Purpose: (Part 1 of 2) The new rules improve the area of outpatient hospital expenditures, by implementing a new Medicaid payment method for outpatient hospital services provided to Medicaid clients. The outpatient prospective payment system (OPPS) uses claims and cost data to calculate reimbursement to hospitals for the facility component of outpatient services, and uses ambulatory payment classifications (APCs) as the primary basis of payment.

     Adopting new sections WAC 388-550-7000 Outpatient prospective payment system (OPPS) -- General, 388-550-7050 OPPS -- Definitions, 388-550-7100 OPPS--Exempt hospitals, 388-550-7200 OPPS -- Payment method, 388-550-7300 OPPS -- Payment limitations, 388-550-7400 OPPS APC relative weights, 388-550-7500 OPPS APC conversion factor, and 388-550-7600 OPPS payment calculation.

     Statutory Authority for Adoption: RCW 74.08.090 and 74.09.500.

      Adopted under notice filed as WSR 04-17-109 on August 17, 2004.

     Changes Other than Editing from Proposed to Adopted Version: The text of the proposed [adopted] rule varies from the text of the proposed rule. The changes follow (text additions are indicated by underlining, and deletions are indicated by strikeouts):

     WAC 388-550-7050 "Ambulatory payment classification (APC) conversion factor" means a hospital specific dollar amount...

     WAC 388-550-7050 "Budget target" means the amount of money allocated appropriated by the legislature or through MAA's budget process to pay for a specific group of services, including anticipated caseload changes or vendor rate increases.

     WAC 388-550-7100 ...(Refer to other sections in chapter 388-550 WAC for alternative outpatient payment methods MAA uses to pay hospital providers that are exempt from MAA's OPPS.)

     WAC 388-550-7200(1), the section describes...for covered outpatient hospital services provided by hospitals not exempted from the outpatient prospective payment system (OPPS).

     WAC 388-550-7200(2), (addition agreed upon by stakeholder and MAA.) MAA uses the APC method when...(CMS) has established weight(s) either an APC weight or a national payment rate to pay for covered:

     WAC 388-550-7200(3), MAA uses the OPPS fee schedule published in the OPPS section of MAA's billing instructions to pay for covered:

     WAC 388-550-7600(1), MAA calculates the ambulatory payment classification (APC) payment as follows: APC payment = APC relative weight x APC hospital specific conversion factor x...

     WAC 388-550-7600(2), the total OPPS claim payment is the lesser of the: (a) Allowed charges for the claim; or (b) Ssum of the APC payments plus the sum of the lesser of the billed charge or allowed charge payments for each non-APC service.

     A final cost-benefit analysis is available by contacting Cynthia Smith, P.O. Box 45510, Olympia, WA 98504, phone (360) 725-1830, fax (360) 753-9152, e-mail smithch@dshs.wa.gov. The cost-benefit analysis (CBA) is unchanged from the preliminary version.

     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 8, Amended 0, 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 8, Amended 0, Repealed 0.

     Date Adopted: September 27, 2004.

Brian H. Lindgren, Manager

Rules and Policies Assistance Unit

     (2) For a complete description of the CMS outpatient hospital prospective payment system, including the assignment of status indicators (SIs), see 42 CFR, Chapter IV, Part 419. The Code of Federal Regulations (CFR) is available from the CFR website and the Government Printing Office, Seattle office. The document is also available for public inspection at the Washington state library (a copy of the document may be obtained upon request, subject to any pertinent charge).

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     "Alternative outpatient payment" means a payment calculated using a method other than the ambulatory payment classification (APC) method, such as the outpatient hospital rate or the fee schedule.

     "Ambulatory payment classification (APC)" means a grouping that categorizes outpatient visits according to the clinical characteristics, the typical resource use, and the costs associated with the diagnoses and the procedures performed.

     "Ambulatory payment classification (APC) weight" means the relative value assigned to each APC.

     "Ambulatory payment classification (APC) conversion factor" means a dollar amount that is one of the components of the APC payment calculation.

     "Budget target" means the amount of money appropriated by the legislature or through MAA's budget process to pay for a specific group of services, including anticipated caseload changes or vendor rate increases.

     "Budget target adjustor" means the MAA specific multiplier applied to all payable ambulatory payment classifications (APCs) to allow MAA to reach and not exceed the established budget target.

     "Discount factor" means the percentage applied to additional significant procedures when a claim has multiple significant procedures or when the same procedure is performed multiple times on the same day. Not all significant procedures are subject to a discount factor.

     "Medical visit" means diagnostic, therapeutic, or consultative services provided to a client by a healthcare professional in an outpatient setting.

     "Modifier" means a two-digit alphabetic and/or numeric identifier that is added to the procedure code to indicate the type of service performed. The modifier provides the means by which the reporting hospital can describe or indicate that a performed service or procedure has been altered by some specific circumstance but not changed in its definition or code. The modifier can affect payment or be used for information only. Modifiers are listed in fee schedules.

     "Observation services" means services furnished by a hospital on the hospital's premises, including use of a bed and periodic monitoring by hospital staff, which are reasonable and necessary to evaluate an outpatient's condition or determine the need for possible admission to the hospital as an inpatient.

     "Outpatient code editor (OCE)" means a software program published by 3M Health Information Systems that MAA uses for classifying and editing claims in ambulatory payment classification (APC) based OPPS.

     "Outpatient prospective payment system (OPPS)" means the payment system used by MAA to calculate reimbursement to hospitals for the facility component of outpatient services. This system uses ambulatory payment classifications (APCs) as the primary basis of payment.

     "Pass-throughs" means certain drugs, devices, and biologicals, as identified by Centers for Medicare and Medicaid Services (CMS), for which providers are entitled to additional separate payment until the drugs, devices, or biologicals are assigned their own ambulatory payment classification (APC).

     "Significant procedure" means a procedure, therapy, or service provided to a client that constitutes the primary reason for the visit to the healthcare professional.

     "Status indicator (SI)" means a one-digit identifier assigned to each service by the outpatient code editor (OCE) software.

     "SI" see "status indicator."

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     (1) Cancer hospitals;

     (2) Critical access hospitals;

     (3) Free-standing psychiatric hospitals;

     (4) Out-of-state hospitals (Bordering-city hospitals are considered in-state hospitals. See WAC 388-550-1050.);

     (5) Pediatric hospitals;

     (6) Peer group A hospitals;

     (7) Rehabilitation hospitals; and

     (8) Veterans' and military hospitals.

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AMBULATORY PAYMENT CLASSIFICATION (APC) METHOD

     (2) MAA uses the APC method when the Centers for Medicare and Medicaid Services (CMS) has established either an APC weight or a national payment rate to pay for covered:

     (a) Medical visits;

     (b) Significant procedures that are not subject to multiple procedure discounting;    

     (c) Significant procedures that are subject to multiple procedure discounting;    

     (d) Nonpass-through drugs or devices;

     (e) Observation services; and

     (f) Ancillary services.

OPPS MAXIMUM ALLOWABLE FEE SCHEDULE

     (3) MAA uses the OPPS fee schedule published in the OPPS section of MAA's billing instructions to pay for covered:

     (a) Services that are exempted from the APC payment methodology or services for which there are no established weight(s);

     (b) Procedures that are on the CMS inpatient only list;

     (c) Items, codes, and services that are not covered by Medicare;    

     (d) Corneal tissue acquisition;

     (e) Drugs or biologicals that are pass-throughs; and

     (f) Devices that are pass-throughs.

HOSPITAL OUTPATIENT RATE

     (4) MAA uses the hospital outpatient rate described in WAC 388-550-4500 to pay for the services listed in subsection (3) of this section for which MAA has not established a maximum allowable fee.

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     (a) When a unit limit for services is not stated in the OPPS fee schedule, MAA pays for services according to the program's unit limits stated in applicable WAC and published issuances.

     (b) Because multiple units for services may be factored into the ambulatory payment classification (APC) weight, MAA pays for services according to the unit limit stated in the OPPS fee schedule when the limit is not the same as the program's unit limit stated in applicable WAC and published issuances.

     (2) MAA does not pay separately for covered services that are packaged into the APC rates. These services are paid through the APC rates.

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APC payment=

APC relative weight x APC conversion factor x

Discount factor (if applicable) x Units of service (if applicable) x

Budget target adjustor

     (2) The total OPPS claim payment is the sum of the APC payments plus the sum of the lesser of the billed charge or allowed charge for each non-APC service.

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