75-02-09-04. Ratesetting.

1. The established rate is based on prospective ratesetting procedures. The establishment of a rate begins with historical costs. Adjustments are then made for claimed costs not includable in allowable costs. Adjustment factors are then applied to allowable costs. Retroactive settlements for actual costs incurred during the rate year exceeding the final rate may not be made unless specifically provided in this chapter.

2. The department shall establish a desk rate, based on the cost report, which must be effective January first of each rate year or on an alternate effective date determined by the department. a. The desk rate must continue in effect until a final rate is established. b. The cost report must be reviewed taking into consideration the prior year's adjustments. A facility must be notified by telephone or electronic mail of any desk adjustments based on the desk review. Within seven working days after notification, the facility may submit information to explain why a desk adjustment should not be made. The department shall review the submitted information, make appropriate adjustments, including adjustment factors, and issue the desk rate. c. Reconsideration may not be given by the department for the desk rate unless the facility has been notified that the desk rate is the final rate. d. A desk rate may be adjusted at any time if subsection 4 applies to the facility.

1. 3. The cost report may be field audited by the department to establish a final rate. If no field audit is performed, the desk rate will become the final rate upon notification to the facility from the department.

1. a. The final rate must be effective as of the effective date of the desk rate.

2. b. The final rate must include any adjustments for nonallowable costs, errors, or omissions that result in a change from the desk rate of at least twenty-five cents per day.

3. c. Adjustments, errors, or omissions found after a final rate has been established must be included as an adjustment in the report year the adjustments, errors, or omissions are found.

4. d. The final rate may be adjusted at any time if subsection 4 applies.

2. 4. A special rate must be established for a facility providing services for the first time, changing ownership, having a capacity increase or major renovation or construction, or having changes in services or staff.

1. a. The rate for a facility providing first-time services purchased by the department must be established using this subdivision for the first two fiscal years of the facility if that period is less than twenty-four months. 1. (1) The facility shall submit a budget, to the department's medical services division, for the first twelve months of operation. A final rate based on the budget and adjustments, if any, must be established for a rate period beginning on the first of the month in which the facility begins operation. This rate must remain in effect for eighteen months. Adjustment factors may not be included in the first year final rate. No retroactive settlements may be made. 2. (2) Upon completion of the first twelve months of operation, the facility must submit a cost report for the twelve-month period regardless of the fiscal yearend of the facility. 1. (a) The twelve-month cost report is due on or before the last day of the third month following the end of the twelve-month period. 2. (b) The twelve-month cost report must be used to establish a rate for the remainder of the second rate year. Appropriate adjustment factors must be used to establish the rate. 3. (3) The facility shall submit a cost report that must be used to establish rates in accordance with subsections 2 and 3 after the facility has been in operation for the entire twelve months of the facility's fiscal year.

2. b. For a facility with a change in ownership, the rate established for the previous owner must be retained until the end of the rate year in which the change of ownership occurs. The rate for the second rate year after a change in ownership occurs must be established as follows: 1. (1) For a facility with four or more months of operation under the new ownership during the report year, a cost report for the period since the ownership change occurred must be used to establish the rate for the next rate year; and 2. (2) For a facility with less than four months of operation under the new ownership in the reporting year, the prior report year's costs as adjusted for the previous owner must be indexed forward using the appropriate adjustment factor.

1. c. For a facility that increases licensed capacity by twenty percent or more or has a renovation or construction project in excess of fifty thousand dollars, the established desk or final rate may be adjusted for the period after the licensed capacity increase occurs or the construction or renovation is complete to include projected property costs.
2. (1) For the rate year in which the capacity increase occurs or construction or renovation is completed, an adjusted rate must be calculated based on a rate for historical costs, exclusive of property costs, as adjusted, divided by historical census, plus a rate for property costs based on projected property costs divided by projected census. The adjusted rate will be effective on the first day of the month in which the renovation or construction is complete or when the capacity increase is approved if no construction or renovation is necessary.
3. (2) For the rate year immediately following the rate year in which the capacity increase occurred or construction and renovation was completed, a rate must be established based on historical costs, exclusive of property costs, as adjusted for the report year, divided by reported census plus a rate for property costs, based on projected property costs, divided by projected census.
4. d. The department may provide for an increase in the established rate for additional costs necessary to add services or staff to the existing program.
5. (1) The facility shall submit information, to the department's medical services division, supporting the request for the increase in the rate. Information must include a detailed listing of new or additional staff or costs associated with the increase in services.
6. (2) The department shall review the submitted information and may request additional documentation or conduct onsite visits. The established rate must be adjusted if an increase in costs is approved. The effective date of the rate increase must be the later of the first day of the month following approval by the department or the first day of the month following the addition of services or staff. The adjustment may not be retroactive to the beginning of the rate year and will exclude adjustment factors provided for in subsection 8.
7. (3) For the rate year immediately following a rate year in which a rate was adjusted under paragraph 2, the facility may request consideration be given to additional costs. The facility shall demonstrate to the department's satisfaction that historical costs do not reflect twelve months of actual costs of the additional staff or added services in order to adjust the rate for the second rate year. The additional costs must be based on a projection of costs for the remainder of a twelve-month period, exclusive of adjustment factors provided for in subsection 8.
8. 1. The final rate must be considered as payment for all accommodations that include items identified in section 75-02-09-06. For any resident whose rate is paid in whole or in part by the department, no payment may be solicited or received from the resident or any other person to supplement the rate as established.
9. 1. When a facility terminates its participation in the program, whether voluntarily or involuntarily, the department may authorize the facility to receive continued payment until residents can be relocated.
10. 1. Limitations.
11. a. The department shall accumulate and analyze statistics on costs incurred by psychiatric residential treatment facilities. Statistics may be used to establish reasonable ceiling

limitations and incentives for efficiency and economy based on reasonable determination of standards of operations necessary for efficient delivery of needed services. Limitations and incentives may be established on the basis of cost of comparable facilities and services and may be applied as ceilings on the overall costs of providing services or on specific areas of operations. The department may implement ceilings at any time based upon information available.

b. The department shall review, on an ongoing basis, aggregate payment to facilities to determine that payments do not exceed an amount that can be reasonably estimated would have been paid for these services under federally required payment principles. If aggregate payments to facilities exceed estimated payments under federally required payments principles, the department may make adjustments to rates so that aggregate payments do not exceed an amount that can be estimated would have been paid under an upper payment limit.

c. Allowable administration costs to be included in the established rate are the lesser of the actual cost of administration as direct costed or allocated to the facility or an amount equal to seventeen percent of the total allowable costs, exclusive of administration costs, for the facility.

8. An adjustment factor may be used to adjust historical allowable costs but may not be used to adjust property costs.

History: Effective May 1, 1994; amended effective October 1, 2011; January 1, 2025; January 1, 2026.

General Authority: NDCC 50-24.1-04