	$14.30
83 – 265	$14.30 – ((Nursing Home Report Card Score – 82) × $0.0777)
266 and above	$0

(l) (k) Through June 30, 2017, the office will increase Medicaid reimbursement to nursing facilities that provide specialized care to Medicaid residents with Alzheimer's disease or dementia, as demonstrated by resident assessment data as of December 31 of each year. Medicaid Alzheimer's and dementia residents shall be determined to be in the SCU based on an exact match of room numbers reported on Schedule Z with the room numbers reported on resident assessments and tracking forms. Resident assessments and tracking forms with room numbers that are not an exact match to the room numbers reported on Schedule Z will be excluded in calculating the number of Medicaid Alzheimer's and dementia resident days in their SCU. Resident days used in this calculation shall be based on the time-weighted days from the final CMI reports utilizing MDS assessments. The additional Medicaid reimbursement shall equal twelve dollars ($12) per Medicaid Alzheimer's and dementia resident day in their SCU. Only facilities that meet the definition for a SCU for Alzheimer's disease or dementia shall be eligible to receive the additional reimbursement. The additional Medicaid reimbursement shall be effective July 1 of the next state fiscal year.

(m) (l) Through June 30, 2017, the office will increase Medicaid reimbursement to nursing facilities to encourage improved quality of care to residents based on each facility's total quality score. For purposes of determining the nursing facility quality rate add-on, each facility's total quality score will be determined annually. Each nursing facility's quality rate add-on shall be determined as follows:

Nursing Facility Total Quality Score	Nursing Facility Quality Rate Add-On
0 – 18	$0
19 – 83	$14.30 – ((84 - Nursing Facility Total Quality Score) × 0.216667)
84 – 100	$14.30

(n) (m) Each nursing facility shall be awarded no more than one hundred (100) quality points as determined by the following eight (8) quality measures:

SECTION 15. 405 IAC 1-14.6-9 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15-13-6

Sec. 9. (a) The Medicaid reimbursement system is based on recognition of the provider's allowable costs for the direct care, therapy, indirect care, administrative, and capital components, plus a potential profit add-on payment as defined below. The direct care, therapy, indirect care, administrative, and capital rate components are calculated as follows:

(b) The profit add-on payment will be calculated as follows:

(c) Notwithstanding subsections (a) and (b), in no instance shall a rate component exceed the overall rate ceiling defined as follows:

(d) In order to determine the normalized allowable direct care costs from each facility's Financial Report for Nursing Facilities, the office shall determine each facility's CMI for all residents on a time-weighted basis. For a provider's financial report beginning in the month referenced in Table 9, column a, the calendar quarters used for determining a facility's CMI will begin with the corresponding calendar quarter referenced in Table 9, column b. The calendar quarters used in determining the facility's CMI will include quarters through the provider's financial report ending in the month referenced in Table 9, column c, with the corresponding calendar quarter referenced in Table 9, column d.  

Table 9
Cost Report Begin Date	Beginning Calendar Quarter to Determine CMI		Cost Report End Date	Ending Calendar Quarter to Determine CMI
(a)	(b)		(c)	(d)
January Year 1	1st Quarter Year 1		January Year 1	1st Quarter Year 1
February Year 1	2nd Quarter Year 1		February Year 1	1st Quarter Year 1
March Year 1	2nd Quarter Year 1		March Year 1	1st Quarter Year 1
April Year 1	2nd Quarter Year 1		April Year 1	2nd Quarter Year 1
May Year 1	3rd Quarter Year 1		May Year 1	2nd Quarter Year 1
June Year 1	3rd Quarter Year 1		June Year 1	2nd Quarter Year 1
July Year 1	3rd Quarter Year 1		July Year 1	3rd Quarter Year 1
August Year 1	4th Quarter Year 1		August Year 1	3rd Quarter Year 1
September Year 1	4th Quarter Year 1		September Year 1	3rd Quarter Year 1
October Year 1	4th Quarter Year 1		October Year 1	4th Quarter Year 1
November Year 1	1st Quarter Year 2		November Year 1	4th Quarter Year 1
December Year 1	1st Quarter Year 2		December Year 1	4th Quarter Year 1

(e) The office shall publish guidelines requirements for use in determining the time-weighted CMI. These guidelines: requirements:

SECTION 16. 405 IAC 1-14.6-10 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 10. (a) Costs and revenues, excluding non-Medicaid routine revenue, shall be reported as required on the financial report forms. Allowable patient care costs shall be clearly identified.

(b) The provider shall report as patient care costs only costs that have been incurred in the providing of patient care services. The provider shall certify on all financial reports that costs not related to patient care have been separately identified on the financial report.

(c) In determining reasonableness of costs, the office may compare line items, cost centers, or total costs of providers throughout the state. The office may request satisfactory documentation from providers whose costs do not appear to be accurate or allowable.

(d) Indiana state taxes, including local taxes, shall be considered an allowable cost. Personal or federal income taxes are not considered allowable costs.

(e) The following costs are not considered allowable costs and shall not be included in the established rate:

SECTION 17. 405 IAC 1-14.6-11 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 11. (a) For facilities other than nonstate government owned nursing facilities, costs applicable to services, facilities, and supplies furnished to the provider by organizations related to the provider by common ownership or control must be included reported in the allowable cost in the unit of service of the provider rate component(s) most descriptive of the related organization's cost at the cost to the related organization. However, such cost must not exceed the price of comparable services, facilities, or supplies that could be purchased as an arm's-length transaction in an open competitive market.

(b) For nonstate government owned (NSGO) nursing facilities, costs applicable to services, facilities, and supplies furnished to the provider by organizations related by common ownership or control to either the current NSGO provider, or any former provider or related entity that currently serves as the management company or entity in a similar decision making capacity for the NSGO provider, must be included reported in the allowable cost of the NSGO provider rate component(s) most descriptive of the related organization's cost at the cost to the related organization. However, such cost must not exceed the price of comparable services, facilities, or supplies that could be purchased as an arm's-length transaction in an open competitive market.

(c) Common ownership exists when an individual, individuals, or any legal entity possesses ownership or equity of at least five percent (5%) in the provider as well as the institution or organization serving the provider. An individual is considered to own the interest of immediate family for the determination of percentage of ownership. The following persons are considered immediate family:

(d) Control exists where an individual or an organization has the power, directly or indirectly, to influence or direct the actions or policies of an organization or institution, whether or not actually exercised. A general partner is considered to control an entity.

(e) Transactions between related parties are not considered to have arisen through arm's-length negotiations. Costs applicable to services, facilities, and supplies furnished to a provider by related parties shall not exceed the lower of the cost to the related party, or the price of comparable services, facilities, or supplies purchased as an arm's-length transaction in an open competitive market. An exception to this subsection may be granted by the office if requested in writing by the provider before the annual rate review effective date to which the exception is to apply. The provider's request shall include a comprehensive representation that every condition in subsection (f) has been met. This representation shall include, but not be limited to, the percentage of business the provider transacts with related and nonrelated parties based upon revenue. When requested by the office, the provider shall submit documentation, such as invoices, standard charge master listings, and remittances, to substantiate the provider's charges for services, facilities, or supplies to related and nonrelated parties.

(f) The office shall grant an exception when a related organization meets all of the following conditions:

(g) The related-party exception shall be granted for any period of time, up to the maximum period of two (2) years.

SECTION 18. 405 IAC 1-14.6-12 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 12. (a) Providers shall be reimbursed for the use of allowable patient-related facilities and equipment, regardless of whether they are owned or leased, by means of a fair rental value allowance. The fair rental value allowance shall be in lieu of the costs of all depreciation, interest, letter of credit fees, lease, rent, amortization expense, deferred loan fees, or other consideration paid for the use of property, except that rental costs for low air loss mattresses, pressure support surfaces, and oxygen concentrators shall be reimbursed in the direct care component. The fair rental value allowance includes all central office facilities and equipment whose patient care-related depreciation, interest, or lease expense is appropriately allocated to the facility.

(b) The fair rental value allowance is calculated as follows:

SECTION 19. 405 IAC 1-14.6-21 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 21. (a) Except as provided in subsection (b), the detailed basis for allocation of expenses between nursing facility services and other services in a facility shall remain a prerogative of the provider as long as the basis is reasonable and consistent between accounting periods.

(b) The following relationships shall be followed:

SECTION 20. 405 IAC 1-14.6-22 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 4-21.5-3; IC 12-13-7-3; IC 12-15

Sec. 22. (a) The office shall notify each provider of the provider's rate after such rate has been computed. If the provider disagrees with the rate the provider may request an administrative reconsideration by the office. Such reconsideration request shall be in writing and shall contain specific issues to be reconsidered and the rationale for the provider's position. The provider must request administrative reconsideration before filing an appeal. Only issues raised by the provider during the administrative reconsideration may be subsequently raised in an appeal. The request shall be signed by the provider or the authorized representative of the provider and must be received by the office not later than forty-five (45) days after release of the rate as computed by the office. Upon receipt of the request for reconsideration, the office shall evaluate the data. After review, the office may amend the rate, amend the challenged procedure or affirm the original decision. The office shall thereafter notify the provider of its final decision in writing, not later than forty-five (45) days from the office's receipt of the request for reconsideration. In the event that a timely response is not made by the office to the provider's reconsideration request, the request shall be deemed denied and the provider may pursue its administrative remedies as set out in subsection (d).

(b) If the provider disagrees with the preliminary recalculated Medicaid rate resulting from a financial audit adjustment or reportable condition the provider may request an administrative reconsideration from the office. Such reconsideration request shall be in writing and shall contain specific issues to be considered and the rationale for the provider's position. The provider must request administrative reconsideration before filing an appeal. Only issues raised by the provider during the administrative reconsideration may be subsequently raised in an appeal. The request shall be signed by the provider or authorized representative of the provider and must be received by the office not later than forty-five (45) days after release of the preliminary recalculated Medicaid rate computed by the office. Upon receipt of the request for reconsideration, the office shall evaluate the data. After review, the office may amend the audit adjustment or reportable condition or affirm the original adjustment or reportable condition. The office shall thereafter notify the provider of its final decision in writing not later than forty-five (45) days from the office's receipt of the request for reconsideration. In the event that a timely response is not made by the office to the provider's reconsideration request, the request shall be deemed denied and the provider may pursue its administrative remedies under subsection (d).

(c) If the provider disagrees with a rate redetermination resulting from a recalculation of its CMI due to an MDS audit review affecting the established Medicaid rate, the provider may request an administrative reconsideration from the office. Such reconsideration request shall be in writing and shall contain specific issues to be considered and the rationale for the provider's position. The provider must request administrative reconsideration before filing an appeal. Only issues raised by the provider during the administrative reconsideration may be subsequently raised in an appeal. The request shall be signed by the provider or authorized representative of the provider and must be received by the office not later than forty-five (45) days after release of the rate computed by the office. After review, the office may amend the audit review adjustment or affirm the original adjustment. The office shall thereafter notify the provider of its final decision in writing not later than forty-five (45) days from the office's receipt of the request for reconsideration. In the event that a timely response is not made by the office to the provider's reconsideration request, the request shall be deemed denied and the provider may pursue its administrative remedies under subsection (d).

(d) After completion of the reconsideration procedure under subsection (a), (b), or (c), the provider may initiate an appeal under IC 4-21.5-3. The request for an appeal must be signed by the nursing facility provider.

(e) The office may take action to implement Medicaid rates without awaiting the outcome of the administrative process, in accordance with section 1(d) of this rule.

SECTION 21. 405 IAC 1-14.6-24 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 4-21.5-3; IC 12-13-7-3; IC 12-15-21-3; IC 16-21; IC 16-28-15; IC 23-2-4

Sec. 24. (a) Through June 30, 2017, the office shall collect a quality assessment from each nursing facility licensed under IC 16-28 as a comprehensive care facility. The census days utilized in the calculation shall be based on the most recently completed annual financial report or quality assessment data collection form and the organization type shall be determined based on the organizations type at the rate effective date being established. The rate utilized is, as follows:

(b) Under IC 16-28-15-7(2), the following nursing facilities shall be exempt from the quality assessment described in subsection (a):

(c) For nursing facilities certified for participation in Medicaid under Title XIX of the federal Social Security Act (42 U.S.C. 1396 et seq.), the quality assessment shall be an allowable cost for cost reporting and auditing purposes. The quality assessment shall be included in Medicaid reimbursement as an add-on to the Medicaid rate. The add-on is determined by dividing the product of the assessment rate times total non-Medicare patient days by total patient days from the most recently completed desk reviewed annual financial report.

(d) For nursing facilities that are not certified for participation in Medicaid under Title XIX of the federal Social Security Act (42 U.S.C. 1396 et seq.), the facility shall remit the quality assessment to the state of Indiana within ten (10) days after the due date. If a nursing facility fails to pay the quality assessment under this subsection within ten (10) days after the date the payment is due, the nursing facility shall pay interest on the quality assessment at the same rate as determined under IC 12-15-21-3(6)(A).

(e) The office shall notify each nursing facility of the amount of the facility's assessment after the amount of the assessment has been computed. If the facility disagrees with the computation of the assessment, the facility shall request an administrative reconsideration by the office. The reconsideration request shall be as follows:

(f) The assessment shall be calculated on an annual basis with equal monthly amounts due on or before the tenth day of each calendar month.

(g) A facility may file a request to pay the quality assessment on an installment plan. The request shall be as follows:

(h) A facility that fails to pay the quality assessment due under this section within ten (10) days after the date the payment is due shall pay interest on the quality assessment at the same rate as determined under IC 12-15-21-3(6)(A).

(i) The office shall offset the collection of the assessment fee for a facility as follows:

(j) If a facility:

SECTION 22. 405 IAC 1-15-1 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 1. This section requires Nursing facilities certified to provide nursing facility care to Medicaid members are required to electronically transmit minimum data set (MDS) information for all nursing facility residents including residents in a noncertified bed, to the office. for use in establishing and maintaining a case mix reimbursement system for Medicaid payments to nursing facilities and other Medicaid program management purposes. Such MDS information shall include the resident's room number on all comprehensive or quarterly MDS assessments and tracking forms. The MDS data is used to establish and maintain a case mix system for Medicaid reimbursement to nursing facilities and other Medicaid program management purposes.

SECTION 23. 405 IAC 1-15-2 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 2. (a) The definitions in this section apply throughout this rule.

(b) "Case mix reimbursement" means a system of paying nursing facilities according to the mix of residents in each facility as measured by resident characteristics and service needs. Its function is to provide payment for resources needed to serve different types of residents.

(c) "Minimum data set" or "MDS" means a core set of screening and assessment elements, including common definitions and coding categories, that forms the foundation of the comprehensive assessment for all residents of long-term care facilities certified to participate in Medicaid. The items in the MDS standardize communication about resident problems, strengths, and conditions within the facilities, between facilities, and between facilities and outside agencies. Version 2.0 (9/2000) is the most current form to the minimum data set (MDS 2.0). The Indiana system will employ the MDS 2.0 3.0 or subsequent revisions as approved by CMS.

SECTION 24. 405 IAC 1-15-4 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15-13-6

Sec. 4. (a) The office shall publish supporting documentation guidelines requirements for all MDS data elements that are utilized to classify nursing facility residents in accordance with the RUG-III IV resident classification system. The guidelines requirements shall be published as a provider bulletin and may be updated by the office as needed. Any such updates shall be made effective no earlier than permitted under IC 12-15-13-6(a).

(b) Nursing facilities shall maintain supporting documentation in the resident's medical chart for all MDS data elements that are utilized to classify nursing facility residents in accordance with the RUG-III IV resident classification system. Such supporting documentation shall be maintained by the nursing facility for all residents in a manner that is accessible and conducive to audit. review.

SECTION 25. 405 IAC 1-15-5 IS AMENDED TO READ AS FOLLOWS:

Affected: IC 12-13-7-3; IC 12-15

Sec. 5. (a) The office shall periodically audit review the MDS supporting documentation maintained by nursing facilities for all residents, regardless of payer type. The audits reviews shall be conducted as frequently as deemed necessary by the office, and each nursing facility shall be audited reviewed no less frequently than every thirty-six (36) months. Advance notification of up to seventy-two (72) hours shall be provided by the office for all MDS audits, reviews, except for follow-up audits reviews that are intended to ensure compliance with validation improvement plans. Advance notification for follow-up audits reviews shall not be required.

(b) All MDS assessments, regardless of payer type, are subject to an MDS audit. review.

(c) When conducting the MDS audits, reviews, the office shall consider all MDS supporting documentation that is provided by the nursing facility and is available to the auditors reviewers prior to the exit conference. MDS supporting documentation that is provided by the nursing facility after the exit conference begins shall not be considered by the office.

(d) The nursing facility shall be required to produce, upon request by the office, a computer generated copy of the MDS assessment that is transmitted in accordance with section 1 of this rule, which shall be the basis for the MDS audit. review.

(e) Suspected intentional alteration of clinical documentation, or creation of documentation after MDS assessments have been transmitted, shall be referred to the IMFCU for investigation of possible fraud. Such an investigation could result in a felony or misdemeanor criminal conviction.

SECTION 26. THE FOLLOWING ARE REPEALED: 405 IAC 1-14.5; 405 IAC 1-15-3; 405 IAC 1-15-6.

DIN: 20171108-IR-405160327FRA

Composed: Apr 28,2024 8:06:28AM EDT

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