Report 2017-109 Recommendation 10 Responses

Report 2017-109: Skilled Nursing Facilities: Absent Effective State Oversight, Substandard Quality of Care Has Continued (Release Date: May 2018)

Recommendation #10 To: Health Planning and Development, Office of Statewide

To ensure that it provides the public with nursing facility information that is accurate and comprehensible, Health Planning should update its regulations to do the following:

- Append additional schedules to the template for the annual cost report to enable nursing facilities to fully disclose related-party transactions.

- Provide a single location in the annual cost report template for nursing facilities to enter related-party transaction amounts next to the amounts they are claiming for Medi-Cal reimbursement.

- Create an additional schedule in the cost report template that depicts how a company is investing in quality-of-care improvements.

Annual Follow-Up Agency Response From October 2023

This recommendation is partially implemented because although the Department of Health Care Access and Information implemented the first two parts of this recommendation by updating its regulations and annual cost report, statutory changes are needed for implementation of the third part of the recommendation.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

Annual Follow-Up Agency Response From October 2022

Statutory changes made in June 2022 abolish the current Skilled Nursing Facility Quality and Accountability Supplemental Payment System and instead require the Department of Health Care Services (DHCS) to develop the Workforce and Quality Incentive Program. Under this new program a network provider furnishing skilled nursing facility services to a Medi-Cal managed care enrollee may earn performance-based directed payments from the Medi-Cal managed care plan they contract with based on meeting milestones and metrics to be developed by DHCS. The statute requires Medi-Cal managed care plans and network providers of skilled nursing facility services to submit information DHCS deems necessary to implement the program, at the times and in the form and manner specified by DHCS. While the legislature did not directly include payments linked to quality-of-care improvements as recommended in the audit report, should the measures developed by DHCS include a quality-of-care improvements component, the Department of Health Care Access and Information, formally known as OSHPD, would create a schedule within the Long-Term Care Integrated Disclosure and Medi-Cal Cost Report allowing skilled nursing facilities to disclose the amount that is reinvested into quality-of-care improvements if so specified by DHCS.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

This recommendation is partially implemented because Health Care Access and Information implemented the first two parts of this recommendation by updating its regulations and annual cost report, but it states that implementation of the third part of the recommendation is contingent upon the development and implementation of the Workforce and Quality Incentive Program.

Annual Follow-Up Agency Response From October 2021

Contingent upon statutory changes made to the Medi-Cal reimbursement program to include quality-of-care improvements as recommended to the legislature, the Department of Health Care Access and Information, formally known as OSHPD, would create a schedule within the Long-Term Care Integrated Disclosure and Medi-Cal Cost Report allowing nursing facilities to disclose the amount that is reinvested into quality-of-care improvements.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

This recommendation is partially implemented because although Health Care Access and Information implemented the first two parts of this recommendation by updating its regulations and annual cost report, it states implementation of the third part of the recommendation is contingent upon statutory changes.

Annual Follow-Up Agency Response From October 2020

OSHPD, in consultation with the Department of Health Care Services, promulgated regulations with an effective date of April 1, 2020. The regulations require full disclosure of related parties and their transactions with skilled nursing facilities and require related-party transactions to be reported next to the amount claimed for Medi-Cal reimbursement.

In conjunction with statutory changes made to the Medi-Cal reimbursement program to include quality-of-care improvements as recommended to the legislature, OSHPD would create a schedule within the Long-Term Care Integrated Disclosure and Medi-Cal Cost Report allowing nursing facilities to disclose the amount that is reinvested into quality-of-care improvements.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

This recommendation is partially implemented because although OSHPD implemented the first two parts of this recommendation by updating its regulations and annual cost report, it states it cannot implement the third part without legislative changes and approval from the Center for Medicare and Medicaid Services.

The annual cost report now includes additional schedules that enable nursing facilities to fully disclose related-party transactions. It also provides a single location for nursing facilities to enter related-party transaction amounts next to the amounts they are claiming for Medi-Cal reimbursement.

OSHPD started in a prior response to our recommendation that it cannot implement the third part of this recommendation without legislative changes to the Medi-Cal reimbursement program. OSHPD also stated that Health Care Service confirmed that California's State Plan Amendment for Medi-Cal would need to be updated which would require approval from the Center for Medicare and Medicaid Services.

Annual Follow-Up Agency Response From October 2019

OSHPD, in consultation with the Department of Health Care Services, has finalized and submitted a rulemaking package to the Office of Administrative Law (OAL) on October 7, 2019, for review and approval with an effective date of April 1, 2020. The regulations would allow for full disclosure of related parties and their transactions with skilled nursing facilities and allow for related-party transactions to be reported next to the amount claimed for Medi-Cal reimbursement.

To the extent that statutory changes are made to the Medi-Cal reimbursement program, OSHPD would create a schedule within the

Long-Term Care Integrated Disclosure and Medi-Cal Cost Report allowing nursing facilities to disclose the amount that is reinvested into quality-of-care improvements.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

Implementation of this recommendation is pending updates to Health Planning's regulations.

1-Year Agency Response

OSHPD and the Department of Health Care Services (DHCS) are finalizing changes to the Long-Term Care Integrated Disclosure and Medi-Cal Cost Report forms and instructions to enable nursing facilities to fully disclose related-party transactions. OSHPD has initiated the rulemaking process to adopt regulations to update these forms and instructions. It is estimated that these regulations will be adopted by January 2020.

The OSHPD/DHCS/CDPH implementation team has identified data-sharing opportunities and is working towards implementation. OSHPD has initiated the rulemaking process to adopt regulations that would increase the transparency of related-party transactions and allow nursing facilities to report these transactions next to the amount claimed for Medi-Cal reimbursement. It is estimated that these regulations will be adopted by January 2020.

There are no changes to the prior 6-month update. To the extent that statutory changes are made to the Medi-Cal reimbursement program, OSHPD would create a schedule within the Long-Term Care Integrated Disclosure and Medi-Cal Cost Report allowing nursing facilities to disclose the amount that is reinvested into quality-of-care improvements.

California State Auditor's Assessment of 1-Year Status: Pending

This recommendation is pending updates to Health Planning's regulations.

6-Month Agency Response

OSHPD has completed a work plan and timeline to adopt regulations by January 2020. Recently enacted legislation, Assembly Bill (AB) 1953 (Chapter 383, Statutes of 2018) requires disclosure of additional related party data, which necessitates additional changes to the annual cost report. Audit recommendations 1 and 2 will be combined into a single regulations package that includes AB 1953 requirements.

The OSHPD/DHCS implementation team is assessing data collection efforts, mapping duplicative tasks, and determining appropriate responsibilities for OSHPD, DHCS, and CDPH to eliminate redundant functions, streamline processes, and increase efficiencies. The team is evaluating required changes to the annual cost report that will provide transparency of related-party transactions. As stated in the 6-month response to Recommendation #1, regulations to update the reporting forms and accompanying instructions are estimated to be adopted by January 2020.

OSHPD and the California Department of Public Health's Quality Assurance Division determined that a modification to the Medi-Cal reimbursement program would require legislative changes. DHCS has confirmed that California's State Plan Amendment for Medi-Cal would need to be updated, which would require approval from the Center for Medicare and Medicaid Services.

To the extent that statutory changes are made to the Medi-Cal reimbursement program, OSHPD would create a schedule for nursing facilities to disclose the amount that is reinvested into quality-of-care improvements.

California State Auditor's Assessment of 6-Month Status: Pending

This recommendation is pending updates to Health Planning's regulations.

60-Day Agency Response

OSHPD established an internal workgroup and identified a lead project manager to evaluate the potential impact of changes to the annual cost report. The workgroup is developing a work plan and timeline to implement the audit recommendations.

OSHPD and the Department of Health Care Services have formed an implementation team to identify proposed revisions to the cost report that will increase the transparency of related-party transactions and report this information next to the amounts claimed for Medi-Cal reimbursement. Any modifications to the report format will require a rulemaking process. The implementation team is scheduled to meet in July 2018 to develop a plan for stakeholder outreach and a schedule for the regulatory process.

OSHPD and the California Department of Public Health's Quality Assurance division are working together to evaluate potential changes to the annual cost report that would depict how a company is investing in quality-of-care improvements, and to determine any necessary legislative or regulatory changes needed to implement this recommendation.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2017-109

Agency responses received are posted verbatim.