(A) As used in this section:

1. (1) "Applicable calendar year" means the following:

   1. (a) For the purpose of the department of medicaid's initial determination under division (D) of this section of each peer group's cost per case-mix unit, calendar year 2003;
   2. (b) For the purpose of the department's rebasings, the calendar year the department selects.
2. (2) "Rebasing" means a redetermination under division (D) of this section of each peer group's cost per case-mix unit using information from cost reports for an applicable calendar year that is later than the applicable calendar year used for the previous determination of such costs.

(C) For the purpose of determining nursing facilities' rates for direct care costs, the department shall establish three peer groups.

1. (1) Until the first rebasing occurs, the peer groups shall be composed as follows:

   1. (a) Each nursing facility located in any of the following counties shall be placed in peer group one: Brown, Butler, Clermont, Clinton, Hamilton, and Warren.
   2. (b) Each nursing facility located in any of the following counties shall be placed in peer group two: Ashtabula, Champaign, Clark, Cuyahoga, Darke, Delaware, Fairfield, Fayette, Franklin, Fulton, Geauga, Greene, Hancock, Knox, Lake, Licking, Lorain, Lucas, Madison, Marion, Medina, Miami, Montgomery, Morrow, Ottawa, Pickaway, Portage, Preble, Ross, Sandusky, Seneca, Summit, Union, and Wood.
   3. (c) Each nursing facility located in any of the following counties shall be placed in peer group three: Adams, Allen, Ashland, Athens, Auglaize, Belmont, Carroll, Columbiana, Coshocton, Crawford, Defiance, Erie, Gallia, Guernsey, Hardin, Harrison, Henry, Highland, Hocking, Holmes, Huron, Jackson, Jefferson, Lawrence, Logan, Mahoning, Meigs, Mercer, Monroe, Morgan, Muskingum, Noble, Paulding, Perry, Pike, Putnam, Richland, Scioto, Shelby, Stark, Trumbull, Tuscarawas, Van Wert, Vinton, Washington, Wayne, Williams, and Wyandot.
2. (2) Beginning with the first rebasing, the peer groups shall be composed as they are under division (C)(1) of this section except that each nursing facility located in Mahoning or Stark county shall be placed in peer group two rather than peer group three.

(D)

1. (1) The department shall determine a cost per case-mix unit for each peer group established under division (C) of this section. The department is not required to conduct a rebasing more than once every ten years. Except as necessary to implement the amendments made to this section by Am. Sub. H.B. 153 and Sub. H.B. 303, both of the 129th general assembly, and H.B. 59 of the 130th general assembly, the cost per case-mix unit determined under this division for a peer group shall be used for subsequent years until the department conducts a rebasing. To determine a peer group's cost per case-mix unit, the department shall do all of the following:

   1. (a) Determine the cost per case-mix unit for each nursing facility in the peer group for the applicable calendar year by dividing each facility's desk-reviewed, actual, allowable, per diem direct care costs for the applicable calendar year by the facility's annual average case-mix score determined under section 5165.192 of the Revised Code for the applicable calendar year;
   2. (b) Subject to division (D)(2) of this section, identify which nursing facility in the peer group is at the twenty-fifth percentile of the cost per case-mix units determined under division (D)(1)(a) of this section;
   3. (c) Calculate the amount that is two per cent above the cost per case-mix unit determined under division (D)(1)(a) of this section for the nursing facility identified under division (D)(1)(b) of this section;
   4. (d) Using the index specified in division (D)(3) of this section, multiply the rate of inflation for the eighteen-month period beginning on the first day of July of the applicable calendar year and ending the last day of December of the calendar year immediately following the applicable calendar year by the amount calculated under division (D)(1)(c) of this section;

   5. (e) Add the following to the amount calculated under division (D)(1)(d) of this section:

      1. (i) Until the earlier of January 1, 2014, or when the first rebasing occurs, one dollar and eighty-eight cents;
      2. (ii) Unless the first rebasing occurs before January 1, 2014, beginning January 1, 2014, and until the first rebasing occurs, eighty-six cents.
   6. (f) Until the first rebasing occurs, increase the amount calculated under division (D)(1)(e) of this section by five and eight hundredths per cent.

2. (2) In making the identification under division (D)(1)(b) of this section, the department shall exclude both of the following:

   1. (a) Nursing facilities that participated in the medicaid program under the same provider for less than twelve months in the applicable calendar year;
   2. (b) Nursing facilities whose cost per case-mix unit is more than one standard deviation from the mean cost per case-mix unit for all nursing facilities in the nursing facility's peer group for the applicable calendar year.

3. (3) The following index shall be used for the purpose of the calculation made under division (D)(1)(d) of this section:

   1. (a) Until the first rebasing occurs, the employment cost index for total compensation, health services component, published by the United States bureau of labor statistics, as the index existed on July 1, 2005;
   2. (b) Effective with the first rebasing and except as provided in division (D)(3)(c) of this section, the employment cost index for total compensation, nursing and residential care facilities occupational group, published by the United States bureau of labor statistics;
   3. (c) If the United States bureau of labor statistics ceases to publish the index specified in division (D)(3)(b) of this section, the index the bureau subsequently publishes that covers nursing facilities' staff costs.
4. (4) The department shall not redetermine a peer group's cost per case-mix unit under this division based on additional information that it receives after the peer group's per case-mix unit is determined. The department shall redetermine a peer group's cost per case-mix unit only if it made an error in determining the peer group's cost per case-mix unit based on information available to the department at the time of the original determination.