Original Notice.

     Preproposal statement of inquiry was filed as WSR 03-08-086.

     Title of Rule: Part 3 of 3, chapter 388-543 WAC, Durable medical equipment; amending WAC 388-543-2100 Wheelchairs -- Reimbursement methodology, 388-543-2500 Reimbursement methodology for other durable medical equipment, and 388-543-2900 Medical supplies and nondurable medical equipment (MSE) -- Reimbursement methodology.

     Purpose: To avoid federal penalties, the department is amending these rules by October 16, 2003, to comply with the requirements of the federal Health Insurance Portability and Accountability Act (HIPAA) of 1996.

     Statutory Authority for Adoption: RCW 74.04.050, 74.04.057, and 74.08.090.

     Statute Being Implemented: Health Insurance Portability and Accountability Act (HIPAA) of 1996, Public Law 104-191.

     Summary: Deletes references to state-unique procedure codes.

     Reasons Supporting Proposal: Complies with the HIPAA requirements and avoids federal penalties by amending rules to be HIPAA-compliant by October 16, 2003.

     Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Kevin Sullivan, P.O. Box 45533, Olympia, WA 98504-5533, (360) 725-1344.

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

     Rule is necessary because of federal law, Public Law 104-191 (Health Insurance Portability and Accountability Act of 1996).

     Explanation of Rule, its Purpose, and Anticipated Effects: See Purpose and Summary above.

     Proposal Changes the Following Existing Rules: See Summary above.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. The department has determined that the proposed rules will have no economic impact on small businesses.

     RCW 34.05.328 applies to this rule adoption. The rules meet the definition of a "significant legislative rule." The department has prepared a memo regarding the cost benefits of this rule change. A copy of the memo can be obtained from the department representative listed above.

     Hearing Location: Blake Office Park (behind Goodyear Courtesy Tire), 4500 10th Avenue S.E., Rose Room, Lacey, WA 98503, on September 9, 2003, at 10:00 a.m.

     Assistance for Persons with Disabilities: Contact Andy Fernando, DSHS Rules Coordinator, by September 5, 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, mail to P.O. Box 45850, Olympia, WA 98504-5850, deliver to 4500 10th Avenue S.E., Lacey, WA, fax (360) 664-6185, e-mail fernaax@dshs.wa.gov, by 5:00 p.m., September 9, 2003.

     Date of Intended Adoption: Not sooner than September 10, 2003.

August 1, 2003

Brian H. Lindgren, Manager

Rules and Policies Assistance Unit

     (a) The client's medical needs;

     (b) Product quality;

     (c) Cost; and

     (d) Available alternatives.

     (2) For ((HCPCS codes for)) wheelchair rentals and wheelchair accessories (e.g., cushions and backs), MAA uses either:

     (a) The Medicare fees that are current on April 1 of each year((.

     (3) For state-assigned procedure codes, including those listed as BR, for wheelchairs and wheelchair accessories,)); or

     (b) MAA's maximum allowable reimbursement is based on a percentage of the manufacturer's list price in effect on January 31 of the base year, or the invoice for the specific item. ((This applies to)) MAA uses the following percentages:

     (((a))) (i) For basic standard wheelchairs, sixty-five percent;

     (((b))) (ii) For add-on accessories and parts, eighty-four percent;

     (((c))) (iii) For upcharge modifications and cushions, eighty percent;

     (((d))) (iv) For all other manual wheelchairs, eighty percent; and

     (((e))) (v) For all other power-drive wheelchairs, eighty-five percent.

     (((4))) (3) MAA determines rental reimbursement for categories of manual and power-driven wheelchairs based on average market rental rates or Medicare rates.

     (((5))) (4) MAA evaluates and updates the wheelchair fee schedule once per year.

     (((6))) (5) MAA implements wheelchair rate changes on April 1 of the base year, and the rates are effective until the next rate change.

[Statutory Authority: RCW 74.08.090, 74.09.530. 01-01-078, § 388-543-2100, filed 12/13/00, effective 1/13/01.]

     (a) "Other durable medical equipment (other DME)" means all durable medical equipment, excluding wheelchairs and related items.

     (b) "Pricing cluster" means a group of discounted manufacturers' list prices and/or dealer's costs for brands/models of other DME that MAA uses to calculate the reimbursement rate for a procedure code that does not have a fee established by Medicare. MAA uses the discounted manufacturer list price for a brand/model unless that price is not available.

     (2) MAA establishes reimbursement rates for purchased other DME.

     (a) For ((HCPCS procedure codes)) other durable medical equipment that have a Medicare rate established for a new purchase, MAA uses the rate that is in effect on January first of the year in which MAA sets the reimbursement.

     (b) For ((all other procedure codes)) other durable medical equipment that do not have a Medicare rate established for a new purchase, MAA uses a pricing cluster to establish the rate.

     (3) Establishing a pricing cluster and reimbursement rates.

     (a) In order to make up a pricing cluster for a procedure code, MAA determines which brands/models of other DME its clients most frequently use. MAA obtains prices for these brands/models from manufacturer catalogs or commercial data bases. MAA may change or otherwise limit the number of brands/models included in the pricing cluster, based on the following:

     (i) Client medical needs;

     (ii) Product quality;

     (iii) Introduction of new brands/models;

     (iv) A manufacturer discontinuing or substituting a brand/model; and/or

     (v) Cost.

     (b) If a manufacturer list price is not available for any of the brands/models used in the pricing cluster, MAA calculates the reimbursement rate at the manufacturer's published cost to providers plus a thirty-five percent mark-up.

     (c) For each brand used in the pricing cluster, MAA discounts the manufacturer's list price by twenty percent.

     (i) If six or more brands/models are used in the pricing cluster, MAA calculates the reimbursement rate at the seventieth percentile of the pricing cluster.

     (ii) If five brands/models are used in the pricing cluster, MAA establishes the reimbursement rate at the fourth highest discounted list price, as described in (b) of this subsection.

     (iii) If four brands/models are used in the pricing cluster, MAA establishes the reimbursement rate at the third highest discounted list price, as described in (b) of this subsection.

     (iv) If three brands/models are used in the pricing cluster, MAA establishes the reimbursement rate at the third highest discounted list price, as described in (b) of this subsection.

     (v) If two or fewer brands/models are used in the pricing cluster, MAA establishes the reimbursement rate at the highest discounted list price, as described in (b) of this subsection.

     (4) Rental reimbursement rates for other DME.

     (a) MAA sets monthly rental rates at one-tenth of the purchase reimbursement rate as it would be calculated as described in subsections (2) and (3) of this section.

     (b) MAA sets daily rental rates at one-three hundredth of the purchase reimbursement rate as it would be calculated as described in subsections (2) and (3) of this section.

     (5) MAA annually evaluates and updates reimbursement rates for other DME.

[Statutory Authority: RCW 74.08.090, 74.09.530. 01-01-078, § 388-543-2500, filed 12/13/00, effective 1/13/01.]

     (a) Medicare fee schedule; or

     (b) Manufacturers' catalogs and commercial data bases for price comparisons.

     (2) MAA evaluates and updates the maximum allowable fees for MSE as follows:

     (a) ((For HCPCS MSE codes, MAA considers the current Medicare fee schedule;

     (b) For all MSE with state-assigned procedure codes, when the legislature mandates a vendor rate increase or decrease.

     (c))) MAA sets the maximum allowable fees for new MSE using one of the following:

     (i) Medicare's fee schedule; or

     (ii) For those items without a Medicare fee, commercial data bases to ((obtain all)) identify brands to make up MAA's pricing cluster. MAA establishes the fee for products in the pricing cluster by using the lesser of either:

     (A) Eighty-five percent of the average manufacturer's list price; or

     (B) One hundred twenty-five percent of the average dealer cost.

     (((d))) (b) All the brands for which MAA obtains pricing information make up MAA's pricing cluster. However, MAA may limit the number of brands included in the pricing cluster if doing so is in the best interests of its clients. MAA considers all of the following:

     (i) A client's medical needs;

     (ii) Product quality;

     (iii) Cost; and

     (iv) Available alternatives.

     (3) MAA's nursing facility per diem rate includes any reusable and disposable medical supplies that may be required for a nursing facility client. MAA may reimburse the following medical supplies separately for a client in a nursing facility:

     (a) Medical supplies or services that replace all or parts of the function of a permanently impaired or malfunctioning internal body organ. This includes, but is not limited to the following:

     (i) Colostomy and other ostomy bags and necessary supplies; and

     (ii) Urinary retention catheters, tubes, and bags, excluding irrigation supplies;

     (b) Supplies for intermittent catheterization programs, for the following purposes:

     (i) Long term treatment of atonic bladder with a large capacity; and

     (ii) Short term management for temporary bladder atony; and

     (c) Surgical dressings required as a result of a surgical procedure, for up to six weeks after surgery.

     (4) MAA considers decubitus care products to be included in the nursing facility per diem rate and does not reimburse for these separately.

[Statutory Authority: RCW 74.08.090, 74.09.530. 01-01-078, § 388-543-2900, filed 12/13/00, effective 1/13/01.]

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