(a)

(1) A specified amount of the funding for nursing facility (NF) services shall be set aside during each fiscal year for purposes of calculating a quality-based component of each NF provider's per diem payment as a quality incentive component, which shall be in addition to quality informed aspects of the NF reimbursement methodology.

(2) At the outset of the implementation of these acuity and quality-based reimbursement systems, the amount of funding set aside for the quality-based component of the reimbursement methodology for nursing facilities shall be no less than forty million dollars ($40,000,000) or four percent (4%) of the total projected fiscal year expenditures for NF services, whichever is greater.

(3) In each subsequent year, the amount of funding set aside for the quality-based component of the reimbursement methodology for nursing facilities shall increase at two (2) times the rate of inflation of the index factor. Index factor inflation shall be calculated from the midpoint of the prior state fiscal year to the midpoint of the new state fiscal year.

(4) This annual quality-based component index factor adjustment shall continue until such time that the quality-based component of the reimbursement methodology for nursing facilities constitutes ten percent (10%) of the total projected fiscal year expenditures for NF services. Once the quality-based component of the reimbursement methodology constitutes ten percent (10%) of the total projected fiscal year expenditures for NF services, it shall then increase or decrease at a rate necessary to ensure that the quality-based component of the reimbursement methodology remains at ten percent (10%).

(5) All noted minimum quality-based component thresholds and index factor inflationary adjustments are made prior to consideration of the budget adjustment factor (BAF).

(b)

(1) The base-year annualized medicaid resident day-weighted median costs and prices shall be rebased at an interval no longer than three (3) years after a new base year period has been established. The new base year median costs and prices will be established using the most recently audited or desk reviewed cost reports that have a cost reporting period greater than six (6) months, with a cost report end date eighteen (18) months or more before the start of the rebase period.

(2) Cost reports issued a disclaimer of opinion during the audit process or cost reports containing substantial issues, including incomplete filing, during the desk review process, as solely determined by the comptroller of the treasury, will be excluded from the median and price calculations.

(3) Only audited or reviewed cost reports available prior to the July 1 rate setting will be considered in the median and price calculations.

(c)

(1) The initial quality outcome measures and point values established for the NF reimbursement system implemented on July 1, 2018, shall be based upon the structure of the QuILTSS criteria established by the bureau of TennCare on August 5, 2014. The bureau of TennCare may establish quality outcome measures and performance benchmarks by rulemaking consistent with this section.

(2) Quality outcome measures and performance benchmarks for each measure shall not be modified for the first three (3) fiscal years of reimbursement unless agreed to by TennCare in consultation with the Tennessee Health Care Association (THCA). After the initial three (3) year period, quality outcome measures, performance benchmarks for each measure, and point values shall be established in consultation with THCA. Any modifications to such criteria shall be established through rulemaking and shall not be changed for another three-year period.

(d) Any submissions by any facility relating to documentation of and participation in the quality-based component of the reimbursement methodology for nursing facilities shall be confidential and privileged and shall be protected from direct or indirect means of discovery, subpoena, or admission into evidence in any judicial or administrative proceeding. However, nothing in this rule shall be construed to make immune from discovery or use in any judicial or administrative proceeding information, record, or documents that are otherwise available from original sources kept in the facility, and would otherwise be available to a litigant through discovery requested from the facility. The confidentiality provisions of this subsection (d) shall also not apply to any judicial or administrative proceeding contesting the determination of the bureau of TennCare regarding the facility's quality component reimbursement.