Section 307. Applicability of case-mix indices (CMI)

A. The CMI shall be used to adjust the direct patient care cost ceilings and rates for application to individual nursing facilities. Indirect patient care cost ceilings and rates shall not be case-mix adjusted. The CMI shall be calculated using MDS data taken from picture dates as specified in this section.

B. When a facility's direct patient care cost ceiling is compared to its facility specific direct patient care cost rate to determine the direct patient care prospective rate, both the ceiling and the rate shall be case-mix neutral. The direct patient care cost ceiling shall be case-mix neutral because it shall be calculated using base year facility direct patient care cost data that have been case-mix neutralized. To accomplish this neutralization, each facility's base year direct patient care operating cost shall be divided by the facility's average normalized Medicaid CMI developed for the two semiannual periods of assessment data that most closely match the provider's cost reporting year that ends in the base year (see Table IV below). This shall be the facility's case-mix neutral direct patient care per diem for the base year and shall be used in the calculation of the peer group direct patient care cost ceilings. Table IV shows an example of the picture dates used to case-mix neutralize facility specific direct costs for the ceiling calculation. For the first few provider fiscal years for which cost neutralization will be done, a data limitation affects the picture dates that can be used. Accurate case-mix data are available starting with the fourth quarter of calendar year (CY) 1999. For providers with cost reporting periods ending during the first, second, and third quarters of CY 2000, the picture dates used in cost neutralization shall be modified to reflect only accurate case-mix data. For provider cost reporting periods ending in the fourth quarter of 2000 and afterward, this limitation no longer exists and assessment data shall be used that most closely match the cost reporting period.

Table IV
Quarter of Provider Cost Report Year End	Picture Dates Used to Neutralize Costs for Ceiling Calculation
	Preferred Picture Dates if No Data Limitation Applied	Picture Dates That Shall be Used Due to Data Limitation
First Quarter of CY 2000	3/31/99, 6/30/99, 9/30/99, 12/31/99	12/31/99
Second Quarter of CY 2000	6/30/99, 9/30/99, 12/31/99, 3/31/00	12/31/99, 3/31/00
Third Quarter of CY 2000	9/30/99, 12/31/99, 3/31/00, 6/30/00	12/31/99, 3/31/00, 6/30/00
Fourth Quarter of CY 2000	12/31/99, 3/31/00, 6/30/00, 9/30/00	12/31/99, 3/31/00, 6/30/00, 9/30/00

C. When direct patient care prospective rates are set, the direct patient care ceilings used in the calculation shall be the case-mix neutralized ceiling described in subsection B of this section, adjusted for inflation to the midpoint of the prospective period. However, the facility-specific direct patient care cost rates used in the calculation shall not be from the base year, but shall be from the provider fiscal year prior to the period for which a prospective rate is being calculated. Therefore, the provider's direct patient care rate from the previous cost reporting period shall be case-mix neutralized using the facility average normalized Medicaid CMI developed for the two semiannual periods of assessment data that most closely match the cost reporting period prior to the prospective period for which a rate is being calculated. Each year when a new prospective rate is developed, the provider specific direct patient care rate shall be case-mix neutralized using CMI data that uses picture dates that correspond to the cost reporting period used to develop the rate. The relationship between provider cost reporting period and picture dates shall be that illustrated in Table IV, except that in the time period when rates will first be set, the data limitation that affected the picture dates shown in Table IV will not apply. Therefore, for all provider cost reporting periods, picture dates that correspond to the cost reporting period shall be used.

D. After the case-mix neutral direct patient care ceiling (adjusted for inflation from the base year to the prospective period) is compared to the case-mix neutralized facility-specific direct patient care rate (adjusted for inflation from the previous cost reporting period to the prospective period), the lower of the two shall be chosen. This lower amount shall be the case-mix neutral prospective rate per diem for the prospective period. It shall then be adjusted for the CMI intended to correspond as closely as possible to the prospective period. Because of the manner in which the necessary data are reported, there shall be a lag between the picture dates used to develop the CMI information and the prospective period to which the CMI shall apply. The relationship between picture dates and prospective rate periods is illustrated in Table V.

Table V Example of Picture Dates Used in Case-Mix Adjustment of Prospective Rate
Quarter of Provider Cost Report Year End	Picture Dates Used to Adjust First Prospective Semiannual Period	Picture Dates Used to Adjust Second Prospective Semiannual Period
First Quarter CY 2002	9/30/01, 12/31/01	3/31/02, 6/30/02
Second Quarter CY 2002	12/31/01, 3/31/02	6/30/02, 9/30/02
Third Quarter CY 2002	3/31/02, 6/30/02	9/30/02, 12/31/02
Fourth Quarter CY 2002	6/30/02, 9/30/02	12/31/02, 3/31/03

E. Any out-of-state nursing facility provider that is enrolled in the Virginia Medical Assistance Program and is required to submit a cost report to the Virginia Medical Assistance Program will be assigned the Virginia statewide normalized CMI of 1.0. This CMI of 1.0 will be used to adjust the direct patient care cost ceilings and rates.

F. Example of case-mix adjustment of direct operating rate.

1. Following is an illustration of how a nursing facility's case-mix index is used to make direct patient care semiannual rate adjustments to the prospective direct patient care operating cost base rate.

2. Assumptions.

a. The nursing facility's fiscal year is January 1, 2002, through December 31, 2002.

b. The average allowable direct patient care operating rate for the year is $50.

c. The allowance for inflation is 4.0% for the fiscal year beginning January 1, 2003.

d. The nursing facility's case-mix neutral direct peer group ceiling for the fiscal year beginning January 1, 2003, is $60.

e. The nursing facility's normalized case-mix scores are as follows:

	12/31/2001 picture date CMI	1.0100
	3/31/2002 picture date CMI	1.0105
	6/30/2002 picture date CMI	1.0098
	9/30/2002 picture date CMI	1.0305
	12/31/2002 picture date CMI	1.0355
	3/31/2003 picture date CMI	1.0400

3. Calculation of nursing facility's Direct Patient Care Operating Cost Rate.

a. Direct Patient Care Operating Cost Rate:

	Average Allowable Direct Patient Care Operating Rate	$50
	Allowance For Inflation FYE 2003 x 1.0400	$52

b. Calculation of case-mix factor used for case-mix neutralization:

	12/31/2001 CMI	1.0100
	3/31/2002 CMI	1.0105
	6/30/2002 CMI	1.0098
	9/30/2002 CMI	1.0305
	Average of four CMI =	1.0152

c. Case-mix neutralized average allowable direct patient care operating rate: Average Allowable Direct Patient Care Operating Rate for FY 2003 $52

Case-mix neutralization factor ÷ 1.0152

Case-mix neutralized Direct Patient Care Operating Rate for FY 2003 = $51.22

d. Lower of case-mix neutralized cost or ceiling:

The case-mix neutralized Direct Patient Care Operating Rate, $51.22, is lower than the case-mix neutral ceiling, $60. $51.22 will be used in the rate calculation.

e. Calculation of case-mix rate adjustments:

(1) Case-mix rate adjustment for the period January 1, 2003, through June 30, 2003:

First semiannual rate adjustment %68 Average of (6/30/2002 CMI, 9/30/2002 CMI) = Average(1.0098,1.0305) = 1.0202

(2) Case-mix rate adjustment for the period July 1, 2003 through December 31, 2003:

Second semiannual rate adjustment %68 Average of (12/31/2002 CMI, 3/31/2003 CMI) = Average(1.0355,1.0400) =1.0378

f. Rates for semiannual periods:

(1) Case-mix adjusted rate for the period January 1, 2003, through June 30, 2003:

First semiannual rate = 1.0202 * $51.22 = $52.25

(2) Case-mix adjusted rate for the period July 1, 2003 through December 31, 2003:

Second semiannual rate = 1.0378 * $51.22 = $53.15

Historical Notes

Derived from Volume 18, Issue 18, eff. July 1, 2002.

Statutory Authority

§ 32.1-325 of the Code of Virginia.