WSR 04-21-061

PROPOSED RULES

DEPARTMENT OF

SOCIAL AND HEALTH SERVICES
(Medical Assistance Administration)

[ Filed October 18, 2004, 3:38 p.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 04-01-141.

Title of Rule and Other Identifying Information: Amending WAC 388-550-2598 Critical access hospital (CAH) program.

Hearing Location(s): Blake Office Park East (behind Goodyear Courtesy Tire), Rose Room, 4500 10th Avenue S.E., Lacey, WA, on November 23, 2004, at 10:00 a.m.

Date of Intended Adoption: Not sooner than November 24, 2004.

Submit Written Comments to: DSHS Rules Coordinator, P.O. Box 45850, Olympia, WA 98504, delivery 4500 10th Avenue S.E., Lacey, WA, e-mail fernaax@dshs.wa.gov, fax (360) 664-6185, by 5:00 p.m., November 19, 2004.

Assistance for Persons with Disabilities: Contact Fred Swenson, DSHS Rules Consultant, by November 19, 2004, TTY (360) 664-6178 or (360) 664-6097.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The proposed rule allows the department to revise the method for cost settlement for services provided to clients eligible under the department's managed care programs. The anticipated effects are to ensure that critical access hospitals receive the correct level of reimbursement.

Reasons Supporting Proposal: See above.

Statutory Authority for Adoption: RCW 74.04.050, 74.08.090.

Statute Being Implemented: RCW 74.04.050, 74.08.090, 74.09.5225.

Rule is not necessitated by federal law, federal or state court decision.

Name of Proponent: Department of Social and Health Services, governmental.

Name of Agency Personnel Responsible for Drafting: Kathy Sayre, P.O. Box 45533, Olympia, WA 98504, (360) 725-1342; Implementation and Enforcement: John Hanson, P.O. Box 45510, Olympia, WA 98504, (360) 725-1856.

No small business economic impact statement has been prepared under chapter 19.85 RCW. The department has analyzed the proposed rule amendment and concludes that it will impose no new costs on small businesses. The preparation of a comprehensive small business economic impact statement is not required.

A cost-benefit analysis is not required under RCW 34.05.328. Since the proposed amendments do not "make significant amendments to a policy or regulatory program" (see RCW 34.05.328 (5)(c)(iii)), MAA has determined that the proposed rule is not "significant" as defined by the legislature. This rule has been rewritten to allow MAA to revise the method for cost settlement for services provided to clients eligible under the department's managed care programs to ensure that critical access hospitals receive the correct level of reimbursement.

October 15, 2004

Brian H. Lindgren, Manager

Rules and Policies Assistance Unit

3478.2
AMENDATORY SECTION(Amending WSR 02-13-099, filed 6/18/02, effective 7/19/02)

WAC 388-550-2598   Critical access ((hospital (CAH) program)) hospitals (CAHs).   (1) ((The critical access hospital (CAH) program provides cost-based reimbursement to a critical access hospital (CAH) through a retrospective cost reimbursement system. Reimbursement is based on a CAH's actual cost of providing hospital services to eligible medical assistance clients during the hospital fiscal year (HFY) of the CAH, subject to the conditions and limitations in this section and other published WACs. CAH program requirements and how the medical assistance administration (MAA) calculates a CAH cost settlement adjustment are described in this section.

(2) The following definitions and abbreviations and those found in WAC 388-500-0005 and 388-550-1050 apply to the CAH program:

(a) "CAH," see "critical access hospital."

(b) "CAH fee-for-service (FFS) cost settlement adjustment" means the department's annual reimbursement or recoupment adjustment to a CAH's fee-for-service interim payment.

(c) "CAH Healthy Options (HO) cost settlement payment" means the department's annual reimbursement adjustment related to a CAH's HO utilization.

(d) "CAH HFY" see "CAH hospital fiscal year."

(e) "CAH hospital fiscal year" means each individual hospital's fiscal year.

(f) "Cost settlement" means a reconciliation of the interim CAH payments with a CAH's actual costs determined after the end of the CAH's HFY.

(g) "Critical access hospital (CAH)" means an MAA-approved hospital that is Medicare-certified by the Centers for Medicare and Medicaid Services (CMS) to operate as a CAH.

(h) "IDWCC rate" see "inpatient departmental weighted cost-to-charge (IDWCC) rate."

(i) "Inpatient departmental weighted cost-to-charge (IDWCC) rate" means a rate MAA uses to determine a fee-for-service interim inpatient CAH payment.

(j) "Interim CAH payment" means the actual payment the department makes, per claim, to a CAH during its HFY, using the appropriate IDWCC or ODWCC rate, as determined by MAA.

(k) "ODWCC rate" see "outpatient departmental weighted cost-to-charge (ODWCC) rate."

(l) "Outpatient departmental weighted cost-to-charge (ODWCC) rate" means a rate MAA uses to determine a fee-for-service interim outpatient CAH payment.

(m) "Per service" means services provided during a healthy options (HO) equivalent admission. (For an example of how to calculate a HO equivalent admission, see subsection (12), step 2.)

(3) An MAA-approved CAH must be Medicare-certified as a CAH. A CAH must provide proof of certification to MAA upon request.

(4) An MAA-approved CAH must also meet the general applicable requirements in chapter 388-502 WAC, Administration of medical programs--Providers. For information on audits conducted by department staff, see WAC 388-502-0240.

(5) MAA may conduct a postpay or on-site review of any CAH to ensure quality of care.

(6) To ensure a client receives necessary care:

(a) A CAH is responsible to investigate any reports of substandard care or violations of the facility's medical staff bylaws;

(b) A CAH provider must have and follow written procedures that provide a resolution to complaints and grievances; and

(c) A complaint or grievance regarding substandard conditions or care may be investigated by any one or more of the following:

(i) Department of health (DOH); or

(ii) Other agencies with review authority for MAA programs.

(7) Subject to the restrictions and limitations in this section and other published WAC, the MAA CAH fee-for-service reimbursement method uses the:

(a) IDWCC rate; and

(b) ODWCC rate.

(8) This section describes the parallel steps MAA uses to calculate both the fee-for-service IDWCC rate and fee-for-service ODWCC rate for each CAH. Consideration will be given to recalculation of the interim payment rates if a CAH submits changes to the initially submitted Medicare HCFA-2552 Cost Report. MAA:

(a) Obtains the following information for each CAH from the Medicare HCFA-2552 Cost Report the CAH initially submits for the period to be cost settled:

(i) Cost-to-charge ratio of each respective ancillary service cost center; and

(ii) Total costs and number of patient days of each respective accommodation cost center.

(b) Obtains from the Medicaid Management Information System (MMIS) the following summary claims data submitted by each CAH for the HFY to be cost settled:

(i) Medical assistance program codes;

(ii) Inpatient and outpatient claim types;

(iii) Procedure codes, revenue codes or diagnosis-related group (DRG) codes;

(iv) Allowed charges and third party liability/client and MAA paid amounts;

(v) Number of claims; and

(vi) Units of service.

(c) Separates the inpatient claims data and outpatient claims data.

(d) Obtains the cost center allowed charges by classifying inpatient allowed charges billed by a CAH (using any one of, or a combination of, procedure codes, revenue codes, or DRG codes) into the related cost center in the CAH's Medicare HCFA-2552 cost report the CAH initially submits to MAA.

(e) Determines the MAA departmental-weighted costs for each cost center by multiplying the cost center's allowed charges for the appropriate inpatient or outpatient claim type by the related ancillary service cost center ratio or accommodation cost center per diem.

(f) Obtains totals from the cost centers used for cost settlement and interim rates from (e) of this subsection by:

(i) Summing all allowed charges; and

(ii) Summing all MAA departmental-weighted costs.

(g) Determines a CAH's fee-for-service IDWCC rate and fee-for-service ODWCC rate by dividing the total MAA departmental-weighted costs from (f)(ii) of this subsection by the total allowed charges from (f)(i) of this subsection. Neither the IDWCC rate nor the ODWCC rate may exceed one hundred percent.

(9) MAA makes interim CAH payments to a CAH during the CAH's HFY using the IDWCC rate for inpatient services provided, and the ODWCC rate for outpatient services provided, as determined in the CAH's most recent cost settlement.

(10) MAA performs a cost settlement for a CAH after the end of the CAH's HFY. MAA calculates the cost settlement using:

(a) MAA claims data; and

(b) The following information submitted by the CAH to MAA at the close of the CAH's HFY:

(i) The Medicare HCFA-2552 Cost Report (see requirements in WAC 388-550-5700); and

(ii) Total HO inpatient and outpatient allowed charges for the CAH's HFY dates of services.

(11) MAA rebases and implements a CAH's new IDWCC rate and ODWCC rate at cost settlement. The rebased IDWCC and ODWCC rates:

(a) Are used to determine a CAH's adjustment for services in the cost-settled HFY; and

(b) Become the current interim payment rates.

(12) See the example in this subsection for how MAA calculates a fee-for-service and managed care CAH cost settlement adjustment. A cost settlement payment for services provided through a Healthy Options managed care plan is limited to no more than the additional amounts per service paid under the CAH program for other medical assistance programs.))((


Example of the payment calculation for a fee-for-service (FFS) and Healthy Options (HO) Critical Access Hospital (CAH) cost settlement adjustment using charges from claims and the hospital's inpatient departmental weighted cost-to-charge (IDWCC) and outpatient departmental weighted cost-to-charge (ODWCC)
STEP 1 CAH FFS Cost Settlement Adjustment for Hospital XYZ
CAH's Hospital Fiscal Year (HFY)
Programs
Inpatient Medical

Assistance Programs

Outpatient Medical

+ Assistance Programs

Total Cost Settlement

= Adjustment

CAH HFY Total allowed charges $96, 735 $33,265 $130,000
IDWCC and ODWCC used for

CAH cost settlement

x 84.3% 70.5%
CAH actual FFS cost = $81,548 $23,452 $105,000
FFS interim CAH payment - $80,833 $19,167 $100,000
* CAH FFS cost settlement adjustment = $ 715 $ 4,285 $ 5,000


*If the CAH FFS cost settlement adjustment total is zero or less, a HO cost settlement is not performed. (Go directly to step 3.) If the CAH FSS cost settlement adjustment total is greater than zero, proceed to step 2.

STEP 2 Calculate Total CAH HO Cost Settlement Payment
$130,000

10

Total allowed CAH HFY charges

FFS inpatient admissions during CAH HFY

= $ 13,000 Average charge per FFS inpatient admission used for HO equivalent admissions
$5,000

10

CAH FFS cost settlement adjustment (from Step 1)

FFS admissions during CAH HFY

= $ 500 CAH settlement for each FFS admission
$ 78,000

$ 13,000

Total allowed HO charges (includes inpatient and outpatient charges)

Average charge per FFS admission used for HO equivalent admissions

6 HO equivalent admissions
$ 500

x 6

CAH settlement for each FFS admission

HO equivalent admissions

= $ 3,000 CAH HO cost settlement payment due the CAH


STEP 3 Calculate Total Additional CAH Cost Settlement Adjustment
$ 5,000

+ $ 3,000

CAH FFS cost settlement adjustment (from Step 1)

CAH HO cost settlement payment (from Step 2)

= $ 8,000 Total additional CAH cost settlement adjustment due from the department
)) The medical assistance administration (MAA) reimburses eligible critical access hospitals (CAHs) for inpatient and outpatient hospital services provided to fee-for-service medical assistance clients on a cost basis, using departmental weighted costs-to-charges (DWCC) ratios and a retrospective cost settlement process.

(2) For inpatient and outpatient hospital services provided to clients enrolled in a managed care plan, DWCC rates for each CAH are incorporated into the calculations for the managed care capitated premiums. MAA considers managed care DWCC rates to be cost. Cost settlements are not performed for managed care claims.

(3) The following definitions and abbreviations and those found in WAC 388-500-0005 and 388-550-1050 apply to this section:

(a) "CAH," see "critical access hospital."

(b) "CAH HFY" see "CAH hospital fiscal year."

(c) "CAH hospital fiscal year" means each individual hospital's fiscal year.

(d) "Cost settlement" means a reconciliation of the fee-for-service interim CAH payments with a CAH's actual costs determined after the end of the CAH's HFY.

(e)"Critical access hospital (CAH)" means a hospital that is approved by the department of health (DOH) for inclusion in DOH's critical access hospital program.

(f) "Departmental weighted costs-to-charges (DWCC) rate" means a rate MAA uses to determine a CAH payment. See subsection (8) for how MAA calculates a DWCC rate.

(g) "DWCC rate" see "departmental weighted costs-to-charges (DWCC) rate."

(h) "Interim CAH payment" means the actual payment the department makes for claims submitted by a CAH for services provided during its current hospital fiscal year, using the appropriate DWCC rate, as determined by MAA.

(4) To be reimbursed as a CAH by MAA, a hospital must be approved by the department of health (DOH) for inclusion in DOH's critical access hospital program. The hospital must provide proof of CAH status to MAA upon request. CAHs reimbursed under the CAH program must meet the general applicable requirements in chapter 388-502 WAC. For information on audits and the audit appeal process, see WAC 388-502-0240.

(5) A CAH must have and follow written procedures that provide a resolution to complaints and grievances.

(6) To ensure quality of care:

(a) A CAH is responsible to investigate any reports of substandard care or violations of the facility's medical staff bylaws; and

(b) A complaint or grievance regarding substandard conditions or care may be investigated by any one or more of the following:

(i) Department of health (DOH); or

(ii) Other agencies with review authority for MAA programs.

(7) MAA may conduct a postpay or on-site review of any CAH.

(8) MAA prospectively calculates fee-for-service inpatient and outpatient DWCC rates separately for each CAH. To calculate prospective interim inpatient and outpatient DWCC rates for each hospital currently in the CAH program, MAA:

(a) Obtains from each CAH its estimated aggregate charge master change for its next HFY;

(b) Obtains from the Medicare HCFA-2552 Cost Report the CAH initially submits for cost settlement of its most recently completed HFY:

(i) The costs-to-charges ratio of each respective service cost center; and

(ii) Total costs, charges, and number of patient days of each respective accommodation cost center.

(c) Obtains from the Medicaid Management Information System (MMIS) the following fee-for-service summary claims data submitted by each CAH for services provided during the same HFY identified in (b) of this subsection:

(i) Medical assistance program codes;

(ii) Inpatient and outpatient claim types;

(iii) Procedure codes, revenue codes, or diagnosis-related group (DRG) codes;

(iv) Allowed charges and third party liability/client and MAA paid amounts;

(v) Number of claims; and

(vi) Units of service.

(d) Separates the inpatient claims data and outpatient claims data;

(e) Obtains the cost center allowed charges by classifying inpatient and outpatient allowed charges from (c) of this subsection billed by a CAH (using any one of, or a combination of, procedure codes, revenue codes, or DRG codes) into the related cost center in the CAH's Medicare HCFA-2552 cost report the CAH initially submits to MAA;

(f) Determines the MAA departmental-weighted costs for each cost center by multiplying the cost center's allowed charges from (c) of this subsection for the appropriate inpatient or outpatient claim type by the related service cost center ratio;

(g) Sums all allowed charges from (e) of this subsection;

(h) Sums all departmental-weighted costs for inpatient and outpatient claims from (f) of this subsection;

(i) Multiplies each hospital's total MAA departmental-weighted costs from (h) of this subsection by the Medicare Market Basket inflation rate. The Medicare Market Basket inflation rate is published and updated periodically by the Centers for Medicare and Medicaid Services (CMS);

(j) Multiplies each hospital's total allowed charges from (g) of this subsection by the CAH estimated charge master change from (a) of this subsection. If the charge master change factor is not available from the hospital, MAA will apply a reasonable alternative factor; and

(k) Determines the DWCC inpatient and outpatient rates by dividing the total appropriate MAA departmental-weighted costs from (h) of this subsection by the total appropriate allowed charges from (g) of this subsection.

(9) For a currently enrolled hospital provider that is new to the CAH program, the basis for calculating DWCC rates for inpatient and outpatient hospital claims for:

(a) Fee-for-service clients is:

(i) The hospital's most recently submitted Medicare cost report, and

(ii) The appropriate MMIS summary claims data for that hospital fiscal year (HFY).

(b) Managed care clients is:

(i) The hospital's most recently submitted Medicare cost report; and

(ii) The appropriate managed care encounter data for that HFY.

(10) For a newly licensed hospital that is also a CAH, MAA uses the current state-wide average DWCC rates for the initial prospective DWCC rates.

(11) For a CAH that comes under new ownership, MAA uses the prior owner's DWCC rates.

(12) To calculate prospective managed care inpatient and outpatient DWCC rates, MAA uses the methodology outlined in subsection (8) of this section, except that managed care encounter data are used rather than MMIS fee-for-service summary claims data. In addition, MAA:

(a) Incorporates the DWCC rates into the calculations for the managed care capitated premiums that will be paid to the managed care plans; and

(b) Requires all managed care plans having contract relationships with CAHs to pay the inpatient and outpatient DWCC rates applicable to managed care claims. For purposes of this section, MAA considers the DWCC rates used to reimburse CAHs for care given to clients enrolled in a managed care plan to be cost. Cost settlements are not performed for managed care claims.

(13) For fee-for-service claims only, MAA performs an interim retrospective cost settlement for each CAH after the end of the CAH's HFY, using Medicare cost report data and claims data from the MMIS related to fee-for-service claims. Specifically, MAA:

(a) Compares actual MAA total interim CAH payments to the departmental-weighted CAH fee-for-service costs for the period being cost settled; and

(b) Pays the hospital the difference between CAH costs and interim CAH payments if actual CAH costs are determined to exceed the total interim CAH payments for that period. MAA recoups from the hospital the difference between CAH costs and interim CAH payments if actual CAH costs are determined to be less than total interim CAH payments.

(14) MAA performs finalized cost settlements using the same methodology as outlined in subsection (13) of this section, except that MAA uses the hospital's settled Medicare cost report instead of the initial cost report. Whenever a CAH's Medicare cost report is settled by the Medicare fiscal intermediary, the CAH must send the settled cost report to MAA to be used in a final cost settlement.

[Statutory Authority: RCW 74.08.090, 74.04.050, 74.09.5225, and HB 1162, 2001 2nd sp.s. c 2. 02-13-099, 388-550-2598, filed 6/18/02, effective 7/19/02.]

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