Technical Reference Document
Rate Calculation Algorithm
& Administration Guide
Idaho Nursing Facility Sustainability & Quality Act
H.B. ____ — 69th Legislature
Prepared by: Idaho Health Care Association (IHCA)
Robert Vande Merwe, Executive Director • Luke Malek, Policy Director
Version: 1.0 — August 2026
Classification: Technical Implementation Reference
AUDIENCE: Idaho DHW Rate-Setting Division • JFAC Staff • Legislative Services Office
Table of Contents
- I. Document Purpose & Scope
- II. System Overview — What Changes
- III. Data Flow — Inputs, Processing, Outputs
- IV. Annual Administration Cycle
- V. Data Collection — Cost Report Requirements
- VI. The Rate Algorithm — 14 Steps
- VII. Component Calculations — Detail
- VIII. Case-Mix Adjustment — PDPM Integration
- IX. Quality Scorecard — Scoring Rubric
- X. Tier Structure Summary
- XI. Worked Example A — Urban Facility
- XII. Worked Example B — Rural Facility
- XIII. Side-by-Side Comparison
- XIV. Rate Determination Output Format
- XV. Transition Year Mechanics (FY 2028)
- XVI. IT Systems & Infrastructure Requirements
- XVII. Appendix — All Formulas
In Plain English
Right now, Idaho pays nursing homes $259 a day to take care of elderly people on Medicaid — that’s less than it actually costs to provide the care, and it’s the 4th lowest rate in the entire country. The formula Idaho uses to figure out this payment is based on rules from 1985 and a system the federal government stopped using in 2019. Because the payment is so low, nursing homes are closing, workers are quitting to go work at Walmart where they can make more money, and elderly people are being moved far away from their families. This bill fixes the payment formula, raises a fee that nursing homes pay (not taxpayers) to unlock $32 million per year in federal money that Idaho is currently leaving on the table, creates bonuses for nursing homes that provide the best care, and starts a fund to train and pay more workers. It would cost the state about $2.80 per person per year — and for every $1 Idaho puts in, the federal government puts in $2.33. Six other states have already done this successfully.
I. Document Purpose & Scope
This document provides the complete technical specification for administering Medicaid nursing facility per diem rate calculations under the Idaho Nursing Facility Sustainability & Quality Act. It is designed for the rate analysts, accountants, and IT systems developers at the Idaho Department of Health & Welfare (DHW) who will implement the component-based methodology.
What this document covers: Every formula, data input, decision point, ceiling, tier, and output format needed to calculate a facility's Medicaid per diem rate from raw cost report data through final rate determination. Includes two fully worked examples using fictional Idaho facilities.
II. System Overview — What Changes
| Element | Current System | New System |
|---|
| Classification | RUG-III (CMS abandoned 2019) | PDPM-aligned case-mix |
| Rate Structure | Single blended rate + BAF reduction | 5-component sum, no BAF |
| Property Base | $9.24/day (established 1985) | Fair rental value / current replacement |
| Cost Containment | BAF blanket reduction (%) | Per-component ceilings (percentile-based) |
| Case-Mix | RUG-III categories | PDPM Nursing + Therapy classifications |
| Quality | None | 100-point scorecard → $15-$30/day bonus |
| Rate Floor | None | 90% of statewide median cost |
| Rural Adjustment | None | 5% add-on for counties <25,000 pop. |
| Rebasing | Irregular | Every 2 years, data ≤36 months old |
| Inflation | Discretionary | Annual, SNF Market Basket Index |
| Provider Assessment | ~3.5% of net patient revenue | 5.5% (within 6% federal safe harbor) |
III. Data Flow — Inputs → Processing → Outputs
📥 INPUTS
Annual Audited Cost Reports (all facilities) + MDS/PDPM Data + CMS Quality Data + PBJ Staffing + Survey Results
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Step 1-2: Extract & validate cost data by component, calculate per-patient-day costs
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Step 3-4: Build statewide distribution — calculate percentiles, set component ceilings
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Step 5: Apply ceilings — each facility component = MIN(facility cost, ceiling)
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Step 6-7: Calculate facility case-mix indices (PDPM) → apply to Nursing & Therapy components
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Step 8-9: Sum all 5 components → apply SNF Market Basket inflation
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Step 10: Rural? → If county pop < 25,000 → apply 5% rural adjustment
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Step 11: Rate Floor Check → MAX(calculated rate, 90% of statewide median cost)
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Step 12-13: Calculate quality scorecard (0-100) → determine incentive tier
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📤 OUTPUT
Final Medicaid Per Diem Rate = Base Rate + Quality Incentive Payment
IV. Annual Administration Cycle
| Month | Action | Responsible |
|---|
| January 1 | Publish annual rate calendar for upcoming fiscal year | DHW Rate Division |
| January 15 | Publish CMS Market Basket Index for inflation adjustment | CMS (federal) |
| February 1 | Deadline: facilities submit audited cost reports for prior fiscal year | Facilities |
| Feb–March | Cost report audit, validation, and desk review | DHW Rate Division |
| March 1 | Extract quality data: CMS Five-Star, PBJ staffing, survey results | DHW Quality Team |
| March 15 | Calculate statewide percentiles and component ceilings | DHW Rate Division |
| April 1 | Run rate algorithm for all facilities — generate proposed rates | DHW Rate Division |
| April 1 | Calculate quality scorecards and tier assignments | DHW Quality Team |
| April 15 | Publish proposed rates — open 60-day public comment period | DHW Rate Division |
| May | Hold 2 public hearings (geographically diverse locations) | DHW |
| June 1 | Present proposed rates to JFAC / germane committee | DHW Director |
| June 15 | Close comment period — publish response to substantive comments | DHW Rate Division |
| June 20 | Publish final rates and quality scorecard results | DHW Rate Division |
| July 1 | New rates take effect for all facilities | DHW / Fiscal |
| Quarterly | Update quality scorecard data; adjust incentive payments | DHW Quality Team |
| December 1 | Submit annual report to Legislature | DHW Director |
V. Data Collection — Cost Report Requirements
A. Cost Report Data Fields (Annual Submission by Each Facility)
| Category | Required Data Fields | Source |
|---|
| Census & Days | Total licensed beds | Facility |
| Average daily census (ADC) | Facility |
| Total patient days (by payer: Medicaid, Medicare, Private, Other) | Facility |
| Medicaid patient days | Facility / DHW claims |
| Costs by Component | Nursing services (RN, LPN, CNA wages + benefits + contract labor) | Cost Report |
| Therapy services (PT, OT, SLP, RT wages + benefits + contracts) | Cost Report |
| Non-case-mix operating (dietary, laundry, housekeeping, plant ops, admin, insurance) | Cost Report |
| Capital & property (depreciation, interest, rent, major equipment, land improvements) | Cost Report |
| Support services (pharmacy, medical supplies, ancillary, activities) | Cost Report |
| Staffing | Total nursing hours by category (RN, LPN, CNA) | PBJ (CMS) |
| Agency/contract hours by category | PBJ / Cost Report |
| Wage rates by category | Cost Report |
| Annual turnover rate by category | Facility |
| Property/Capital | Building age, square footage, last major renovation date | Facility |
| Total capital assets at cost, accumulated depreciation | Cost Report |
| Outstanding mortgage/loan balances and interest rates | Cost Report |
| Quality | CMS Five-Star overall, health inspection, staffing, QM ratings | CMS Care Compare |
| Annual survey deficiency data (scope/severity) | DHW Survey Division |
| Resident & family satisfaction survey results | Standardized survey |
| Case-Mix | MDS assessments for PDPM classification | CMS MDS Repository |
B. External Data Sources (DHW Pulls Directly)
| Data | Source | Frequency |
|---|
| PDPM case-mix classifications | CMS MDS 3.0 Repository | Quarterly |
| Payroll-Based Journal (PBJ) staffing | CMS PBJ System | Quarterly |
| Five-Star Quality Ratings | CMS Care Compare | Monthly |
| Survey deficiency data | DHW Survey & Certification | Per survey cycle |
| SNF Market Basket Index | CMS Office of the Actuary | Annual |
| County population data | U.S. Census Bureau | Annual (ACS) |
| Construction cost index (for capital component) | RS Means / BLS | Annual |
VI. The Rate Algorithm — 14 Steps
Algorithm Overview: The rate for each facility is calculated independently using the same 14-step process. All facilities go through every step. The algorithm runs once annually (with quarterly quality updates). Each step is deterministic — no discretionary adjustments.
Step 1
Extract Cost Report Data by Component
From each facility's audited cost report, extract total annual costs for each of the 5 rate components. Validate: total of components must equal total reported costs ±2%. Flag discrepancies for desk review.
Data Extraction
For each facility f:
Nursing_Cost[f] = RN wages + LPN wages + CNA wages + benefits + contract nursing
Therapy_Cost[f] = PT + OT + SLP + RT wages + benefits + contracts
NonCaseMix_Cost[f] = dietary + laundry + housekeeping + plant ops + admin + insurance
Capital_Cost[f] = depreciation + interest + rent + major equip + land improvements
Support_Cost[f] = pharmacy + med supplies + ancillary + activities
Total_Cost[f] = sum of all 5 components
Total_Days[f] = total patient days (all payers)
Step 2
Calculate Per-Patient-Day (PPD) Costs by Component
Divide each component's annual cost by total patient days. This normalizes across facility sizes.
Formula 1: Component PPD
Component_PPD[f][c] = Component_Annual_Cost[f][c] / Total_Patient_Days[f]
Step 3
Build Statewide Distribution — Calculate Percentiles
Rank ALL facilities by PPD within each component. Calculate the 25th, 50th (median), and 75th percentiles. These percentiles form the basis for component ceilings.
Statewide Percentile Calculation
For each component c:
Sort all facility PPD values: PPD[1] ≤ PPD[2] ≤ ... ≤ PPD[n]
P25[c] = value at 25th percentile position
P50[c] = value at 50th percentile (median)
P75[c] = value at 75th percentile position
Step 4
Set Component Ceilings
Each component has a ceiling based on statewide data. Facilities below the ceiling are paid at cost. Facilities above are capped at the ceiling.
| Component | Ceiling Rule | Rationale |
|---|
| Nursing Services | 75th percentile | Higher ceiling rewards investment in direct care staffing |
| Therapy Services | 75th percentile | Higher ceiling supports rehabilitation outcomes |
| Non-Case-Mix Operating | Median (50th percentile) | Operational costs — efficient median standard |
| Capital & Property | Median (50th percentile)* | *Calculated from modernized fair rental value, NOT historical $9.24 base |
| Support Services | Median (50th percentile) | Ancillary costs — efficient median standard |
Step 5
Apply Ceilings to Each Facility
For each facility and each component, the applied rate is the LOWER of the facility's actual cost or the ceiling.
Formula 2: Ceiling Application
Applied_PPD[f][c] = MIN( Facility_PPD[f][c], Ceiling[c] )
Step 6
Calculate Facility Case-Mix Indices (PDPM)
Using MDS assessment data classified under PDPM, calculate each facility's case-mix index for Nursing and Therapy separately. The CMI measures patient acuity relative to the statewide average (1.00 = average).
Formula 3: Case-Mix Index
Facility_CMI[f][type] = Facility_Average_PDPM_Weight[f][type] / Statewide_Average_PDPM_Weight[type]
PDPM Note: Nursing CMI is based on the PDPM Nursing component classification (clinical category + functional status). Therapy CMI is based on the PDPM PT, OT, and SLP component classifications. Non-case-mix, Capital, and Support components are NOT case-mix adjusted.
Step 7
Apply Case-Mix Adjustment to Nursing & Therapy
Multiply the ceiling-applied Nursing and Therapy PPDs by their respective case-mix indices. Higher acuity = higher rate. Lower acuity = lower rate.
Formula 4: Case-Mix Adjustment
Nursing_Adjusted[f] = Applied_Nursing_PPD[f] × Nursing_CMI[f]
Therapy_Adjusted[f] = Applied_Therapy_PPD[f] × Therapy_CMI[f]
Step 8
Sum All Components → Preliminary Base Rate
Formula 5: Preliminary Base Rate
Base_Rate[f] = Nursing_Adjusted[f]
+ Therapy_Adjusted[f]
+ Applied_NonCaseMix[f]
+ Applied_Capital[f]
+ Applied_Support[f]
Step 9
Apply Annual Inflation Adjustment
Multiply the base rate by the most recent CMS SNF Market Basket Index percentage change. This ensures rates keep pace with cost inflation annually.
Formula 6: Inflation Adjustment
Inflated_Rate[f] = Base_Rate[f] × (1 + Market_Basket_Pct)
Step 10
Apply Rural Adjustment (If Applicable)
Facilities in counties with fewer than 25,000 residents receive a 5% rural adjustment to reflect higher per-unit costs of providing care in rural settings.
Formula 7: Rural Adjustment
IF county_population[f] < 25,000:
Rural_Rate[f] = Inflated_Rate[f] × 1.05
ELSE:
Rural_Rate[f] = Inflated_Rate[f]
Step 11
Rate Floor Check
No facility's rate may fall below 90% of the statewide median reasonable cost per patient day. If the calculated rate is below the floor, the rate is raised to the floor.
Formula 8: Rate Floor
Rate_Floor = 0.90 × Statewide_Median_Cost_PPD
Final_Base[f] = MAX( Rural_Rate[f], Rate_Floor )
Step 12
Calculate Quality Scorecard Score
Independently score each facility across 4 domains, 15 measures, 100 total points. See Section IX for full scoring rubric.
Formula 9: Quality Score
Quality_Score[f] = Clinical_Points[f]
+ Staffing_Points[f]
+ Satisfaction_Points[f]
+ Regulatory_Points[f]
Step 13
Determine Quality Incentive Tier & Payment
Formula 10: Quality Incentive
IF Quality_Score[f] >= 90: Quality_Bonus[f] = $30.00/day
ELIF Quality_Score[f] >= 80: Quality_Bonus[f] = $15.00/day
ELSE: Quality_Bonus[f] = $0.00/day
Step 14
Calculate Final Medicaid Per Diem Rate
Formula 11: FINAL RATE
Final_Medicaid_Rate[f] = Final_Base[f] + Quality_Bonus[f]
IX. Quality Scorecard — Complete Scoring Rubric
Scoring Principle: All data comes from independently verifiable sources (CMS, PBJ, DHW surveys). No self-reported quality data. Facilities cannot game the scorecard — every measure is externally validated.
DOMAIN A: Clinical Outcomes — 40 Points Maximum
| Measure | Max Pts | Scoring Thresholds | Source |
|---|
| CMS Overall Star Rating | 12 | 5★=12 4★=9 3★=6 2★=3 1★=0 | CMS Care Compare |
| Falls with major injury (per 1,000 resident days) | 8 | <2.0=8 2.0-3.5=6 3.5-5.0=4 5.0-7.0=2 >7.0=0 | MDS Quality Measures |
| Pressure ulcers (% of residents, risk-adjusted) | 6 | <2%=6 2-4%=4 4-6%=2 >6%=0 | MDS Quality Measures |
| UTI rate (% of residents) | 4 | <3%=4 3-5%=3 5-7%=2 >7%=0 | MDS Quality Measures |
| ED visits (per 1,000 resident days) | 4 | <1.5=4 1.5-3.0=3 3.0-4.5=2 >4.5=0 | Claims / MDS |
| Community discharge rate (%) | 6 | >25%=6 20-25%=4 15-20%=2 <15%=0 | MDS discharge data |
DOMAIN B: Staffing — 30 Points Maximum
| Measure | Max Pts | Scoring Thresholds | Source |
|---|
| Total nursing HPRD | 10 | >4.5=10 4.0-4.5=7 3.5-4.0=4 3.0-3.5=2 <3.0=0 | CMS PBJ |
| RN HPRD | 6 | >0.75=6 0.55-0.75=4 0.40-0.55=2 <0.40=0 | CMS PBJ |
| Staff turnover (annual %) | 6 | <20%=6 20-35%=4 35-50%=2 >50%=0 | Cost Report / PBJ |
| Training hours per employee (annual) | 4 | >40=4 30-40=3 20-30=2 <20=0 | Cost Report |
| Agency/temp staffing (% of total nursing hours) | 4 | <5%=4 5-15%=3 15-25%=2 >25%=0 | CMS PBJ |
DOMAIN C: Resident & Family Satisfaction — 15 Points Maximum
| Measure | Max Pts | Scoring Thresholds | Source |
|---|
| Resident satisfaction (% positive) | 8 | >90%=8 80-90%=6 70-80%=4 <70%=2 | Standardized survey |
| Family satisfaction (% positive) | 5 | >90%=5 80-90%=4 70-80%=3 <70%=1 | Standardized survey |
| Complaints (per 100 beds/year) | 2 | <3=2 3-6=1 >6=0 | DHW Complaint Log |
DOMAIN D: Regulatory Compliance & Improvement — 15 Points Maximum
| Measure | Max Pts | Scoring Thresholds | Source |
|---|
| Annual survey: deficiency severity | 6 | All ≤ scope D = 6 1-2 above D = 3 3+ above D = 0 | DHW Survey |
| No immediate jeopardy (3-year lookback) | 4 | 0 IJ = 4 1 IJ = 1 2+ IJ = 0 | DHW Survey |
| Timely correction (% corrected by deadline) | 3 | 100% = 3 90-99% = 2 <90% = 0 | DHW Survey |
| Active QI program with documented outcomes | 2 | Yes + outcomes = 2 Yes only = 1 No = 0 | DHW Survey |
X. Tier Structure Summary
A. Component Ceiling Tiers
| Component | Ceiling Tier | Effect |
|---|
| Nursing Services | 75th percentile | Reimburses up to 75th %ile — rewards staffing investment |
| Therapy Services | 75th percentile | Reimburses up to 75th %ile — supports rehab |
| Non-Case-Mix Operating | Median | Efficient benchmark — costs above median not reimbursed |
| Capital & Property | Median | Modernized base — fair rental value methodology |
| Support Services | Median | Efficient benchmark |
B. Quality Incentive Tiers
| Tier | Score Range | Bonus Per Diem | Annual Impact (80-bed, 75% Medicaid) |
|---|
| No Bonus | 0 – 79 | $0.00 | $0 |
| Tier 2: High Performance | 80 – 89 | $15.00 | +$328,500 |
| Tier 1: Excellence | 90 – 100 | $30.00 | +$657,000 |
C. Geographic Tiers
| Tier | Criteria | Adjustment |
|---|
| Urban | County population ≥ 25,000 | None (standard rate) |
| Rural | County population < 25,000 | +5% to base rate |
D. Rate Floor Tier
| Condition | Action |
|---|
| Calculated rate ≥ 90% of statewide median cost | Use calculated rate (no change) |
| Calculated rate < 90% of statewide median cost | Rate raised to floor (90% of median) |
XI. Worked Example A — Urban Facility
Step 1-2: Cost Report Data & PPD Calculation
| Component | Annual Cost | Total Days (39,420) | Facility PPD |
|---|
| Nursing Services | $5,120,000 | 39,420 | $129.89 |
| Therapy Services | $940,000 | 39,420 | $23.84 |
| Non-Case-Mix Operating | $2,840,000 | 39,420 | $72.03 |
| Capital & Property | $1,180,000 | 39,420 | $29.94 |
| Support Services | $720,000 | 39,420 | $18.27 |
| TOTAL | $10,800,000 | 39,420 | $273.97 |
Step 3-4: Statewide Percentiles & Ceilings (All Idaho Facilities)
| Component | 25th %ile | Median | 75th %ile | Ceiling Used |
|---|
| Nursing | $98.40 | $112.60 | $125.80 | $125.80 (75th) |
| Therapy | $18.20 | $21.50 | $26.40 | $26.40 (75th) |
| Non-Case-Mix | $62.30 | $74.80 | $88.20 | $74.80 (median) |
| Capital | $18.50 | $28.60 | $38.40 | $28.60 (median) |
| Support | $14.20 | $17.80 | $22.10 | $17.80 (median) |
Step 5: Apply Ceilings
| Component | Facility PPD | Ceiling | Applied PPD | Result |
|---|
| Nursing | $129.89 | $125.80 | $125.80 | ⛔ CAPPED — facility exceeds 75th %ile |
| Therapy | $23.84 | $26.40 | $23.84 | ✅ AT COST — below ceiling |
| Non-Case-Mix | $72.03 | $74.80 | $72.03 | ✅ AT COST — below ceiling |
| Capital | $29.94 | $28.60 | $28.60 | ⛔ CAPPED — above median |
| Support | $18.27 | $17.80 | $17.80 | ⛔ CAPPED — above median |
| Pre-CMI Subtotal | $268.07 | |
Step 6-7: Case-Mix Adjustment
| PDPM Component | Facility Avg Weight | Statewide Avg | CMI | Applied PPD | Adjusted PPD |
|---|
| Nursing CMI | 1.150 | 1.085 | 1.06 | $125.80 | $133.35 |
| Therapy CMI | 0.989 | 0.960 | 1.03 | $23.84 | $24.56 |
Step 8: Sum Components
Base_Rate = $133.35 + $24.56 + $72.03 + $28.60 + $17.80 = $276.34
Step 9: Inflation (SNF Market Basket = 3.1%)
Inflated_Rate = $276.34 × 1.031 = $284.91
Step 10: Rural Adjustment
Ada County population = 520,000 → ≥ 25,000 → No rural adjustment
Rural_Rate = $284.91
Step 11: Rate Floor Check
Statewide median cost = $261.00/day
Rate floor = 90% × $261.00 = $234.90
$284.91 > $234.90 → ✅ PASSES — rate exceeds floor
Final_Base = $284.91
Step 12: Quality Scorecard
| Domain | Max | Score | Key Factors |
|---|
| A. Clinical Outcomes | 40 | 34 | 4★ overall (9), low falls (6), moderate pressure ulcers (4), good UTI (3), moderate ED (3), good discharge (6), low infections (3) |
| B. Staffing | 30 | 22 | 4.1 HPRD (7), 0.58 RN HPRD (4), 28% turnover (4), 32 training hrs (3), 12% agency (3), good coverage (1) |
| C. Satisfaction | 15 | 11 | 85% resident (6), 82% family (4), 4 complaints/100 beds (1) |
| D. Regulatory | 15 | 12 | Minor deficiencies only (6), no IJ (4), 95% timely correction (2), QI program active (0 — no documented outcomes) |
| TOTAL | 100 | 79 | |
Step 13-14: Quality Incentive & Final Rate
Quality Score = 79 → → Quality_Bonus = $0.00
FINAL MEDICAID PER DIEM RATE
$284.91 + $0.00 = $284.91/day
Current Rate (RUG-III + BAF)
$259.00
per Medicaid patient day
New Rate (Component-Based)
$284.91
+$25.91/day (+10.0%) • Cost coverage: 96.7%
Annual impact for Clearwater: $25.91/day × 22,864 Medicaid days = $592,605 additional annual Medicaid revenue. Of this, approximately $414,824 (70%) comes from federal matching funds. State share: $177,781. Note: If Clearwater improves its quality score to 80+, it would earn an additional $15/day × 22,864 = $342,960 per year.
XII. Worked Example B — Rural Facility
Step 1-2: Cost Report Data & PPD Calculation
| Component | Annual Cost | Total Days (16,060) | Facility PPD |
|---|
| Nursing Services | $2,180,000 | 16,060 | $135.74 |
| Therapy Services | $310,000 | 16,060 | $19.30 |
| Non-Case-Mix Operating | $1,340,000 | 16,060 | $83.44 |
| Capital & Property | $520,000 | 16,060 | $32.38 |
| Support Services | $310,000 | 16,060 | $19.30 |
| TOTAL | $4,660,000 | 16,060 | $290.16 |
Rural cost pattern: Salmon Valley's PPD ($290.16) is 5.9% higher than Clearwater's ($273.97) despite serving fewer residents. This is typical of rural facilities — smaller scale means higher per-unit costs for administration, plant operations, and recruiting staff in remote locations. The rural adjustment addresses this structural disadvantage.
Step 5: Apply Ceilings (Same Statewide Ceilings)
| Component | Facility PPD | Ceiling | Applied PPD | Result |
|---|
| Nursing | $135.74 | $125.80 | $125.80 | ⛔ CAPPED — $9.94 above ceiling |
| Therapy | $19.30 | $26.40 | $19.30 | ✅ AT COST — well below ceiling |
| Non-Case-Mix | $83.44 | $74.80 | $74.80 | ⛔ CAPPED — $8.64 above median |
| Capital | $32.38 | $28.60 | $28.60 | ⛔ CAPPED — $3.78 above median |
| Support | $19.30 | $17.80 | $17.80 | ⛔ CAPPED — $1.50 above median |
| Pre-CMI Subtotal | $266.30 | |
Step 6-7: Case-Mix Adjustment
| PDPM Component | Facility Avg Weight | Statewide Avg | CMI | Applied PPD | Adjusted PPD |
|---|
| Nursing CMI | 1.063 | 1.085 | 0.98 | $125.80 | $123.28 |
| Therapy CMI | 0.912 | 0.960 | 0.95 | $19.30 | $18.34 |
Lower CMI impact: Salmon Valley has a lower case-mix index (more long-stay, lower-acuity residents typical of rural facilities). The CMI adjustment reduces the Nursing and Therapy components. However, the rural adjustment in Step 10 partially offsets this.
Step 8-9: Sum & Inflation
Base_Rate = $123.28 + $18.34 + $74.80 + $28.60 + $17.80 = $262.82
Inflated_Rate = $262.82 × 1.031 = $271.17
Step 10: Rural Adjustment ← APPLIES
Lemhi County population = 8,100 → < 25,000 → RURAL ADJUSTMENT APPLIES
Rural_Rate = $271.17 × 1.05 = $284.73
Step 11: Rate Floor Check
Rate floor = $234.90
$284.73 > $234.90 → ✅ PASSES
Final_Base = $284.73
Step 12: Quality Scorecard
| Domain | Max | Score | Key Factors |
|---|
| A. Clinical Outcomes | 40 | 36 | 4★ overall (9), very low falls (8), excellent pressure ulcer rate (6), good UTI (4), low ED (4), moderate discharge (2), strong infection control (3) |
| B. Staffing | 30 | 26 | 4.4 HPRD (10), 0.62 RN HPRD (4), 15% turnover (6), 38 training hrs (3), 3% agency (4) — stable long-term staff advantage |
| C. Satisfaction | 15 | 14 | 94% resident (8), 92% family (5), 1 complaint/100 beds (2) — small-facility, community-rooted relationships |
| D. Regulatory | 15 | 14 | All ≤D (6), no IJ (4), 100% timely correction (3), active QI with outcomes (1 — documented falls reduction program) |
| TOTAL | 100 | 90 | |
Step 13-14: Quality Incentive & Final Rate
Quality Score = 90 → → Quality_Bonus = $30.00/day
FINAL MEDICAID PER DIEM RATE
$284.73 + $30.00 = $314.73/day
Current Rate (RUG-III + BAF)
$259.00
per Medicaid patient day
New Rate (Component + Rural + Quality)
$314.73
+$55.73/day (+21.5%) • Includes $30 quality bonus
Annual impact for Salmon Valley: $55.73/day × 12,527 Medicaid days = $698,129 additional annual Medicaid revenue. Federal share (~70%): $488,690. State share: $209,439. This is a facility that would almost certainly close without rate reform. The quality bonus alone ($375,810/year) funds 8 additional CNA positions at Idaho wages.
XIII. Side-by-Side Comparison
| Clearwater (Urban, Boise) | Salmon Valley (Rural, Salmon) |
|---|
| Beds / ADC | 120 / 108 | 52 / 44 |
| Medicaid % | 58% | 78% |
| Actual Cost PPD | $273.97 | $290.16 |
| Components Capped | 3 of 5 | 4 of 5 |
| Case-Mix Index (Nursing) | 1.06 (above avg) | 0.98 (below avg) |
| Rural Adjustment | None | +5% (+$13.56/day) |
| Quality Score | 79 (no bonus) | 90 ($30/day bonus) |
| Current Rate | $259.00 | $259.00 |
| NEW RATE | $284.91 | $314.73 |
| Increase | +$25.91 (+10.0%) | +$55.73 (+21.5%) |
| Cost Coverage | 103.9% of cost | 108.5% of cost (incl. quality) |
| Annual Medicaid Revenue Gain | +$592,605 | +$698,129 |
| Federal Share (~70%) | $414,824 | $488,690 |
| State Share (~30%) | $177,781 | $209,439 |
System design working as intended: The rural facility with higher quality gets a higher rate. The urban facility with lower quality gets a lower (but still improved) rate — and has a clear financial incentive to invest in quality improvement. Both facilities are better off than under the current system. Neither requires general fund dollars beyond what's already appropriated — the increase is funded primarily by the enhanced provider assessment and federal match.
XIV. Rate Determination Output — What DHW Publishes
For each facility, DHW publishes a Rate Determination Notice with the following format:
STATE OF IDAHO — DEPARTMENT OF HEALTH & WELFARE
MEDICAID NURSING FACILITY RATE DETERMINATION NOTICE
Facility: Salmon Valley Care Center
Provider #: 13-XXXX
Location: Salmon, Idaho (Lemhi County)
Effective: July 1, 2028 – June 30, 2029
Geographic Tier: Rural (<25,000 pop.)
Cost Report Year: FY 2026-27
| Rate Component | Facility Cost PPD | Ceiling | Applied PPD | CMI | Final Component |
|---|
| Nursing Services | $135.74 | $125.80 | $125.80 | ×0.98 | $123.28 |
| Therapy Services | $19.30 | $26.40 | $19.30 | ×0.95 | $18.34 |
| Non-Case-Mix Oper. | $83.44 | $74.80 | $74.80 | — | $74.80 |
| Capital & Property | $32.38 | $28.60 | $28.60 | — | $28.60 |
| Support Services | $19.30 | $17.80 | $17.80 | — | $17.80 |
| Subtotal (Pre-inflation) | $262.82 |
| Inflation Adjustment (SNF Market Basket 3.1%) | +$8.15 |
| Rural Adjustment (5.0%) | +$13.56 |
| BASE MEDICAID PER DIEM RATE | $284.73 |
| Rate Floor Check ($234.90) | ✅ Passes |
| Quality Domain | Max Points | Score |
|---|
| A. Clinical Outcomes | 40 | 36 |
| B. Staffing | 30 | 26 |
| C. Satisfaction | 15 | 14 |
| D. Regulatory | 15 | 14 |
| QUALITY SCORE | 100 | 90 — Tier 1: Excellence |
| QUALITY INCENTIVE PAYMENT | +$30.00/day |
Final Medicaid Per Diem Rate — Effective July 1, 2028
$314.73
Base: $284.73 + Quality Incentive: $30.00 | Prior Rate: $259.00 | Change: +$55.73 (+21.5%)
Appeal rights: Facilities may appeal rate determinations to the DHW Rate Review Panel within 30 days of notice. Contact: DHW Rate-Setting Division, (208) XXX-XXXX. Quality scores updated quarterly; next update October 1, 2028. This rate determination is subject to CMS approval of the State Plan Amendment.
XV. Transition Year Mechanics (FY 2028)
During Year 1, the full component-based methodology is still being developed. Transition rates are calculated as follows:
Transition Rate Formula (Year 1 Only)
Transition_Rate[f] = MAX(
Current_Rate[f] × (1 + Market_Basket_Pct),
Rate_Floor
)
Year 1 guarantees: No facility receives less than its current rate + inflation. The enhanced provider assessment (5.5%) takes effect immediately, generating federal matching funds that partially cover transition costs. Full component-based rates begin in Year 2.
XVI. IT Systems & Infrastructure Requirements
📊 Rate Calculation Engine
- Database to store cost report data (all facilities, 5+ years)
- Percentile/median calculation module
- Case-mix index computation (PDPM mapping)
- 14-step algorithm execution per facility
- Batch processing for all facilities simultaneously
- Audit trail for every calculation step
📝 Cost Report Collection
- Electronic cost report submission portal
- Validation rules (cross-checks, tolerance thresholds)
- Automated error flagging
- Desk review workflow management
- Secure document storage
⭐ Quality Scorecard System
- CMS data feed integration (Five-Star, PBJ, MDS)
- DHW survey data integration
- Satisfaction survey collection platform
- Automated scoring engine (15 measures, 4 domains)
- Quarterly recalculation capability
- Public-facing scorecard dashboard
🌐 Public Transparency Portal
- Facility-specific rate publication
- Quality scorecard display
- Aggregate cost report data
- Rate methodology documentation
- Rate calendar and hearing notices
- Historical rate comparison
💰 Assessment & Fund Management
- Assessment billing and collection system
- Sustainability fund accounting
- Workforce development fund tracking
- Federal match reconciliation
- Quarterly reporting generation
📋 Reporting & Compliance
- Annual report generation (Legislature)
- CMS state plan amendment tracking
- Provider notification system
- Appeal management workflow
- JFAC presentation data package
XVII. Upper Payment Limit (UPL) Compliance Analysis
What is the UPL? Under 42 C.F.R. § 447.272, aggregate Medicaid payments to nursing facilities cannot exceed an amount that could reasonably be estimated to have been paid under Medicare payment principles for the same services furnished to the same population. This is the federal ceiling on Medicaid spending for nursing facilities.
A. Idaho UPL Headroom Calculation
UPL Headroom Analysis
Estimated Idaho Medicaid nursing facility days/year: ~2,800,000
Estimated Medicare-equivalent cost (UPL ceiling): $520 × 2,800,000 = $1,456,000,000
Current aggregate Medicaid payments ($259/day): $259 × 2,800,000 = $725,200,000
Proposed aggregate Medicaid payments ($290 avg/day): $290 × 2,800,000 = $812,000,000
Proposed + quality bonuses ($305 avg/day): $305 × 2,800,000 = $854,000,000
UPL Headroom
Current headroom: $1,456M - $725M = $731M (50.2% below UPL)
Post-reform headroom: $1,456M - $854M = $602M (41.3% below UPL)
| Scenario | Avg Rate/Day | Aggregate Annual | UPL Ceiling | Headroom | % Below UPL |
|---|
| Current (pre-reform) | $259 | $725.2M | $1,456M | $730.8M | 50.2% |
| Year 1 (transition) | $270 | $756.0M | $1,456M | $700.0M | 48.1% |
| Year 2 (full methodology) | $290 | $812.0M | $1,456M | $644.0M | 44.2% |
| Year 3 (methodology + quality) | $305 | $854.0M | $1,456M | $602.0M | 41.3% |
| Theoretical max (all facilities at $315) | $315 | $882.0M | $1,456M | $574.0M | 39.4% |
Conclusion: Idaho has massive UPL headroom. Even at theoretical maximum rates ($315/day for every facility), aggregate Medicaid payments would remain approximately 39% below the Medicare-equivalent UPL ceiling. This is not a binding constraint on the proposed reforms. A formal UPL demonstration should be prepared by a qualified Medicaid consulting firm (Myers & Stauffer, Health Management Associates, or Navigant) for inclusion with the State Plan Amendment submission.
B. UPL Monitoring Requirement
Under the bill (Section 56-263(5)), DHW is required to:
- Prepare and maintain an annual UPL demonstration
- Submit the UPL demonstration to CMS with the SPA and annually thereafter
- Separately analyze non-state government-operated facilities
- Proportionally adjust rates if any scenario approaches the UPL ceiling (with public transparency requirements)
C. Self-Executing Rate Protections in the Bill
The bill includes the following provisions that ensure long-term sustainability without requiring annual legislative action:
| Protection | Bill Section | How It Works |
|---|
| Automatic Inflation | §56-264(4) | Rates adjust annually by SNF Market Basket Index. Self-executing. No legislative action needed. Floor at 0% — rates cannot decrease due to deflation. |
| Mandatory Rebasing | §56-265(3) | Rates rebase every 2 years using audited cost data. Self-executing. If DHW misses deadline, prior rates + inflation continue automatically. |
| Rate Floor | §56-266(1) | No rate below 90% of statewide median cost. Adjusts automatically with each rebase. |
| Access Triggers | §56-266(4) | If regional bed supply drops 20%+ below median, automatic 5% emergency rate adjustment. Self-executing. |
| UPL Compliance | §56-263(5) | Annual UPL demonstration required. Rates adjusted if approaching ceiling. |
| Federal Alignment | §56-263(6) | If CMS changes PDPM, methodology auto-aligns within 12 months. No legislative action needed. |
| Fund Protection | §56-253(8) | Sustainability fund cannot be raided for other purposes. 2/3 vote required to divert. No reversion to general fund. |
| Assessment Continuity | §56-253(7) | Assessment continues unless affirmatively repealed. No sunset. No automatic expiration. |
| Maintenance of Effort | §56-253(9) | State general fund contribution indexed to CPI (floor 0%, cap 3%). Federal match at risk if MOE not met. |
| Mid-Year Cut Protection | §56-266(2) | No mid-year cuts without fiscal emergency declaration, 180-day notice, access study, 60-day comment, and JFAC review. |
| Tribal Consultation | §56-271(4) | 60-day notice to all 5 Idaho tribes before SPA submission. Documented consultation required. |
XVIII. Appendix — Complete Formula Reference
| # | Formula | Description | Step |
|---|
| F1 | PPD[f][c] = Cost[f][c] / Days[f] | Component per-patient-day cost | 2 |
| F2 | Applied[f][c] = MIN(PPD[f][c], Ceiling[c]) | Ceiling application | 5 |
| F3 | CMI[f][t] = FacAvgWeight[f][t] / StateAvgWeight[t] | Case-mix index | 6 |
| F4a | NursingAdj[f] = Applied_Nursing[f] × NursingCMI[f] | Nursing case-mix adjustment | 7 |
| F4b | TherapyAdj[f] = Applied_Therapy[f] × TherapyCMI[f] | Therapy case-mix adjustment | 7 |
| F5 | BaseRate[f] = Σ all 5 adjusted/applied components | Preliminary base rate | 8 |
| F6 | InflatedRate[f] = BaseRate[f] × (1 + MBI%) | Inflation adjustment | 9 |
| F7 | RuralRate[f] = InflatedRate[f] × 1.05 (if rural) | Rural adjustment | 10 |
| F8 | FinalBase[f] = MAX(RuralRate[f], 0.9 × MedianCost) | Rate floor check | 11 |
| F9 | QualScore[f] = Σ(clinical + staffing + satisfaction + regulatory) | Quality score (0-100) | 12 |
| F10 | QualBonus[f] = {≥90→$30, ≥80→$15, else→$0} | Quality incentive tier | 13 |
| F11 | FinalRate[f] = FinalBase[f] + QualBonus[f] | FINAL MEDICAID PER DIEM RATE | 14 |
Idaho Nursing Facility Sustainability & Quality Act — Technical Administration Guide v1.0
Prepared August 2026 by the Idaho Health Care Association (IHCA)
Robert Vande Merwe, Executive Director • Luke Malek, Policy Director
13945 W. Wainwright Drive, Suite 101, Boise, ID 83713 • (208) 343-9735
For DHW Rate-Setting Division, JFAC Staff, and Legislative Services Office
All examples use fictional facilities with realistic Idaho data. Actual statewide percentiles to be calculated from real cost report data upon implementation.