Original Notice.

     Preproposal statement of inquiry was filed as WSR 04-03-090.

     Title of Rule: Amending WAC 388-550-4900 Disproportionate share payments, 388-550-5100 Payment method -- MIDSH and 388-550-5200 Payment method -- SRHAPDSH; and adopting new sections WAC 388-550-5210 Payment method -- SRHIAAPDSH and 388-550-5220 Payment method -- NRHIAAPDSH.

     Purpose: To meet legislative requirements, the department is adding two new sections for the new small rural hospital indigent adult assistance program disproportionate share hospital (SRHIAAPDSH) disproportionate share hospital (DSH) and the nonrural hospital indigent adult assistance program disproportionate share hospital (NRHIAAPDSH) DSH programs. The new sections establish payment calculations for these programs. The rules also clarify and update payment methods for other DSH programs.

     Statutory Authority for Adoption: RCW 74.08.090, 74.04.050.

     Statute Being Implemented: RCW 74.08.090, 74.04.050, 43.88.290, chapter 25, Laws of 2003 1st sp.s.

     Summary: To meet legislative requirement by adding two new sections that establish the SRHIAAPDSH and NRHIAAPDSH programs and establish payment calculation methods for these programs. To clarify and update payment methods for other DSH programs.

     Reasons Supporting Proposal: Per legislative direction in chapter 25, Laws of 2003 1st sp.s.

     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: See Purpose, Summary and Reasons Supporting Proposal above.

     The anticipated effects are:

     (1) MAA will be in compliance with legislative directive;

     (2) The rule will establish standards for two new DSH programs and to provide a basis for establishing application criteria and payment calculation methods for these programs.

     (3) The rule will mitigate the loss of the medically indigent (MI) program for the hospitals.

     (4) The rule will be clearer and up-to-date on current payment methods for the DSH programs.

     Proposal Changes the Following Existing Rules: The proposed rule:

     (1) Adds a definition for "obstetric services" to clarify requirements for establishing DSH eligibility;

     (2) Adds language that MAA calculates each hospital's profitability margin based on the most recently completed year-end data using audited financial statements from the hospital; and

     (3) Describes how MAA determines a profit factor for each qualifying hospital at the time an SRHAPDSH payment is to be made.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. The department has analyzed the rules and concluded that no new costs will be imposed on small businesses. The rules help mitigate the termination on July 1, 2003, of the medically indigent (MI) program.

     RCW 34.05.328 applies to this rule adoption. The department has determined that the rules meet the definition of a "significant legislative rule." A cost benefit analysis was completed and is available upon request from John Hanson, Medical Assistance Administration, P.O. Box 45510, Olympia, WA 98504, phone (360) 725-1856, fax (360) 753-9152, 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 May 11, 2004, at 10:00 a.m.

     Assistance for Persons with Disabilities: Contact Andy Fernando, DSHS Rules Coordinator, by May 7, 2004, phone (360) 664-6097, 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., May 11, 2004.

     Date of Intended Adoption: Not sooner than May 12, 2004.

April 2, 2004

Brian H. Lindgren, Manager

Rules and Policies Assistance Unit

     (1) To qualify for a DSH payment for each state fiscal year (SFY), 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) 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)) specific 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 at the hospital. For the purpose of establishing DSH eligibility, "obstetric services" is defined as routine nonemergency delivery of babies. This requirement for two obstetricians with staff privileges does not apply to a hospital:

     (i) ((The inpatients of which are)) That provides inpatient services predominantly to individuals under eighteen years of age; or

     (ii) ((Which)) That 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 for programs other than the LIDSH program if the hospital submits a DSH application ((and complies with the following for the respective year)) for the specific year and meets the following criteria for the year specified in the application:

     (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) Small rural hospital indigent adult assistance program disproportionate share hospital (SRHIAAPDSH);

     (e) Nonrural hospital indigent adult assistance program disproportionate share hospital (NRHIAAPDSH);

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

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

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

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

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

     (a) 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; and

     (e) Plus any adjustments required and/or authorized by federal regulation.

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

     If the MAA statewide allotment is exceeded, MAA 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) NRHIAAPDSH;

     (g) SRHIAAPDSH;

     (h) MIDSH;

     (((g))) (i) GAUDSH; and

     (((h))) (j) LIDSH.

[Statutory Authority: RCW 74.08.090, 74.09.500, 74.09.035(1), and 43.88.290. 03-13-055, § 388-550-4900, filed 6/12/03, effective 7/13/03. 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.]

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

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

     (c) ((Provides)) Provided services to clients under the medically indigent program for dates of services before July 1, 2003; 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, 74.09.500, 74.09.035(1), and 43.88.290. 03-13-055, § 388-550-5100, filed 6/12/03, effective 7/13/03. 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.]

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

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

     (b) Be an in-state hospital;

     (c) Be a small rural hospital with fewer than seventy-five acute licensed beds; and

     (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 subsequent SFY ((subsequent to July 1, 2002)), the nonstudent population ((in (d)(i) of this subsection)) requirement is increased cumulatively by two percent.

     (3) MAA pays hospitals qualifying for SRHAPDSH payments from a ((legislative)) legislatively 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)) calculates each hospital's profitability margin based on the most recent, completed year-end data using audited financial statements from the hospital.

     (b) ((Divides the Medicaid reimbursement amount by the total Medicaid payments made to all qualifying hospitals during the same period)) MAA determines the average profitability margin for the qualifying hospitals.

     (c) Any hospital with a profitability margin of less than one hundred ten percent of the average profitability margin for qualifying hospitals receives a profit factor of 1.1. All other hospitals receive a profit factor of 1.0.

     (d) MAA:

     (i) Identifies the individual hospital's most recent, completed SFY Medicaid reimbursement amounts. These amounts are based on historical data considered to be complete; then

     (ii) Multiplies the Medicaid reimbursement amount by the individual hospital's assigned profit factor (1.1 or 1.0) to identify a revised Medicaid reimbursement amount; then

     (iii) Divides the revised Medicaid reimbursement amount by the sum of the revised Medicaid reimbursement amounts for 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 unless an exception is identified by federal regulation. MAA reallocates dollars as defined in the state plan.

[Statutory Authority: RCW 74.08.090, 74.09.500, 74.09.035(1), and 43.88.290. 03-13-055, § 388-550-5200, filed 6/12/03, effective 7/13/03. 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.]

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

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

     (b) Be an in-state hospital that provided services to clients eligible under the medically indigent (MI) program during the most recent, completed fiscal year;

     (c) Be a small rural hospital with fewer than seventy-five acute licensed beds; and

     (d) For state fiscal year (SFY) beginning July 1, 2003, be located in a city or town that has a nonstudent population of fifteen thousand eight hundred ten or less. For each subsequent SFY, the nonstudent population requirement is increased cumulatively by two percent.

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

     (a) At the time the SRHIAAPDSH payment is to be made, MAA calculates each hospital's profitability margin based on the most recent, completed year-end data using audited financial statements from the hospital.

     (b) MAA determines the average profitability margin for the qualifying hospitals.

     (c) Any hospital with a profitability margin of less than one hundred ten percent of the average profitability margin for qualifying hospitals receives a profit factor of 1.1. All other hospitals receive a profit factor of 1.0.

     (d) MAA:

     (i) Identifies from historical data considered to be complete, each individual qualifying hospital's inpatient and outpatient allowed charges for MAA's MI clients; then

     (ii) Multiplies the total allowed charges by the hospital's ratio of costs-to-charges (RCC) to determine the hospital's MI costs; then

     (iii) Multiplies the hospital's MI costs by the hospital's profit factor assigned in (c) of this subsection to identify a revised cost amount; then

     (iv) Determines the hospital's percentage of revised costs by dividing its revised cost amount by the sum of the revised MI cost amounts for all qualifying hospitals during the same period.

     (4) MAA's SRHIAAPDSH 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 unless an exception is identified by federal regulation. MAA reallocates dollars as defined in the state plan.

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

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

     (b) Be an in-state or border area hospital that provided services to clients eligible under the medically indigent (MI) program during the most recent, completed fiscal year; and

     (c) Be a hospital that does not qualify as a small rural hospital as defined in WAC 388-550-5210.

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

     (a) At the time the NRHIAAPDSH payment is to be made, MAA calculates each hospital's profitability margin based on the most recent, completed year-end data using audited financial statements from the hospital.

     (b) MAA determines the average profitability margin for the qualifying hospitals.

     (c) Any hospital with a profitability margin of less than one hundred ten percent of the average profitability margin for qualifying hospitals receives a profit factor of 1.1. All other hospitals receive a profit factor of 1.0.

     (d) MAA:

     (i) Identifies from historical data considered to be complete, each individual qualifying hospital's inpatient and outpatient allowed charges for MAA's MI clients; then

     (ii) Multiplies the total allowed charges by the hospital's ratio of costs-to-charges (RCC) to determine the hospital's MI costs; then

     (iii) Multiplies the hospital's MI costs by the hospital's profit factor assigned in (c) of this subsection to identify a revised cost amount; then

     (iv) Determines the hospital's percentage of the NRHIAAPDSH revised costs by dividing the hospital's revised cost amount by the total MI costs for all qualifying hospitals during the same period.

     (4) MAA's NRHIAAPDSH payments to a hospital may not exceed one hundred percent of the projected cost of care for Medicaid clients and uninsured indigent patients for the hospital unless an exception is identified by federal regulation. MAA reallocates dollars as defined in the state plan.

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