(2)__That no upper limits, caps, state median rates or other cost or payment limitations set forth in the applicable principles of reimbursement may be applied to limit payment of any costs or rates reviewed under the certificate of need process or under any other applicable department review process and found to be reasonable and necessary to ensure the financial feasibility of the project;

(3)__That the interim and final per diem payment rates and the total Medicaid payments made by the department to the facility in each cost reporting period are consistent with, and do not assume or require reductions in, the facility's reasonable capital and noncapital operating costs as found and considered in the certificate of need review process; and

(4)__That the department shall fully recognize and pay, on an ongoing basis and not subject to any time limitations, all costs and pro forma cost report projections that the department has approved or found reasonable in the course of issuing its certificate of need approval, or that are set forth in the findings or analysis on the basis of which that approval is based, or have been deemed reasonable by the department in granting approval for residential care facility beds.

SUMMARY

This bill addresses and resolves certain inconsistent provisions in the certificate of need law governing nursing facilities and in the principles of reimbursement governing both nursing facilities and residential care facilities that adversely affect facilities that replace prior existing facilities. Under the current law, any certificate of need approval for new nursing facilities or additional beds must ensure so-called "Medicaid budget neutrality" and this bill does not change that requirement.

Rather, the bill addresses circumstances where a replacement facility has completely fulfilled applicable Medicaid budget neutrality requirements, but is now prevented from receiving compensation for its proposed nursing and other staff costs that are necessary to meet licensure and certification requirements of the Department of Human Services due to various statewide median caps that limit reimbursement for certain particular components, especially the direct patient care component, the indirect

patient care component and the routine care component. For residential care facilities, the applicable principles of reimbursement impose upper limits on direct care and routine care cost components.

In cases where the new facility's proposed annual expenses fulfill the Medicaid budget neutrality requirements, the bill requires the department to amend the existing nursing facility and residential care facility principles of reimbursement to ensure that:

1. The total actual cost of nursing staff, other direct staff and other direct and routine care costs that are within approved department staffing patterns will be fully reimbursed by the Medicaid system;

2. That no upper limits, caps, state median rates or other cost or payment limitations set forth in the principles of reimbursement may be applied to limit the payment to these facilities, so long as the underlying costs have been approved by the certificate of need process in the case of nursing facility beds or have otherwise been approved by the department in the case of residential care facility beds; and

3. That interim and final per diem rates and total Medicaid payments made to these replacement facilities fully recognize these approved costs both initially and on an ongoing basis.