Effective Date of Rule: Immediately.

     Purpose: The agency is implementing a new alternative payment methodology for federally qualified health centers (FQHCs) and rural health clinics (RHCs) for services provided on and after July 1, 2011. The agency received approval of its state plan amendment on January 11, 2012.

     Citation of Existing Rules Affected by this Order: Amending WAC 182-548-1400 and 182-549-1400.

     Statutory Authority for Adoption: RCW 41.05.021.

     Under RCW 34.05.350 the agency for good cause finds that immediate adoption, amendment, or repeal of a rule is necessary for the preservation of the public health, safety, or general welfare, and that observing the time requirements of notice and opportunity to comment upon adoption of a permanent rule would be contrary to the public interest; that state or federal law or federal rule or a federal deadline for state receipt of federal funds requires immediate adoption of a rule; and that in order to implement the requirements or reductions in appropriations enacted in any budget for fiscal year 2009, 2010, 2011, 2012 or 2013, which necessitates the need for the immediate adoption, amendment, or repeal of a rule, and that observing the time requirements of notice and opportunity to comment upon adoption of a permanent rule would be contrary to the fiscal needs or requirements of the agency.

     Reasons for this Finding: This emergency rule is necessary to continue the emergency rule adopted under WSR 12-06-002 until the permanent rules become effective. The implementation of these emergency rules was necessitated by the level of appropriations made by the legislature in 2ESHB 1087, for services provided by FQHCs and RHCs as of July 1, 2011. Delaying this adoption could jeopardize the state's ability to provide mandatory medicaid services to a significant number of medicaid clients. The language within the rule text has not changed since the last emergency filing. The agency filed permanent rules under WSR 12-16-060, effective August 30, 2012.

     Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 2, Repealed 0.

     Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0;      Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 2, Repealed 0.

     Date Adopted: August 13, 2012.

August 13, 2012

Kevin M. Sullivan

Rules Coordinator

OTS-4372.2

AMENDATORY SECTION(Amending WSR 11-14-075, filed 6/30/11, effective 7/1/11)

WAC 182-548-1400   Federally qualified health centers--Reimbursement and limitations.   (1) ((Effective)) For services provided during the period beginning January 1, 2001, and ending December 31, 2008, the agency's payment methodology for federally qualified health centers (FQHC) ((conforms to 42 U.S.C. 1396a(bb). As set forth in 42 U.S.C. 1396a (bb)(2) and (3), all FQHCs that provide services on January 1, 2001, and through December 31, 2008, are reimbursed on)) was a prospective payment system (PPS) as authorized by 42 U.S.C. 1396a (bb)(2) and (3).

     (2) ((Effective)) For services provided beginning January 1, 2009, FQHCs have the choice to ((continue being)) be reimbursed under the PPS or to be reimbursed under an alternative payment methodology (APM), as authorized by 42 U.S.C. 1396a (bb)(6). As required by 42 U.S.C. 1396a (bb)(6), payments made under the APM ((must)) will be at least as much as payments that would have been made under the PPS.

     (3) The ((department)) agency calculates the FQHC's PPS encounter rate as follows:

     (a) Until the FQHC's first audited medicaid cost report is available, the ((department)) agency pays an average encounter rate of other similar FQHCs within the state, otherwise known as an interim rate;

     (b) Upon availability of the FQHC's first audited medicaid cost report, the ((department)) agency sets the ((clinic's)) FQHC's encounter rate at one hundred percent of its total reasonable costs as defined in the cost report. The FQHC receives this rate for the remainder of the calendar year during which the audited cost report became available. Thereafter, the encounter rate is then ((inflated)) increased each January 1st by the medicare economic index (MEI) for primary care services provided by the FQHC.

     (4) For FQHCs in existence during calendar years 1999 and 2000, the ((department)) agency sets the payment prospectively using a weighted average of one hundred percent of the ((center's)) FQHC's total reasonable costs for calendar years 1999 and 2000 and adjusted for any increase or decrease in the scope of services furnished during the calendar year 2001 to establish a base encounter rate.

     (a) The ((department)) agency adjusts a PPS base encounter rate to account for an increase or decrease in the scope of services provided during calendar year 2001 in accordance with WAC ((388-548-1500)) 182-548-1500.

     (b) The PPS base encounter rates are determined using audited cost reports, and each year's rate is weighted by the total reported encounters. The ((department)) agency does not apply a capped amount to these base encounter rates. The formula used to calculate the base encounter rate is as follows:

Specific FQHC Base Encounter Rate =	(Year 1999 Rate x Year 1999 Encounters) + (Year 2000 Rate x Year 2000 Encounters)
	(Year 1999 Encounters + Year 2000 Encounters) for each FQHC

     (c) Beginning in calendar year 2002 and any year thereafter, the encounter rate is increased by the MEI for primary care services, and adjusted for any increase or decrease within the ((center's)) FQHC's scope of services.

     (5) The ((department)) agency calculates the FQHC's APM encounter rate for services provided during the period beginning January 1, 2009, and ending April 6, 2011, as follows:

     (a) ((Beginning January 1, 2009,)) The APM utilizes the FQHC base encounter rates, as described in ((WAC 388-548-1400)) subsection (4)(b) of this section.

     (((i))) (b) The base rates are adjusted to reflect any valid changes in scope of service between calendar years 2002 and 2009.

     (((ii))) (c) The adjusted base rates are then ((inflated)) increased by each annual percentage, from calendar years 2002 through 2009, of the APM index. The result is the year 2009 APM rate for each FQHC that chooses to be reimbursed under the APM.

     (((b) The department will ensure that the APM pays an amount that is at least equal to the PPS, the annual inflator used to increase the APM rates is the greater of the APM index or the MEI.

     (c) The department will periodically rebase the APM rates. The department will not rebase rates determined under the PPS.))

     (6) The agency:

     (a) Upon approval from the federal Centers for Medicare and Medicaid Services (CMS) of the agency's state plan amendment, calculates the FQHC's APM encounter rate for services provided during the period beginning April 7, 2011, and ending June 30, 2011, as described in this section.

     (b) Pending approval by CMS of the state plan amendment, continued to pay FQHCs at the encounter rate described in subsection (5) of this section.

     (c) For all payments made for services provided during the period beginning April 7, 2011, and ending January 11, 2012, (the date CMS approved the state plan amendment), will recoup from FQHCs any amount paid in excess of the encounter rate established in this section. The APM utilizes each FQHC's PPS rate for each calendar year and increases it by five percent.

     (7) For services provided on and after July 1, 2011, each FQHC will have the choice of receiving either its PPS rate (as determined under the method described in subsection (3) of this section) or a rate determined under a revised APM. CMS approval of the state plan amendment describing this methodology occurred on January 11, 2012.

     (a) For all payments made for services between July 1, 2011, and January 11, 2012, (the date CMS approved the state plan amendment), the agency will recoup from FQHCs any amount in excess of the encounter rate established in this section.

     (b) The revised APM will be as follows:

     (i) For FQHCs that rebased their rate effective January 1, 2010, their allowed cost per visit during the cost report year increased by the cumulative percentage increase in the MEI between the cost report year and 2011.

     (ii) For FQHCs that did not rebase in 2010, their rate is based on their PPS base rate from 2001 (or subsequent year for FQHCs receiving their initial FQHC designation after 2002) increased by the cumulative percentage increase in the IHS Global Insight index from the base year through calendar year 2008 and the cumulative increase in the MEI from calendar years 2008 through 2011. The rates will be increased by MEI effective January 1, 2012, and each January 1st thereafter.

     (c) When the APM methodology is in effect, the state will periodically rebase the FQHC encounter rates using the FQHC cost reports and other relevant data. Rebasing will be done only for FQHCs that are reimbursed under the APM.

     (d) The agency will ensure that the payments made under the APM are at least equal to the payments that would be made under the PPS.

     (8) The ((department)) agency limits encounters to one per client, per day except in the following circumstances:

     (a) The visits occur with different healthcare professionals with different specialties; or

     (b) There are separate visits with unrelated diagnoses.

     (((7))) (9) FQHC services and supplies incidental to the provider's services are included in the encounter rate payment.

     (((8))) (10) Payments for ((nonFQHC)) non-FQHC services provided in an FQHC are made on a fee-for-service basis using the ((department's)) agency's published fee schedules. ((NonFQHC)) Non-FQHC services are subject to the coverage guidelines and limitations listed in chapters ((388-500 through 557)) 182-500 through 182-557 WAC.

     (((9))) (11) For clients enrolled with a managed care organization (MCO), covered FQHC services are paid for by that plan.

     (((10))) (12) Only clients enrolled in Title XIX (medicaid) or Title XXI (CHIP) are eligible for encounter or enhancement payments. The ((department)) agency does not pay the encounter rate or the enhancement rate for clients in state-only medical programs. Services provided to clients in state-only medical programs are considered fee-for-service regardless of the type of service performed.

     (((11))) (13) For clients enrolled with ((a managed care organization (MCO))) an MCO, the ((department)) agency pays each FQHC a supplemental payment in addition to the amounts paid by the MCO. The supplemental payments, called enhancements, are paid in amounts necessary to ensure compliance with 42 U.S.C. 1396a (bb)(5)(A).

     (a) The FQHCs receive an enhancement payment each month for each managed care client assigned to them by an MCO.

     (b) To ensure that the appropriate amounts are paid to each FQHC, the ((department)) agency performs an annual reconciliation of the enhancement payments. For each FQHC, the ((department)) agency will compare the amount actually paid to the amount determined by the following formula: (Managed care encounters times encounter rate) less ((FFS)) fee-for-service equivalent of MCO services. If the ((center)) FQHC has been overpaid, the ((department)) agency will recoup the appropriate amount. If the ((center)) FQHC has been underpaid, the ((department)) agency will pay the difference.

[11-14-075, recodified as § 182-548-1400, filed 6/30/11, effective 7/1/11. Statutory Authority: RCW 74.08.090, BIPA of 2000 Section 702, sections 201 and 209 of 2009-2011 budget bill, and 42 U.S.C. 1396a(bb). 10-09-002, § 388-548-1400, filed 4/7/10, effective 5/8/10.]

OTS-4373.2

AMENDATORY SECTION(Amending WSR 11-14-075, filed 6/30/11, effective 7/1/11)

WAC 182-549-1400   Rural health clinics--Reimbursement and limitations.   (1) ((Effective)) For services provided during the period beginning January 1, 2001, and ending December 31, 2008, the agency's payment methodology for rural health clinics (RHC) ((conforms to)) was a prospective payment system (PPS) as authorized by 42 U.S.C. 1396a (bb)(2) and (3). ((RHCs that provide services on January 1, 2001 through December 31, 2008 are reimbursed on a prospective payment system (PPS).

     Effective)) (2) For services provided beginning January 1, 2009, RHCs have the choice to ((continue being)) be reimbursed under the PPS or be reimbursed under an alternative payment methodology (APM), as authorized by 42 U.S.C. 1396a (bb)(6). As required by 42((.)) U.S.C. 1396a (bb)(6), payments made under the APM ((must)) will be at least as much as payments that would have been made under the PPS.

     (((2))) (3) The ((department)) agency calculates the RHC's PPS encounter rate for RHC core services as follows:

     (a) Until the RHC's first audited medicare cost report is available, the ((department)) agency pays an average encounter rate of other similar RHCs (whether the RHC is classified as hospital-based or free-standing) within the state, otherwise known as an interim rate.

     (b) Upon availability of the RHC's audited medicare cost report, the ((department)) agency sets the ((clinic's)) RHC's encounter rate at one hundred percent of its costs as defined in the cost report divided by the total number of encounters the ((clinic)) RHC has provided during the time period covered in the audited cost report. The RHC will receive this rate for the remainder of the calendar year during which the audited cost report became available. The encounter rate is then ((inflated)) increased each January 1st by the medicare economic index (MEI) for primary care services provided by the RHC.

     (((3))) (4) For RHCs in existence during calendar years 1999 and 2000, the ((department)) agency sets the payment prospectively using a weighted average of one hundred percent of the ((clinic's)) RHC's total reasonable costs for calendar years 1999 and 2000 and adjusted for any increase or decrease in the scope of services furnished during the calendar year 2001 to establish a base encounter rate.

     (a) The ((department)) agency adjusts a PPS base encounter rate to account for an increase or decrease in the scope of services provided during calendar year 2001 in accordance with WAC ((388-549-1500)) 182-549-1500.

     (b) The PPS base encounter rates are determined using medicare's audited cost reports, and each year's rate is weighted by the total reported encounters. The ((department)) agency does not apply a capped amount to these base encounter rates. The formula used to calculate the base encounter rate is as follows:

Specific RHC Base Encounter Rate =	(Year 1999 Rate x Year 1999 Encounters) + (Year 2000 Rate x Year 2000 Encounters)
	(Year 1999 Encounters + Year 2000 Encounters) for each RHC

     (c) Beginning in calendar year 2002 and any year thereafter, the encounter rate is increased by the MEI and adjusted for any increase or decrease in the ((clinic's)) RHC's scope of services.

     (((4))) (5) The ((department)) agency calculates the RHC's APM encounter rate for services provided during the period beginning January 1, 2009, and ending April 6, 2011, as follows:

     (a) ((Beginning January 1, 2009,)) The APM utilizes the RHC base encounter rates as described in ((WAC 388-549-1400 (3)(b))) subsection (4)(b) of this section.

     (b) The base rates are ((inflated)) increased by each annual percentage, from calendar years 2002 through 2009, of the APM index.

     (c) The result is the year 2009 APM rate for each RHC that chooses to be reimbursed under the APM.

     (((b) To ensure that the APM pays an amount that is at least equal to the PPS in accordance with 42 USC 1396a (bb)(6), the annual inflator used to increase the APM rates is the greater of the APM index or the MEI.

     (c) The department periodically rebases the APM rates. The department does not rebase rates determined under the PPS.

     (d) When rebasing the APM encounter rates, the department applies a productivity standard to the number of visits performed by each practitioner group (physicians and mid-levels) to determine the number of encounters to be used in each RHC's rate calculation. The productivity standards are determined by reviewing all available RHC cost reports for the rebasing period and setting the standards at the levels necessary to allow ninety-five percent of the RHCs to meet the standards. The encounter rates of the clinics that meet the standards are calculated using each clinic's actual number of encounters. The encounter rates of the other five percent of clinics are calculated using the productivity standards. This process is applied at each rebasing, so the actual productivity standards may change each time encounter rates are rebased.

     (5))) (6) The agency:

     (a) Upon approval from the federal Centers for Medicare and Medicaid Services (CMS) of the agency's state plan amendment, calculates the RHC's APM encounter rate for services provided during the period beginning April 7, 2011, and ending June 30, 2011, as described in this section.

     (b) Pending approval by CMS of the state plan amendment, continued to pay RHCs at the encounter rate described in subsection (5) of this section.

     (c) For all payments made for services provided during the period beginning April 7, 2011, and ending January 11, 2012, (the date CMS approved the state plan amendment), will recoup from RHCs any amount paid in excess of the encounter rate established in this section. The APM utilizes each RHC's PPS rate for each calendar year and increases it by five percent.

     (7) For services provided on and after July 1, 2011, each RHC will have the choice of receiving either its PPS rate (as determined under the method described in subsection (3) of this section), or a rate determined under a revised APM. CMS approval of the state plan amendment describing the methodology occurred on January 11, 2012.

     (a) For all payments made for services between July 1, 2011, and January 11, 2012, (the date CMS approved the state plan amendment), the agency will recoup from RHCs any amount paid in excess of the encounter rate established in this section.

     (b) The revised APM will be as follows:

     (i) For RHCs that rebased their rate effective January 1, 2010, their allowed cost per visit during the cost report year increased by the cumulative percentage increase in the MEI between the cost report year and 2011.

     (ii) For RHCs that did not rebase in 2010, their rate is based on their PPS base rate from 2002 (or subsequent year for RHCs receiving their initial RHC designation after 2002) increased by the cumulative percentage increase in the IHS Global Insight index from the base year through calendar year 2008 and the cumulative increase in the MEI from calendar years 2008 through 2011. The rate will be increased by the MEI effective January 1, 2012, and each January 1st thereafter.

     (c) When the APM methodology is in effect, the agency will periodically rebase the RHC encounter rate using the RHC cost reports and other relevant data. Rebasing will be done only for RHCs that are reimbursed under the APM.

     (d) The agency will ensure that the payments made under the APM are at least equal to the payments that would be made under the PPS.

     (8) The ((department)) agency pays for one encounter, per client, per day except in the following circumstances:

     (a) The visits occur with different healthcare professionals with different specialties; or

     (b) There are separate visits with unrelated diagnoses.

     (((6))) (9) RHC services and supplies incidental to the provider's services are included in the encounter rate payment.

     (((7))) (10) Payments for non-RHC services provided in an RHC are made on a fee-for-service basis using the ((department's)) agency's published fee schedules. Non-RHC services are subject to the coverage guidelines and limitations listed in chapters ((388-500 through 388-557)) 182-500 through 182-557 WAC.

     (((8))) (11) For clients enrolled with a managed care organization (MCO), covered RHC services are paid for by that plan.

     (((9))) (12) The ((department)) agency does not pay the encounter rate or the enhancements for clients in state-only programs. Services provided to clients in state-only programs are considered fee-for-service, regardless of the type of service performed.

     (((10))) (13) For clients enrolled with ((a managed care organization (MCO))) an MCO, the ((department)) agency pays each RHC a supplemental payment in addition to the amounts paid by the MCO. The supplemental payments, called enhancements, are paid in amounts necessary to ensure compliance with 42 U.S.C. 1396a (bb)(5)(A).

     (a) The RHCs receive an enhancement payment each month for each managed care client assigned to them by an MCO.

     (b) To ensure that the appropriate amounts are paid to each RHC, the ((department)) agency performs an annual reconciliation of the enhancement payments. For each RHC, the ((department)) agency will compare the amount actually paid to the amount determined by the following formula: (Managed care encounters times encounter rate) less fee-for-service equivalent of MCO services. If the ((clinic)) RHC has been overpaid, the ((department)) agency will recoup the appropriate amount. If the ((clinic)) RHC has been underpaid, the ((department)) agency will pay the difference.

[11-14-075, recodified as § 182-549-1400, filed 6/30/11, effective 7/1/11. Statutory Authority: RCW 74.08.090, 74.09.510, 74.09.522, 42 U.S.C. 1396a(bb), 42 C.F.R. 405.2472, and 42 C.F.R. 491. 10-09-030, § 388-549-1400, filed 4/13/10, effective 5/14/10. Statutory Authority: RCW 74.08.090, 74.09.510, 74.09.522, 42 C.F.R. 405.2472, 42 C.F.R. 491. 08-05-011, § 388-549-1400, filed 2/7/08, effective 3/9/08.]