The Texas Nursing Home Upper Payment Limit (UPL) could result in significant financial benefits for nursing home operators and many Texas governmental hospitals. Here is an update on the program’s status and key action steps.
In October 2012, the Centers for Medicare & Medicaid Services (CMS) approved a Texas State Plan Amendment allowing for a nursing home Intergovernmental Transfer (IGT)/UPL program. This plan allows for nonstate, government-owned entities that hold nursing facility licenses in Texas to participate in a UPL program, which would enable nursing facilities to receive additional payments for their Medicaid residents up to an amount that otherwise would have been paid by Medicare Part A for the same service. Participating entities would make IGT payments to the state, which would subsequently draw down federal matching dollars based on the Texas Federal Medical Assistance Percentages. These funds then would be redistributed to the participating entities.
Where We Are Now
The state currently plans to allow qualifying facilities to sign up for the program prior to September 30, 2013, and the program itself is expected to begin October 1, 2013. In addition, providers that later become eligible to participate will have the opportunity to enter the program on the first day of the federal fiscal quarter following the date they become eligible to participate. However, there are currently many unanswered questions about the program:
- How will the state actually compute the maximum UPL dollars available?
- How and when will IGT and UPL payments be made between the state and qualifying providers?
- What impact will the passage of Senate Bill 7 have on this program? (One component of SB 7, which was passed during the latest Texas legislative session, is the mandate that Texas nursing facilities will move to a managed-care system in October 2014.)
SB 7 certainly creates some challenges for the viability of the nursing facility UPL program because the program currently would only be available under traditional Medicaid and not managed care. However, the state has been receptive to the idea of applying for a waiver program from CMS to allow these UPL funds to continue to be accessible.
Although uncertainties exist, this UPL program can be beneficial to current nursing home operators and nonstate, government-owned entities such as hospital districts and authorities. Under the UPL program, these entities will need to partner with existing nursing home operators to qualify for these funds. These arrangements could be an excellent way to coordinate care and potentially help reduce hospital readmissions.
What to Do Now if You Are Considering Participation in this UPL Program
While it may be premature to execute change of ownership agreements between entities, we suggest nursing home operators and potential partners continue to move forward with their discussions as follows:
- Execute a confidentiality agreement between the nursing facility operator and potential hospital partner or other qualifying entity.
- Generate cash flow models that will assist in evaluating the benefits of this program.
- Review draft management and lease agreements that would be necessary if and when the parties decide to move forward.
- These agreements would be entered into directly between the current nursing facility operator and a participating hospital or other qualifying entity. While some groups may determine a third-party management company is beneficial, others will decide the added administrative cost of such an entity is not warranted.
If you’d like more information regarding this program, contact your BKD representative.