WSR 97-06-066

PERMANENT RULES

DEPARTMENT OF

LABOR AND INDUSTRIES

[Filed February 28, 1997, 8:05 a.m., effective April 1, 1997]

Date of Adoption: February 28, 1997.

Purpose: To clarify and revise rules relating to the methods, policies and rates used to reimburse hospitals for inpatient and outpatient services delivered to eligible workers.

Citation of Existing Rules Affected by this Order: Repealed and replaced chapter 296-23A WAC, Hospitals.

Statutory Authority for Adoption: RCW 51.04.020, 51.04.030, and 51.36.080.

Adopted under notice filed as WSR 96-24-105 on December 4, 1996.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, amended 0, repealed 0; Federal Rules or Standards: New 0, amended 0, repealed 0; or Recently Enacted State Statutes: New 0, amended 0, repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, amended 0, repealed 0.

Number of Sections Adopted on the Agency's own Initiative: New 43, amended 0, repealed 33.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 43, amended 0, repealed 33.

Number of Sections Adopted using Negotiated Rule Making: New 0, amended 0, repealed 0; Pilot Rule Making: New 0, amended 0, repealed 0; or Other Alternative Rule Making: New 43, amended 0, repealed 33.

Effective Date of Rule: April 1, 1997.

February 22, 1997

Gary Moore

Director

PART 1 - GENERAL INFORMATION

NEW SECTION

WAC 296-23A-0100 Where can I find general information and rules pertaining to the care of workers? Hospitals may find general information and rules pertaining to the care of workers in chapters 296-20, 296-21 and 296-23 WAC, department bulletins and other department publications. This list is not exhaustive and hospitals remain responsible for other applicable rules.

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NEW SECTION

WAC 296-23A-0110 When will the department or self-insurer pay for hospital services? The department or self-insurer will pay for hospital services when proper and necessary for the treatment of the accepted occupational disease or injury.

See WAC 296-20-01002 for the definition of medically necessary.

See WAC 296-20-075 for further rules regarding hospitalization.

See WAC 296-20-03001 for treatment requiring authorization.

See WAC 296-20-03002 for treatment not authorized.

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NEW SECTION

WAC 296-23A-0120 What services are subject to review by the department or self-insurer? The department uses utilization review criteria and all hospital inpatient and outpatient services and billed charges are subject to review by the department, self-insurer or a representative chosen by the department or self-insurer.

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NEW SECTION

WAC 296-23A-0130 How does the department establish hospital payment rates? The department will establish and update hospital payment rates, methods and policies in consultation with interested persons at times determined by the department. The department will publish a description of payment methods, rates, and policies for hospital services at least thirty calendar days prior to implementation.

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NEW SECTION

WAC 296-23A-0140 How can interested persons request advance notice of changes to hospital payment rates, methods and policies? The department will give at least thirty calendar days notice to interested persons who request advance notice of changes to hospital payment rates, methods and policies. Interested persons may request advance notice by contacting the department at the following address:

Department of Labor and Industries

Health Services Analysis

Mailing List for Hospital Payment Rates

P.O. Box 44322

Olympia, Washington 98504-4322

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PART 1.1 - SUBMITTING BILLS

NEW SECTION

WAC 296-23A-0150 How must hospitals submit bills for hospital services? Hospitals must submit bills for hospital services using the current National Uniform Billing Form (billing form), or electronically using department file format specifications. Providers using the paper billing form must follow both the billing instructions provided by the department and the Washington state version of the National Uniform Billing Data Element Specifications as adopted by the National Uniform Billing Committee.

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NEW SECTION

WAC 296-23A-0160 How must hospitals submit charges for ambulance and professional services? Hospitals must submit charges for ambulance services and professional services provided by hospital staff physicians on the Health Insurance Claim Form, HCFA 1500 using the provider account number(s) assigned by the department for these services. Hospitals using any of the electronic transfer options must follow department instructions for electronic billing.

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NEW SECTION

WAC 296-23A-0170 How must hospitals bill the department or self-insurer for preadmission services? Preadmission services performed in a hospital outpatient setting within one day prior to hospital admission must be billed as hospital inpatient services.

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PART 1.2 - SUPPORTING DOCUMENTATION REQUIREMENTS

NEW SECTION

WAC 296-23A-0180 What supporting documentation must hospitals send for hospital services? Hospitals must send the following supporting documentation for hospital services:

Admission history and physical examination

Discharge summary for stays over forty-eight hours

Emergency room reports

Operative reports

Anesthesia records

Other documentation as requested by the department or self-insurer.

Hospitals must place the worker's name and claim number on the upper right-hand corner of each page of supporting documentation submitted.

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NEW SECTION

WAC 296-23A-0190 Where must hospitals send supporting documentation for hospital services for state fund claims? Do not submit supporting documentation with the bill for services. Hospitals must send supporting documentation for hospital services for state fund claims to:

Department of Labor and Industries

Claims Section

P.O. Box 44291

Olympia, WA 98504-4291

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NEW SECTION

WAC 296-23A-0195 When must providers using electronic medium submit supporting documentation? Providers using any of the electronic transfer options provided by the department must send the department or self-insurer the required supporting documentation within thirty calendar days of the date billing information was sent to the department on electronic medium. Providers must comply with the electronic billing instructions supplied by the department regarding the submission of hospital bill documentation.

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PART 2 - PAYMENT METHODS FOR HOSPITAL SERVICES

NEW SECTION

WAC 296-23A-0200 How does the department pay for hospital inpatient services? The department will pay for hospital inpatient services according to the following table:

[Open Style:Columns Off]

(WAC 296-23A-0200, Table 1)




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NEW SECTION

WAC 296-23A-0210 How do self-insurers pay for hospital inpatient services? Self-insurers will pay for hospital inpatient services using percent of allowed charges (POAC) factors, according to the following table:

(WAC 296-23A-0210, Table 1)




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NEW SECTION

WAC 296-23A-0220 How does the department or self-insurer pay for hospital outpatient services? The department or self-insurer will pay for hospital outpatient services according to the following table:

(WAC 296-23A-0220, Table 1)


Hospitals are reimbursed only for the technical component of rates listed in the fee schedules, for outpatient radiology, pathology and laboratory services.

See chapter 296-23 WAC for rules on radiology, pathology, laboratory, physical therapy and work hardening services.

See WAC 296-20-132 and 296-20-135 for information on the conversion factor used for hospital outpatient services.

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NEW SECTION

WAC 296-23A-0230 How does the department or self-insurer pay out-of-state hospitals for hospital services? The department or self-insurer pays out-of-state hospitals for hospital services using a percent of allowed charges (POAC) factor or department fee schedule. The POAC factor may differ for services performed in inpatient and outpatient settings. The department or self-insurer will pay out-of-state hospitals according to the following table:

(WAC 296-23A-0230, Table 1)




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NEW SECTION

WAC 296-23A-0240 How does the department define and pay a new hospital? New hospitals are those open for less than one year prior to the implementation of the department's most recent hospital payment rates. The department will pay new hospitals according to the following table:

(WAC 296-23A-0240, Table 1)




[Open Style:Columns On]

A new hospital will be paid using its hospital-specific POAC within three years of receiving a provider account number(s) from the department.

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NEW SECTION

WAC 296-23A-0250 Does a change in hospital ownership affect a hospital's payment rate? A change in ownership does not constitute the creation of a new hospital. If a hospital changes ownership, rates will remain the same as those payable to the previous owner.

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PART 2.1 - PERCENT OF ALLOWED CHARGES (POAC)

PAYMENT METHODS AND POLICIES

NEW SECTION

WAC 296-23A-0300 When do percent of allowed charges (POAC) payment factors apply? The department may designate from time to time, those hospitals and hospital services to be paid using POAC factors.

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NEW SECTION

WAC 296-23A-0310 What is the method for calculating percent of allowed charges (POAC) factors? POAC factors are based on Medicare cost report data and are calculated by dividing adjusted operating expenses by adjusted patient revenues. The department will allow costs for graduate medical education and charity care. Allowable costs for charity care shall not exceed a maximum of two percent of the facility's total allowable costs. A hospital's POAC factor shall not exceed one hundred percent of allowed charges.

Payment rates are calculated by multiplying the POAC factor by the allowed charges.

Amount Paid = (POAC Factor) X (Allowed Charges)

Each hospital will be notified of their revised POAC factor thirty days prior to implementation. Incorrect data or erroneous calculations can be appealed in accordance with WAC 296-23A-0600.

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PART 2.2 - PER DIEM PAYMENT METHODS AND POLICIES

NEW SECTION

WAC 296-23A-0350 When do per diem rates apply? The department may designate from time to time, those hospitals and hospital services paid on a per diem basis. For example, the department may develop per diem rates for the following diagnosis-related-group (DRG) categories:

Psychiatric;

Rehabilitation;

Substance abuse;

Medical;

Surgical; and

Other categories as determined by the department.

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NEW SECTION

WAC 296-23A-0360 What is the method for calculating per diem rates? Per diem rates are calculated by dividing the total costs for all relevant cases in the historical data base by the total number of days. The total number of days is equal to the sum of the number of days for each relevant case. The number of days per case is equal to last date of service minus the first date of service. The department will allocate costs at the detailed revenue code level using Medicare cost report data and Medicare definitions for allowable costs. The department will allow costs for graduate medical education and charity care. Allowable costs for charity care shall not exceed a maximum of two percent of the facility's total allowable costs.

Payment rates are equal to the applicable per diem rate multiplied by the number of days allowed by the department. The department does not pay for the day of discharge. Payment shall not exceed allowed billed charges.

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PART 2.3 - DIAGNOSIS-RELATED-GROUP PAYMENT METHODS AND POLICIES

NEW SECTION

WAC 296-23A-0400 What is a "diagnosis-related-group" payment system? A diagnosis-related-group (DRG) system categorizes patients into clinically coherent and homogenous groups with respect to resource use. The department will use an all-patient grouper to perform the diagnostic categorization. To the extent feasible, where DRG relative weights meet acceptable reliability and validity standards, the department will use DRG per case rates for payment of hospital inpatient services.

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NEW SECTION

WAC 296-23A-0410 How does the department calculate diagnosis-related-group (DRG) relative weights? In calculating DRG relative weights, the department will:

(1) Allocate costs for hospital services at a detailed revenue code level using Medicare cost report data and Medicare definitions for allowable costs. The department will allow costs for graduate medical education and charity care. Allowable costs for charity care shall not exceed a maximum of two percent of the facility's total allowable costs.

(2) Classify department hospital admissions data and hospital discharge data in the Washington state department of health's comprehensive hospital abstract reporting system (CHARS), using an all-patient grouper.

(3) Establish relative weights from department of labor and industries' hospital admission data. If the department's data is not sufficient to calculate stable relative weights, the department may use hospital discharge data in the Washington state department of health's comprehensive hospital abstract reporting system (CHARS) or another appropriate data source.

(4) Exclude the following types of cases from DRG relative weight calculations: Transfers, statistical outliers, length of stay equal to zero, psychiatric, substance abuse and rehabilitation DRGs, out-of-state hospitals, other hospitals and services designated as exempt from DRG payment rates.

See WAC 296-23A-0470 and 296-23A-0480 for exclusions and exceptions to DRG payments for hospital services.

(5) Test each DRG statistically for adequacy of sample size to ensure that relative weights meet acceptable reliability and validity standards.

(6) Replace unstable department relative weights with stable CHARS derived relative weights.

(7) Standardize department and CHARS relative weights to a state-wide case-mix index of 1.0.

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NEW SECTION

WAC 296-23A-0420 How does the department determine the base price for hospital services paid using per case rates? The department determines the base price for hospital services paid using per case rates according to the following table:

[Open Style:Columns Off]

(WAC 296-23A-0420, Table 1)


[Open Style:Columns On]



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NEW SECTION

WAC 296-23A-0430 How does the department calculate a hospital specific case-mix adjusted average cost per case? The department determines the case-mix adjusted average cost per case for each hospital by:

(1) Allocating costs for hospital services at a detailed revenue code level using Medicare cost report data and Medicare definitions for allowable costs. The department will allow costs for graduate medical education and charity care. Allowable costs for charity care shall not exceed a maximum of two percent of the facility's total allowable costs;

(2) Totaling the costs of all DRG cases;

(3) Dividing the total by the number of cases; and

(4) Then dividing that number by the hospital's case-mix index.

(5) Per case costs are indexed to the payment period for inflation and other factors.

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NEW SECTION

WAC 296-23A-0440 How does the department calculate the base price for DRG hospitals, except major teaching hospitals? The department calculates the base price for DRG hospitals, except major teaching hospitals by:

(1) Calculating each hospital's case-mix adjusted average cost per case;

(2) Weighting each hospital's case-mix adjusted average cost per case by the number of cases at that hospital;

(3) Determining the median (fiftieth percentile) of the list of case-mix adjusted average costs per case.

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NEW SECTION

WAC 296-23A-0450 What cases does the department exclude from base price calculations? The department excludes the following types of cases from base price calculations:

Transfers;

Statistical outliers;

Length of stay equal to zero;

Psychiatric, substance abuse and rehabilitation DRGs;

Out-of-state hospitals; and

Other hospitals and services designated as exempt from DRG payment rates.

See WAC 296-23A-0470 and 296-23A-0480 for exclusions and exceptions to DRG payments for hospital services.

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NEW SECTION

WAC 296-23A-0460 How does the department calculate the diagnosis-related-group (DRG) per case payment rate for a particular hospital? The DRG per case rate for a particular hospital is calculated by multiplying the assigned DRG relative weight for that admission by the applicable base price.

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NEW SECTION

WAC 296-23A-0470 Which exclusions and exceptions apply to diagnosis-related-group (DRG) payments for hospital services? The following exclusions and exceptions apply to DRG payments for hospital services:

Psychiatric, rehabilitation, and chemical dependency (substance abuse) services will be excluded from payment by DRG rates. These services will be paid using per diem payment rates.

Ambulance and air transportation services are excluded from DRG payments.

Bills assigned to a DRG that is defined as ungroupable will be denied.

Bills where the principal diagnosis is invalid as a discharge diagnosis will be denied.

Bills where the injured worker has been admitted and discharged in less than twenty-four hours will be reviewed by the department and may be paid as hospital outpatient services.

The department may choose to exclude other DRGs from DRG payment rates due to concerns about access, case volume or other considerations. These services will be paid using the applicable percent of allowed charges (POAC) factor and per diem rates.

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NEW SECTION

WAC 296-23A-0480 Which hospitals does the department exclude from diagnosis-related-group (DRG) payments? The following hospitals are excluded from DRG payments:

Military, Veterans Administration, state psychiatric facilities, health maintenance organizations (HMO), and children's hospitals will be paid their allowed charges.

Department-approved chronic pain management programs will be paid according to department agreement or contract.

Peer Group A hospitals, as defined by the department of health, will be paid using per diem rates.

Hospitals located outside of Washington will be paid a percent of allowed charges (POAC).

Other hospitals, as determined by the department, may be excluded from DRG reimbursement rates due to concerns about access, case volume or other considerations. These facilities will be paid using the applicable POAC factor and per diem rates.

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NEW SECTION

WAC 296-23A-0490 Which hospital services does the department include in diagnosis-related-group (DRG) rates? Unless otherwise specified, the department will include in the DRG rate all hospital services provided to an injured worker admitted to a hospital. Hospital services must be medically necessary for the treatment of the accepted occupational disease or injury.

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NEW SECTION

WAC 296-23A-0500 When does a case qualify for high outlier status? Outlier payments apply only to diagnosis-related-group (DRG) reimbursed cases with unusually high or low costs. Outlier status does not apply to cases paid using a percent of allowed charges (POAC) factor or per diem rates. To have a bill considered for outlier status, a hospital must enter "61" for the condition code, block 35 of the hospital billing form.

A case is considered a high cost outlier if the costs for the case exceed the outlier threshold for the assigned diagnosis-related-group. The costs for a case are determined by multiplying the allowed charges for the case by the hospital specific POAC factor. The threshold used to define a high outlier case is the greater of a dollar threshold of twelve thousand dollars or two standard deviations above the state-wide average cost for each DRG paid by the department.

The dollar threshold may be adjusted annually for inflation or other factors as determined by the department. The standard deviations for DRGs will be computed from all relevant cases in the historical data base, excluding statistical outliers.

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NEW SECTION

WAC 296-23A-0520 How does the department pay for high outlier cases? Cases defined as high cost outliers will be reimbursed at the diagnosis-related-group (DRG) payment rate plus one hundred percent of costs in excess of the threshold. Costs are determined by multiplying the allowed charges by the hospital specific percent of allowed charges (POAC) factor.

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NEW SECTION

WAC 296-23A-0530 How does a case qualify for low outlier status? To qualify as a low outlier, the allowed charges multiplied by that hospital's percent of allowed charges (POAC) factor must be less than ten percent of the state-wide diagnosis-related-group (DRG) rate or five hundred dollars whichever is greater. The standard deviations for DRGs will be computed from all relevant cases in the historical data base, excluding statistical outliers.

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NEW SECTION

WAC 296-23A-0540 How does the department pay for low outlier cases? Low outlier cases are paid by multiplying each hospital's specific percent of allowed charges (POAC) factor by the allowed charges for the case.

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NEW SECTION

WAC 296-23A-0550 Under what circumstances will the department pay for interim bills? The department will deny interim bills which are assigned to diagnosis-related-groups (DRGs) paid per case rates by the department.

If an interim bill is coded as a diagnosis-related-group (DRG) not paid per case rates by the department, then the bill will be paid using the applicable percent of allowed charges (POAC) factor and per diem rates. If a subsequent bill coded as a DRG paid per case rates by the department, for the same injured worker, has a first date of service within seven days of the last date of service of the previous bill, then the bills will be subject to review and adjustment by the department.

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NEW SECTION

WAC 296-23A-0560 How does the department define and pay for hospital readmissions? The department will review hospital readmissions occurring within seven days of discharge and will determine whether the second admission resulted from premature discharge. Payment for services associated with readmission will depend upon the review. For example:

If the second admission is determined unnecessary, reimbursement may be denied.

If the admission was avoidable, the two admissions may be combined and a single diagnosis-related-group (DRG) payment made.

If two different DRG assignments are involved, reimbursement for the appropriate DRG will be based upon review of the case.

Readmissions involving different hospitals will be reviewed by the department and may be paid using the payment method for transfers.

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NEW SECTION

WAC 296-23A-0570 How does the department define a transfer case? A transfer case is defined as an injured worker's admission to another acute care hospital within seven days of that worker's previous discharge. All bills for transfer cases will be subject to review by the department and payment will be determined based on that analysis. The transferring hospital may qualify for high and low outlier status.

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NEW SECTION

WAC 296-23A-0575 How does the department pay a transferring hospital for a transfer case? When the stay at the transferring hospital is a diagnosis-related-group (DRG) paid by the department, and does not qualify as a low outlier, the transferring hospital is paid a graduated per diem rate for each day of care allowed by the department. If the case qualifies as a low cost outlier, the hospital will be paid the graduated per diem amount or low cost outlier payment amount, whichever is lower. The per diem rate is determined by dividing that hospital's rate for the appropriate DRG by that DRG's average length of stay as determined by the department. Payment for the first day of service will be two times the per diem rate. For subsequent allowed days, the basic per diem rate will be paid up to the full DRG payment amount. Unless the case qualifies as a high outlier, payment to the transferring hospital will not exceed the appropriate DRG rate that would have been paid had the injured worker not been transferred to another hospital.

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NEW SECTION

WAC 296-23A-0580 How does the department pay the receiving hospital for a transfer case? The hospital receiving a transfer will be paid according to the department's review of the case. If the receiving hospital's stay is a diagnosis-related-group (DRG) paid by the department, then the hospital will receive the appropriate per case and outlier payments. If the case is not a DRG paid by the department, then the hospital is paid using applicable percent of allowed charges (POAC) factor or per diem rates.

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PART 3 - REQUESTING A HOSPITAL RATE ADJUSTMENT

NEW SECTION

WAC 296-23A-0600 How can a hospital request a rate adjustment? Hospitals may submit a request for adjustment to their rate if:

The rate methodology or principles of reimbursement established in department publications were incorrectly applied, or

Incorrect data or erroneous calculations were used in the establishment of the hospital's rate.

In all circumstances, requests for adjustments to rates must show how the rate adjustment was calculated and contain sufficient detail to permit an audit. Requests must specify the nature and the amount of the adjustment sought. The burden of proof is on the requesting hospital.

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NEW SECTION

WAC 296-23A-0610 Where must hospitals submit requests for rate adjustments? Hospitals must submit requests for rate adjustments in writing to:

Department of Labor and Industries

Health Services Analysis

Request for Hospital Rate Adjustment

P.O. Box 44322

Olympia, Washington 98504-4322.

Requests must be received within sixty days after the facility receives notice of its payment rates.

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NEW SECTION

WAC 296-23A-0620 What action will the department take upon receipt of a request for a rate adjustment? Upon receipt of the request, the department shall determine the need for a conference with the hospital and will contact the facility to arrange a conference if needed. The conference, if needed, must be held within sixty days of the department's receipt of the request.

Within thirty calendar days of the receipt of the request for review or the date of the conference, the department shall notify the facility of the action to be taken by the department.

If the department's review of the material submitted by the hospital results in a favorable determination for the hospital, the department will modify the hospital's payment rate(s). The revised rate(s) will apply to all bills with a date of admission on or after a date chosen by the department. The chosen date will be within one hundred twenty days of the department's and hospital's agreement to modify the rate(s).

If the department's review of the material submitted by the hospital results in an unfavorable determination for the hospital, the hospital may file an appeal with the board of industrial insurance appeals.

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REPEALER

The following sections of the Washington Administrative Code are repealed:

WAC 296-23A-100 General information.

WAC 296-23A-105 Payment for hospital inpatient and outpatient services.

WAC 296-23A-106 Reimbursement for inpatient services by per case rates and percentage of allowed charges.

WAC 296-23A-110 Hospital outpatient fee schedule information.

WAC 296-23A-115 Hospital outpatient services conversion factors.

WAC 296-23A-120 Questionable eligibility.

WAC 296-23A-125 Refund of incorrect payments.

WAC 296-23A-130 Treatment of unrelated illness or injury.

WAC 296-23A-135 Closed claims.

WAC 296-23A-140 Take-home Rx's.

WAC 296-23A-145 Routine laboratory procedures on admission.

WAC 296-23A-150 Billing procedures.

WAC 296-23A-155 New hospitals.

WAC 296-23A-160 Excluded and included services.

WAC 296-23A-165 Out-of-state hospitals.

WAC 296-23A-170 Outliers.

WAC 296-23A-175 Interim bills.

WAC 296-23A-180 Readmissions.

WAC 296-23A-185 Transfers.

WAC 296-23A-190 Adjustment of rates.

WAC 296-23A-200 General information--Hospital outpatient radiology.

WAC 296-23A-205 Billing procedures.

WAC 296-23A-210 Injection procedures.

WAC 296-23A-215 Responsibility for x-rays.

WAC 296-23A-220 Duplication of x-rays.

WAC 296-23A-225 Additional views.

WAC 296-23A-230 Unlisted service or procedure.

WAC 296-23A-235 Special report.

WAC 296-23A-300 General information--Hospital outpatient pathology and laboratory.

WAC 296-23A-310 Billing procedures.

WAC 296-23A-315 Unlisted service or procedure.

WAC 296-23A-320 Special report.

WAC 296-23A-400 Hospital outpatient physical therapy rules.

WAC 296-23A-430 Work hardening.

Legislature Code Reviser

Register

Washington State Code Reviser's Office