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TO:  Skilled Nursing Facilities

RE:  Therapy Add-on Election, Retroactive Rate Changes, January 1 Inflation Rate 

Upon CMS approval, for per diem rates effective October 1, 2025 and thereafter, costs for Medicaid therapy services, including physical therapy, occupational therapy and speech-language pathology, will be considered allowable costs. To reimburse these covered services, a per patient day therapy services rate add-on will be implemented.

Providers must complete and upload the Budget Therapy Add-on Election worksheet to the Myers & Stauffer electronic submission portal by January 15, 2026.

•  Retroactive October 1, 2025 rate changes will be implemented in January 2026.

•  Retroactive January 1, 2026 rate changes will be implemented in February 2026.

To assist with budgeting, the January 1, 2026 inflation rate is 3.27%.

To calculate Medicaid Therapy Services Patient Care costs, a therapy charge apportionment methodology will be applied. This methodology will calculate Medicaid therapy discipline charges as a percentage of total therapy discipline charges. This applicable percentage will then be multiplied by the associated total therapy discipline costs to determine Medicaid's share of therapy costs. The Medicaid therapy costs for each therapy discipline will be combined to create total Medicaid therapy costs. The resulting Medicaid therapy costs, after applying an inflation index, will be divided by the reported Medicaid patient days to determine the Medicaid Therapy Service add-on.

Actual therapy cost and charge data will be reported on the June 30, 2026 cost report, due September 15, 2026. Actuals will be used to set the January 1, 2027 therapy add-on. In addition, the budget therapy add-on for the period October 1, 2025 - December 31, 2026 will be reconciled based on actual cost and charges. The reconciliation will be performed in April 2027 and will settle therapy add-ons with a lump sum payment or recoupment.

Each year, therapy add-ons will be evaluated to ensure that the aggregate therapy add-on for skilled nursing facilities does not exceed the established maximum. If the Therapy add-on for UPL Group exceeds the Therapy add-on maximum, each facility's therapy add-on will be reduced pro rata to reduce the aggregate therapy add-on to the maximum.

The additional worksheets provided will assist in budgeting and are not required submissions.

Questions regarding this ALERT should be emailed to ProviderAudit@medicaid.alabama.gov.

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