§ 905. Basis for determination of nursing home rates

(a)(1) Consistent with the objectives established under section 901 of this title, the Division shall develop a payment system based on cost categories established for each nursing home. The system shall include no fewer than the following three cost categories:

(A) direct care costs, which refer, at a minimum, to nursing salaries and nursing assistant wages, fringe benefits, and payroll taxes associated therewith;

(B) indirect costs, which refer to all operating costs not established under subdivision (1) of this subdivision; and

(C) property and related costs.

(2) At the discretion of the Director, the cost categories referred to in subdivision (1) of this subsection may be subdivided. Facilities may also be divided into groups, based on considerations such as size or other appropriate determinants within each cost category or subdivision thereof.

(b)(1) The basis for reimbursement within the direct care cost category shall be a resident classification system, which shall group residents into classes according to similarity of their assessed condition and required services. Each resident shall be assigned to one of no fewer than three classes, based on the nature and extent of nursing care needed. The Director may subdivide these classes.

(2) The direct care component of a nursing home's payment rate shall be reflective of the necessary professional and paraprofessional nursing staff time and costs required to address the care needs of the residents of the facility.

(3) Assessments of residents for classification purposes shall be made on the basis of standardized information made available by each facility to the Division. Each nursing home shall assess all of its residents not less often than annually, in accordance with standards and a schedule developed by the Department of Disabilities, Aging, and Independent Living. The accuracy of the information shall be verified and final classifications made by the Department of Disabilities, Aging, and Independent Living.

(c) Rates shall be determined prospectively for each facility on the basis of cost reports submitted to the Director. The Director shall certify the rate for each facility annually by selecting a base year, setting a rate for the base year, and adjusting it annually by inflation factors which are reasonable and which adequately reflect economic conditions. The inflation factors may differ for direct care and other costs. The base years may be changed at different intervals for direct care and other costs. For direct care costs, such change shall occur no less frequently than once every three years, and, for other costs, no less frequently than once every four years, unless the Secretary of Human Services certifies to the General Assembly that it is not necessary to do so. (Added 1989, No. 267 (Adj. Sess.), § 3; amended 1995, No. 160 (Adj. Sess.), § 13; 2005, No. 174 (Adj. Sess.), § 81; 2013, No. 131 (Adj. Sess.), § 20, eff. May 20, 2014.)