Medicaid: Reimbursement For Nursing Home Services May Be Offset By Earned Investment Income, Court Rules
Legal Eagle Eye Newsletter for the Nursing Profession
October 1995
Quick Summary: The interest offset rule should be applied both to investor-operated and non-investor-operated nursing homes, the Court of Special Appeals of Maryland ruled. This will serve the important purpose, in the court’s view, that providers are reimbursed at "reasonable and adequate rates." The state agency charged with Medicaid reimbursement of nursing homes must insure that providers borrow only what they need to fulfill capital requirements relating to providing services to Medicaid beneficiaries, as part of the overall goal of insuring that such providers operate in an efficient manner. There is also a policy to treat facilities in the same manner, by reimbursing them under the same formula for capital-related costs regardless of the type of ownership.
In general terms, the purpose of the Medicaid program reimbursement system is to reimburse reasonable allowable costs of providing services to Medicare beneficiaries, not reimbursement of all the costs related to the nursing facility.
Costs are divided into administrative and routine costs, direct nursing care costs, patient care costs and capital costs. Capital costs include such items as property taxes, property insurance, mortgage interest, net capital value rental and central office capital costs.
Net interest expenses are a cost element that is considered in fixing reimbursement rates to Medicaid facilities. However, as the court ruled in this case, interest income to the facility must be subtracted from interest expense.
Department of Health and Mental Hygiene vs Nursing Center, 657 A. 2d 372 (Md. App., 1995).