AGING AND DISABILITY SERVICES ADMINISTRATION

2007 NH "Dear Administrator" Letters

November 14, 2007

ADSA: NH #2007-031
ALLOWABLE OXYGEN COSTS

Dear Nursing Facility/Home Administrator:

Under RCW 74.46.410 (2) (b), the Office of Rates Management (ORM) has allowed the cost of providing oxygen to a resident only when it could be established that the oxygen was not covered by “fee for service” -  i.e., the Medicaid coupon system.  In recent meetings with the Health and Rehabilitation Services Administration (HRSA), the section of DSHS that oversees the Medicaid coupon system program, ORM learned the following is not covered by “fee for service”:

• Emergent and intermittent use of oxygen; and
• Intermittent oxygen therapy for Medicaid residents with oxygen saturation levels of 88% or above.

Because oxygen is covered by Medicaid, under RCW 74.46.410 (2) (a) it is an allowable cost as long as it is not paid by “fee for service,” per RCW 74.46.410 (2) (b).  Effective with the 2007 cost report year, ORM is changing its policy on allowable oxygen costs to the following:

• Purchased (or capitalized leased) concentrators will be an allowable cost.  Oxygen concentrators are not office equipment, and therefore under RCW 74.46.410 (2) (ii) rental costs are not allowable. Nursing homes should report the cost of the concentrators by either:
  • capitalizing the cost when it is over the minimum capitalization threshold, and adding it to the Depreciation Schedule; or
  • expensing the cost in account 5486, Operations Minor Equipment, per the Nursing Home Accounting & Reporting Manual page IV-22.
• Intermittent oxygen therapy for residents with an oxygen saturation level of 88% or higher will be an allowable cost subject to the following verification procedure:
  • The oxygen is necessary, documented and recorded in Direct Care;
  • The facility submits a log that contains the resident’s name and type of oxygen therapy - i.e., emergency or intermittent; and
  • The facility submits a random sampling of medical records verifying that it is emergency oxygen and/or the resident’s saturation level was at or above 88%
• A denial from HRSA in lieu of any of the above is acceptable. Without the above documentation, or a HRSA denial, oxygen expense will be unallowable. There is no substitute for the above verification.

If you have questions, please call the analyst responsible for your facility. If you do not know your assigned analyst, please call Linda Herrera at (360) 725-2498.

Sincerely,

Kenneth Callaghan, Chief
Office of Rates Management

Kathy Marshall, Director, Management Services Division

Ed Southon, Manager, NH Rates