Original Notice.

     Preproposal statement of inquiry was filed as WSR 02-03-092.

     Title of Rule: Amending WAC 388-550-4500 Payment method -- Inpatient RCC (ratio of costs to charges) and administrative day rate and outpatient rate, 388-550-4900 Disproportionate share hospital (DSH) payments, 388-550-5000 Payment method -- LIDSH, 388-550-5100 Payment method -- MIDSH, 388-550-5150 Payment method -- GAUDSH, 388-550-5200 Payment method -- SRHAPDSH, 388-550-5400 Payment method -- PHDDSH, and 388-550-5600 Administrative appeal for hospital rate reimbursement; and new WAC 388-550-6800 Proportionate share payments for inpatient hospital services and 388-550-6900 Proportionate share payments for outpatient hospital services.

     Purpose: The proposed amendments: (1) Amend language to state that MAA annually calculates weighted average in-state RCC rates, the weighted average in-state outpatient rate, and the outpatient adjustment factor; (2) add language to clarify that MAA uses a prospective payment method to determine certain payments made through the DSH program to eligible hospitals; (3) clarify the payment method for the small rural hospital assistance program (SRHAPDSH) and the criteria to qualify for a payment; and (4) incorporate into rule existing policy for proportionate share payments for inpatient and outpatient hospital services.

     Statutory Authority for Adoption: RCW 74.08.090, 74.09.500, 74.09.035(1), and 43.88.290.

     Statute Being Implemented: RCW 74.08.090, 74.09.500, 74.09.035(1), and 43.88.290.

     Summary: Proposed rules: Add language to clarify that MAA uses a prospective payment method to determine certain payments made through the DSH program; clarifies that MAA annually calculates weighted average in-state RCC rates, the weighted average in-state outpatient rate, and the outpatient adjustment factor; add a description of existing policy for proportionate share payments for inpatient and outpatient hospital services; and updates language to reflect current department policy.

     Reasons Supporting Proposal: Updates rule content to reflect current department policy.

     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.

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

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

     Explanation of Rule, its Purpose, and Anticipated Effects: The proposed rules provide clarifying language that MAA annually calculates weighted average in-state RCC rates, the weighted average in-state outpatient rate, and the outpatient adjustment factor. The proposed rules also clarify that MAA uses a prospective payment method to determine certain payments made through the disproportionate share hospital (DSH) program to eligible hospitals, and clarify the payment method for the small rural hospital assistance program (SRHAPDSH) and the criteria to qualify for a payment. In addition, the proposed rules incorporate into rule existing policy for proportionate share payments for inpatient and outpatient hospital services. The purpose of this rule-making action is to adopt into permanent rule clarifying language to reflect current department policy and business practices.

     The anticipated effects are: Providers should have a clearer understanding of:

     (1) How MAA annually calculates weighted average in-state RCC rates and the weighted average in-state outpatient rate and the outpatient adjustment factor;

     (2) How MAA uses a prospective payment method to determine certain payments to eligible hospitals;

     (3) How MAA makes DSH payment adjustments to eligible hospitals per legislative direction and established prospective payment methods;

     (4) The payment method for the SRHAPDSH and the criteria to qualify for a payment; and

     (5) The policy for proportionate share payments for inpatient and outpatient hospital services.

     Proposal Changes the Following Existing Rules: The language that identifies a specific date that MAA calculates weighted average in-state RCC rates and the weighted average in-state outpatient rate and the outpatient adjustment factor is changed to "annually." The department has added the language "per legislative direction and established prospective payment methods" to reflect current department policy.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. Small businesses are not affected by these rule changes.

     RCW 34.05.328 applies to this rule adoption. The rules meet the definition of a "significant legislative rule." The department has prepared a cost benefit analysis (CBA) regarding these rule changes. A copy of the CBA can be obtained from John Hanson, Division of Business and Finance, Medical Assistance Administration, Department of Social and Health Services, P.O. Box 45510, Olympia, WA 98504-5510, phone (360) 753-4338, e-mail hansojr@dshs.wa.gov.

     Hearing Location: Blake Office Park (behind Goodyear Courtesy Tire), 4500 10th Avenue S.E., Rose Room, Lacey, WA 98503, on April 8, 2003, at 10:00 a.m.

     Assistance for Persons with Disabilities: Contact Andy Fernando, DSHS Rules Coordinator, by April 4, 2003, phone (360) 664-6094, TTY (360) 664-6178, e-mail fernaax@dshs.wa.gov.

     Submit Written Comments to: Identify WAC Numbers, DSHS Rules Coordinator, Rules and Policies Assistance Unit, P.O. Box 45850, Olympia, WA 98504-5850, fax (360) 664-6185, e-mail fernaax@dshs.wa.gov, by 5:00 p.m., April 8, 2003.

     Date of Intended Adoption: Not earlier than April 9, 2003.

February 28, 2003

Bonita H. Jacques

for Brian H. Lindgren, Manager

Rules and Policies Assistance Unit

     (a) The medical assistance administration (MAA) calculates a hospital's RCC by dividing allowable operating costs by patient revenues associated with these allowable costs.

     (b) MAA bases these figures on the annual Medicare cost report data provided by the hospital.

     (c) MAA updates a hospital's inpatient RCC rate annually with the submittal of new ((HCFA)) CMS 2552 Medicare cost report data. Prior to computing the ratio, MAA excludes increases in operating costs or total rate-setting revenue attributable to a change in ownership.

     (2) The department limits a hospital's RCC payment to one hundred percent of its allowable charges.

     (3) The department establishes the basic inpatient hospital RCC payment by multiplying the hospital's assigned RCC rate by the allowed charges for medically necessary services. MAA deducts client responsibility (spend-down) and third-party liability (TPL) from the basic payment to determine the actual payment due.

     (4) The department uses the RCC payment method to reimburse:

     (a) DRG-exempt hospitals as provided in WAC 388-550-4300; and

     (b) Any hospital for DRG-exempt services described in WAC 388-550-4400.

     (5) In-state and border area hospitals that lack sufficient ((HCFA)) CMS 2552 Medicare cost report data to establish a hospital specific RCC are reimbursed using the weighted average in-state:

     (a) RCC rate for inpatient services as provided in WAC 388-550-4300 and 388-550-4400; and

     (b) Outpatient rate as provided in WAC 388-550-6000.

     (6) Out-of-state hospitals are also reimbursed for the respective services using the weighted average in-state:

     (a) RCC rate for inpatient services as provided in WAC 388-550-4300 and 388-550-4400; and

     (b) Outpatient rate for outpatient hospital services as provided in WAC 388-550-6000.

     (7) MAA identifies all in-state hospitals that have hospital specific RCC rates, and calculates the weighted average in-state RCC rate annually ((on August 1,)) by dividing the total allowable operating costs of these hospitals by the total respective patient revenues.

     (8) The department pays hospitals an all-inclusive administrative day rate for those days of hospital stay in which a client no longer needs an acute inpatient level of care, but is not discharged because an appropriate placement outside the hospital is not available.

     (a) MAA sets payment for administrative days at the statewide average Medicaid nursing facility per diem rate. The administrative day rate is adjusted annually ((effective November 1)).

     (b) Ancillary services provided during administrative days are not reimbursed.

     (c) The department identifies administrative days for a DRG exempt case during the length of stay review process after the client's discharge from the hospital.

     (d) The department pays the hospital at the administrative day rate starting the date of hospital admission if the admission is solely for a stay until an appropriate sub-acute placement can be made.

     (9) MAA calculates the weighted average in-state outpatient rate annually ((on August 1,)) by multiplying the weighted average in-state RCC rate by the outpatient adjustment factor.

     (10) For hospitals that have their own hospital specific inpatient RCC rate, MAA calculates the hospital's specific outpatient rate by multiplying the hospital's inpatient RCC rate by the outpatient adjustment factor.

     (11) The outpatient adjustment factor:

     (a) Must not exceed 1.0; and

     (b) Is updated annually ((on November 1)). This update causes an additional update of the outpatient rate for each hospital ((on November 1 annually)).

     (12) MAA establishes the basic hospital outpatient payment as provided in WAC 388-550-6000. MAA deducts client responsibility (spend-down) and third-party liability (TPL) from the basic payment to determine the actual payment due.

[Statutory Authority: RCW 74.08.090 and 42 U.S.C. 1395x(v), 42 C.F.R. 447.271, .11303, and .2652. 01-16-142, § 388-550-4500, filed 7/31/01, effective 8/31/01. Statutory Authority: RCW 74.08.090, 42 USC 1395x(v), 42 CFR 447.271, 447.11303, and 447.2652. 99-06-046, § 388-550-4500, filed 2/26/99, effective 3/29/99. Statutory Authority: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010, 74.09.200, [74.09.]500, [74.09.]530 and 43.20B.020. 98-01-124, § 388-550-4500, filed 12/18/97, effective 1/18/98.]

     Reviser's note: The bracketed material preceding the section above was supplied by the code reviser's office.
AMENDATORY SECTION(Amending WSR 99-14-040, filed 6/30/99, effective 7/1/99)

WAC 388-550-4900   Disproportionate share payments.   (((1))) As required by section 1902 (a)(13)(A) of the Social Security Act, the medical assistance administration (MAA) gives consideration to hospitals ((which)) that serve a disproportionate number of low-income clients with special needs by making a payment adjustment to eligible hospitals per legislative direction and established prospective payment methods. MAA considers this adjustment a disproportionate share hospital (DSH) payment.

     (1) To qualify for a DSH payment for each state fiscal year, an instate or border area hospital provider must submit to MAA by certified mail, the hospital's completed and final DSH application by the due date specified in that year's application letter. The application due date will not be less than sixty days after MAA makes the application available.

     (2) ((MAA considers)) A hospital is a disproportionate share hospital eligible for the low-income disproportionate share hospital (LIDSH) program for a specific state fiscal year (SFY) if the hospital submits a DSH application for that respective year in compliance with subsection (1) and if both the following apply:

     (a) The hospital's Medicaid inpatient utilization rate (MIPUR) is at least one standard deviation above the mean Medicaid inpatient utilization rate for hospitals receiving Medicaid payments in the state, or its low-income utilization rate (LIUR) exceeds twenty-five percent; and

     (b) The hospital has at least two obstetricians who have staff privileges at the hospital and who have agreed to provide obstetric services to eligible individuals((,)). This requirement does not apply to a hospital:

     (i) The inpatients of which are predominantly individuals under eighteen years of age; or

     (ii) Which did not offer nonemergency obstetric services to the general public as of December 22, 1987, when section 1923 of the Social Security Act was enacted.

     (3) For hospitals located in rural areas, "obstetrician" means any physician with staff privileges at the hospital to perform nonemergency obstetric procedures.

     (4) MAA may consider a hospital a disproportionate share hospital ((if both of the following apply)) for programs other than the LIDSH program if the hospital submits a DSH application and complies with the following for the respective year:

     (a) The hospital has a MIPUR of not less than one percent; and

     (b) The hospital meets the requirement of subsection (2)(b) of this section.

     (5) MAA administers the low-income disproportionate share (LIDSH) program and may administer any of the following DSH programs:

     (a) Medically indigent disproportionate share hospital (MIDSH);

     (b) General assistance-unemployable disproportionate share hospital (GAUDSH);

     (c) Small rural hospital assistance program disproportionate share hospital (SRHAPDSH);

     (d) Teaching hospital assistance program disproportionate share hospital (THAPDSH);

     (e) State teaching hospital financing program disproportionate share hospital (STHFPDSH);

     (f) County teaching hospital financing program disproportionate share hospital (CTHFPDSH); and

     (g) Public hospital district disproportionate share hospital (PHDDSH).

     (6) MAA allows a hospital to receive any one or all of the ((disproportionate share hospital ())DSH(())) payment adjustments discussed in subsection (5) of this section when the hospital:

     (a) ((Applies to MAA)) Meets the requirements in subsection (4) of this section; and

     (b) Meets the eligibility requirements for the particular DSH payment program, as discussed in WAC 388-550-5000 through 388-550-5400.

     (7) MAA ensures each hospital's total DSH payments do not exceed the individual hospital's DSH limit, defined as:

     (a) The cost to the hospital of providing services to Medicaid clients, including clients served under Medicaid managed care programs;

     (b) Less the amount paid by the state under the non-DSH payment provision of the state plan;

     (c) Plus the cost to the hospital of providing services to uninsured patients; and

     (d) Less any cash payments made by uninsured clients.

     (8) MAA's total annual DSH payments must not exceed the state's DSH allotment for the federal fiscal year.

     If the ((DSH)) MAA statewide allotment is exceeded, MAA ((recoups overpayments from hospitals)) may adjust future DSH payments to each hospital to compensate for the amount overpaid. Adjustments will be made in the following program order:

     (a) PHDDSH;

     (b) THAPDSH;

     (c) CTHFPDSH;

     (d) STHFPDSH;

     (e) SRHAPDSH;

     (f) MIDSH;

     (g) GAUDSH; and

     (h) LIDSH.

[Statutory Authority: RCW 74.08.090, 74.09.730 and 42 U.S.C. 1396r-4. 99-14-040, § 388-550-4900, filed 6/30/99, effective 7/1/99. Statutory Authority: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010, 74.09.200, [74.09.]500, [74.09.]530 and 43.20B.020. 98-01-124, § 388-550-4900, filed 12/18/97, effective 1/18/98.]

     (2) The medical assistance administration (MAA) pays hospitals considered eligible under the criteria in subsection (1) of this section. The total LIDSH payment amounts equal the funding set by the state's appropriations act for LIDSH. The amount that the state appropriates for LIDSH may vary from year to year.

     (3) MAA distributes LIDSH payments to individual hospitals ((as follows by:

     (a))) using the prospective payment method for each LIDSH-eligible hospital((, determining)). MAA determines the standardized Medicaid inpatient utilization rate (MIPUR)((. The MIPUR is standardized)) by:

     (a) Dividing the hospital's MIPUR by the average MIPUR of all LIDSH-eligible hospitals; then

     (b) ((Multiples)) Multiplying the hospital's standardized MIPUR by the hospital's most recent DRG payment method rebased case mix index, and then by the hospital's most recent fiscal year Title XIX admissions((, and lastly by the hospital's profitability factor. MAA then multiplies)); then

     (c) Multiplying the product by an initial random base amount; and then

     (((c) Compares))

     (d) Comparing the sum of all annual LIDSH payments to the appropriated amount. If the amounts differ, MAA progressively selects a new base amount by ((trial and error)) successive approximation until the sum of the LIDSH payments to hospitals equals the legislatively appropriated amount.

     (4) After each applicable state fiscal year, MAA will not make changes to the LIDSH payment distribution that has resulted from calculations identified in subsection (3)(c) of this section. However, hospitals may still submit corrected DSH application data to MAA after June 15 and prior to July 1 of the applicable state fiscal year to correct calculation of the MIPUR or low income utilization rate (LIUR) for historical record keeping. See WAC 388-550-5550 for rules regarding public notice for changes in Medicaid payment rates for hospital services.

[Statutory Authority: RCW 74.08.090, 74.09.730 and 42 U.S.C. 1396r-4. 99-14-040, § 388-550-5000, filed 6/30/99, effective 7/1/99. Statutory Authority: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010, 74.09.200, [74.09.]500, [74.09.]530 and 43.20B.020. 98-01-124, § 388-550-5000, filed 12/18/97, effective 1/18/98.]

     (a) Meets the criteria in WAC 388-550-4900 (2)(b) and (4);

     (b) Is an in-state or border area hospital;

     (c) Provides services to clients under the medically indigent program; and

     (d) Has a low-income utilization rate of one percent or more.

     (2) MAA determines the MIDSH payment for each eligible hospital, using a prospective payment method, in accordance with WAC 388-550-4800.

[Statutory Authority: RCW 74.08.090, 74.09.730, chapter 74.46 RCW and 42 U.S.C. 1396r-4. 99-14-025, § 388-550-5100, filed 6/28/99, effective 7/1/99. Statutory Authority: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010, 74.09.200, [74.09.]500, [74.09.]530 and 43.20B.020. 98-01-124, § 388-550-5100, filed 12/18/97, effective 1/18/98.]

     (a) Meets the criteria in WAC 388-550-4900 (2)(b) and (4);

     (b) Is an in-state or border area hospital;

     (c) Provides services to clients under the medical care services program; and

     (d) Has a low-income utilization rate (LIUR) of one percent or more.

     (2) MAA determines the GAUDSH payment for each eligible hospital, using a prospective payment method, in accordance with WAC 388-550-4800, except that the payment is not reduced by the additional three percent specified in WAC 388-550-4800(4).

[Statutory Authority: RCW 74.08.090, 74.09.730, chapter 74.46 RCW and 42 U.S.C. 1396r-4. 99-14-025, § 388-550-5150, filed 6/28/99, effective 7/1/99. Statutory Authority: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010, 74.09.200, [74.09.]500, [74.09.]530 and 43.20B.020. 98-01-124, § 388-550-5150, filed 12/18/97, effective 1/18/98.]

     (2) To qualify for a SRHAPDSH payment, a hospital must:

     (a) ((Meets)) Meet the criteria in WAC 388-550-4900 (2)(b) and (4);

     (b) ((Is)) Be an in-state hospital;

     (c) ((Is)) Be a small((,)) rural hospital((, defined as a hospital)) with fewer than seventy-five licensed beds; and ((located in a city or town with a nonstudent population of thirteen thousand or less; and

     (d) Provides at least one percent of its services to low-income patients in rural areas of the state.

     (2)(a) MAA pays hospitals qualifying for SRHAPDSH payments from a legislatively appropriated pool.

     (b) MAA determines each individual hospital's SRHAPDSH payment as follows: The total dollars in the pool will be multiplied by the percentage derived from dividing the Medicaid payments to the individual hospital during the fiscal year that is two years previous to the state fiscal year immediately preceded by the total Medicaid payments to all SRHAPDSH hospitals during the same hospital fiscal year))

     (d) Be located in a city or town that meets the following criteria:

     (i) For the SRHAPDSH program year to be implemented for state fiscal year (SFY) beginning July 1, 2002, the city or town must have a nonstudent population of fifteen thousand five hundred or less.

     (ii) For each SRHAPDSH program year to be implemented for each SFY subsequent to July 1, 2002, the nonstudent population in (d)(i) of this subsection is increased cumulatively by two percent.

     (3) MAA pays hospitals qualifying for SRHAPDSH payments from a legislative appropriated pool. MAA determines each hospital's individual SRHAPDSH payment from the total dollars in the pool using percentages established through the following prospective payment method:

     (a) At the time the SRHAPDSH payment is to be made, MAA identifies from historical data considered to be complete, each individual qualifying hospital's most current Medicaid reimbursement amount; then

     (b) Divides the Medicaid reimbursement amount by the total Medicaid payments made to all qualifying hospitals during the same period.

     (4) MAA's SRHAPDSH payments to a hospital may not exceed one hundred percent of the projected cost of care for Medicaid clients and uninsured indigent patients for that hospital. MAA reallocates dollars as defined in the state plan.

[Statutory Authority: RCW 74.08.090, 74.09.730, chapter 74.46 RCW and 42 U.S.C. 1396r-4. 99-14-025, § 388-550-5200, filed 6/28/99, effective 7/1/99. Statutory Authority: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010, 74.09.200, [74.09.]500, [74.09.]530 and 43.20B.020. 98-01-124, § 388-550-5200, filed 12/18/97, effective 1/18/98.]

     (a) Meets the criteria in WAC 388-550-4900 (2)(b) and (4);

     (b) Is a public district hospital in Washington state or a border area hospital owned by a public corporation; and

     (c) Provides at least one percent of its services to low-income patients.

     (2) Using a prospective payment method, MAA pays hospitals considered eligible under the criteria in subsection (1) of this section a PHDDSH payment amount from the legislatively appropriated PHDDSH pool.

[Statutory Authority: RCW 74.08.090, 74.09.730, chapter 74.46 RCW and 42 U.S.C. 1396r-4. 99-14-025, § 388-550-5400, filed 6/28/99, effective 7/1/99. Statutory Authority: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010, 74.09.200, [74.09.]500, [74.09.]530 and 43.20B.020. 98-01-124, § 388-550-5400, filed 12/18/97, effective 1/18/98.]

[Statutory Authority: RCW 74.08.090 and 74.09.730. 99-16-070, § 388-550-5600, filed 8/2/99, effective 9/2/99. Statutory Authority: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010, 74.09.200, [74.09.]500, [74.09.]530 and 43.20B.020. 98-01-124, § 388-550-5600, filed 12/18/97, effective 1/18/98.]

     (a) State-owned hospital; or

     (b) Nonstate government-owned hospital.

     (2) Prior to payment, proportionate share payments for inpatient hospital services are subject to:

     (a) Federal approval for federal matching funds;

     (b) A department analysis of the Medicare upper limit; and

     (c) The federal Medicare upper payment limit for hospital payment.

     (3) The medical assistance administration (MAA) determines each payment year's total proportionate share payment for inpatient hospital services by:

     (a) Using the charge and payment data from MAA's Medicaid Management Information System (MMIS) for inpatient hospital services for the base years; and

     (b) Calculating the cumulative difference between covered Title XIX inpatient charges, Title XIX payments, and third party liability payments for all eligible hospitals during the most recent federal fiscal year.

     (4) Proportionate share payments for inpatient hospital services:

     (a) Are determined and paid periodically to participating eligible hospitals during each federal fiscal year; and

     (b) Must be used to improve health care services to low income patients.

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     (a) State-owned hospital; or

     (b) Nonstate government-owned hospital.

     (2) Prior to payment, proportionate share payments for outpatient hospital services are subject to:

     (a) Federal approval for federal matching funds;

     (b) A department analysis of the Medicare upper limit; and

     (c) The federal Medicare upper payment limit for hospital payment.

     (3) The medical assistance administration (MAA) determines each payment year's total proportionate share payment for outpatient hospital services by:

     (a) Using the charge and payment data from MAA's Medicaid Management Information System (MMIS) for outpatient hospital services for the base years; and

     (b) Calculating the cumulative difference between covered Title XIX outpatient charges, Title XIX payments, and third party liability payments for all eligible hospitals during the most recent federal fiscal year.

     (4) Proportionate share payments for outpatient hospital services:

     (a) Are determined and paid periodically to participating eligible hospitals during each federal fiscal year; and

     (b) Must be used to improve health care services to low income patients.

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