(a) The commissioner shall develop and implement an acuity-based reimbursement methodology for nursing facility services, based on an individualized assessment of need, as an alternative to the current cost-based nursing facility reimbursement system.

(b) The methodology may include, but is not limited to, the development of enhanced rates for specified chronic care services that may encourage the establishment of chronic care units that specialize in the care of persons with specified chronic care conditions, such as persons who are ventilator-dependent.

(c) The comptroller of the treasury shall set the medicaid rates for nursing facility services under the existing cost-based nursing facility reimbursement system and any acuity-based reimbursement system developed pursuant to this section and adopted by the bureau of TennCare in a rulemaking hearing in which interested persons may provide testimony under the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. To the extent possible, any acuity-based reimbursement system shall be implemented in conjunction with the implementation of § 71-5-1407. Nothing in this section shall prevent TennCare from implementing rate adjustments as required pursuant to an act (including an annual appropriation act) of the general assembly that requires such adjustment. Nor shall TennCare be required to promulgate a rule to implement rate adjustments that are required pursuant to an act of the general assembly, unless such implementation requires a change in the underlying rate methodology.

(d) When both acuity and quality supplemental transition payments as described in § 71-5-1004 are transitioned into the medicaid per diem rates of the nursing home reimbursement system, the bureau of TennCare is authorized to adopt rules necessary to implement a new nursing home reimbursement system, subject to the following limitations:

(1) Any rules promulgated by the bureau of TennCare under this subsection (d) shall be developed in consultation with the comptroller of the treasury and with the Tennessee Health Care Association; and

(2) Any rules or regulations shall be promulgated in accordance with the Uniform Administrative Procedures Act; provided, however, that the bureau of TennCare shall not promulgate emergency rules under this subsection (d) as authorized in § 4-5-208.

(e) Under any TennCare dual-eligible demonstration project, skilled nursing facilities shall be reimbursed for medicare skilled nursing facility services in an amount that is consistent with the net payment they would have received for the service absent such demonstration in a medicare fee-for-service system, taking together the primary payment by medicare and the secondary payment of cost sharing by medicaid, in accordance with the institutional crossover payment methodology set forth in the medicaid state plan. Nursing facilities participating in any TennCare dual-eligible demonstration project shall be reimbursed for medicaid nursing facility services in a manner that is consistent with the methodology for medicaid nursing facility services delivered outside the demonstration. Nothing in this section shall prevent a skilled nursing facility or nursing facility from agreeing, at its own discretion, to contract with an MCO under any alternative payment methodology including, but not limited to, shared risk or savings arrangements or quality incentive payments that may be offered under such dual demonstration in order to promote evidence-based best practices and to engage the facility in key quality improvements, such as reduced avoidable hospital admissions and reduced hospital readmissions.