On June 30, 2012, the Pennsylvania Department of Public Welfare (“DPW”) issued final regulations revising its process and standards for reviewing requests to enroll new nursing home beds in Pennsylvania’s Medical Assistance (“MA”) (i.e., Medicaid) program, and transfers of MA beds between existing nursing facilities. The new regulations suggest that DPW’s restrictive approach to gaining approval for new MA beds will continue.

Background. The Pennsylvania Certificate of Need program, which had required approval for the establishment of new health care facilities or the expansion of existing facilities, sunsetted in 1996. As a result, in the same year, DPW issued a Statement of Policy providing that DPW would not permit MA enrollment or expansion of certain types of providers, including nursing facilities, unless DPW grants an exception following its review. In 2006, the Commonwealth Court of Pennsylvania determined that the Statement of Policy was merely an “unpromulgated regulation,” and overturned DPW’s rejection of nursing facility’s exception request. Eastwood Nursing and Rehabilitation Center v. Department of Public Welfare, 910 A.2d 134 (Pa. Commw. Ct. 2006). In response, in 2007, the Pennsylvania legislature enacted revisions to the Public Welfare Code requiring DPW to propose regulations establishing a process and criteria to be used to review and respond to requests for increases in MA certified nursing facility beds. 62 Pa. Cons. Stat. § 443.1(8). In the meantime, the legislation authorized DPW to continue review of increases in MA certified beds under the Statement of Policy (with permitted amendments), but only until June 30, 2012. DPW published the proposed regulations on November 6, 2010.

Review Process for New MA Nursing Facility Beds. The newly-published regulations, promulgated at 55 Pa. Code § 1187.161-§ 1187.177, require that each nursing facility bed licensed by the Department of Health that participates in the MA program must be certified by DPW for MA participation. In order to acquire MA certification, both already-established nursing facilities wishing to expand MA-certified beds and not-yet-constructed nursing facilities wishing to participate in the MA program must submit a bed request to DPW and obtain DPW’s advance written approval prior to expanding or commencing a proposed construction project. Any bed request submitted must meet the requirements mandated by 55 Pa. Code § 1187.172.

Review Process for Bed Transfers. In addition to directing applicants seeking MA-certification for newly developed beds, the regulations also explain the criteria for the approval of bed transfer requests and the bed transfer request process. The bed transfer criteria include the following: (1) neither the transferor nor the transferee will receive an increase in reimbursement as a result of a change in its peer group; and (2) if the proposed bed transfer will result in a change in peer group assignments for either the transferor or transferee, the change will not have a negative impact on the MA program, other facilities in the peer group, or MA recipients.

Evaluating Access to Medically Necessary Services. Both the regulations’ preamble and the language of the regulations focus on “a more balanced long-term living system,” and the preamble argues, without substantiation, that consumers prefer home and community-based services. Interestingly, in response to a comment suggesting that DPW place a moratorium on new, MA-certified nursing facility beds, DPW responds by stating:

There may be instances in which the enrollment of a new MA nursing facility provider or an increase in the bed capacity of an existing MA nursing facility provider is needed to assure that MA recipients continue to have access to medically necessary nursing facility services. For example, an increase in bed capacity may be needed if nursing facility services are not available for MA recipients who reside in a particular locale or who have specialized medical needs that are not being met by the current MA nursing facility provider complement.

Based on the above guidance, it will likely be challenging to obtain MA certification for new nursing facility beds unless the nursing facility can strongly demonstrate that the locality requires additional MA-certified nursing facility beds or the nursing facility meets another unmet, medical need of a particular community.

More Transparent Process. The regulations also suggest the development of a more publicly transparent bed request and bed transfer process. For example, DPW plans to post bed requests, bed transfer requests, public comments, and applicants’ response to public comments on its website. Note that the public comments and the applicants’ response to those comments will be posted after the comment period and upon receipt, respectively. Further, DPW intends to compile and post, on its website, data related to the availability and cost of MA nursing facility services and home and community-based services both statewide and on a county-by-county basis and state-wide and county-by-county demographic data.

Further Information. The new regulations, and DPW’s response to public comments on its proposed regulations, can be found in the June 30, 2012 Pennsylvania Bulletin. In addition, please contact Karl Thallner (kthallner@reedsmith.com) or Susan Edwards (saedwards@reedsmith.com), or any Reed Smith attorney with whom you work if you would like additional information about any items in this post.


The contents of this post are for informational purposes only, and do not constitute legal advice.