WSR 07-09-080



(Health and Recovery Services Administration)

[ Filed April 17, 2007, 3:48 p.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 05-17-136.

Title of Rule and Other Identifying Information: WAC 388-550-4600 Hospital selective contracting program and 388-550-4700 Payment -- Non-SCA participating hospitals.

Hearing Location(s): Blake Office Park East, Rose Room, 4500 10th Avenue S.E., Lacey, WA 98503, (one block north of the intersection of Pacific Avenue S.E. and Alhadeff Lane. A map or directions are available at or by calling (360) 664-6097), on May 22, 2007, at 10:00 a.m.

Date of Intended Adoption: Not earlier than May 23, 2007.

Submit Written Comments to: DSHS Rules Coordinator, P.O. Box 45850, Olympia, WA 98504, delivery 4500 10th Avenue S.E., Lacey, WA 98503, e-mail, fax (360) 664-6185, by 5:00 p.m. on May 22, 2007.

Assistance for Persons with Disabilities: Contact Stephanie Schiller, DSHS Rules Coordinator, by May 18, 2007, TTY (360) 664-6178 or (360) 664-6097 or by e-mail at

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The department is ending the hospital selective contracting program on June 30, 2007.

Reasons Supporting Proposal: The program is ending because it is being replaced with a new inpatient payment system. The hospital selective contracting program was based on negotiating a rate below the conversion factor based on facility-specific costs (subject to peer group caps in some instances). Conversion factors in the new inpatient payment system were generally based on statewide weighted average cost per discharge amounts, which were then adjusted to reflect the unique characteristic of hospitals in the state for payment purposes. The new inpatient methodology was developed as budget neutral; aggregate payments to hospitals under the proposed methodology do not exceed what projected aggregate payments would be to those same hospitals if the current methodology remained in place.

Statutory Authority for Adoption: RCW 74.08.090 and 74.09.500.

Statute Being Implemented: RCW 74.08.090 and 74.09.500.

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

Name of Proponent: Department of social and health services, governmental.

Name of Agency Personnel Responsible for Drafting: Kathy Sayre, P.O. Box 45504, Olympia, WA 98504-5504, (360) 725-1342; Implementation and Enforcement: Larry Linn, P.O. Box 45502, Olympia, WA 98504-5502, (360) 725-1856.

No small business economic impact statement has been prepared under chapter 19.85 RCW. The department has determined that the proposed rule will not create more than minor costs for affected small businesses.

A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Larry Linn, P.O. Box 45502, Olympia, WA 98504-5502, phone (360) 725-1856, fax (360) 753-9152, e-mail

April 13, 2007

Stephanie E. Schiller

Rules Coordinator

AMENDATORY SECTION(Amending WSR 06-08-046, filed 3/30/06, effective 4/30/06)

WAC 388-550-4600   Hospital selective contracting program.   This section applies only for dates of admission before July 1, 2007. The hospital selective contracting program ends on June 30, 2007.

(1) The department designates selective contracting areas (SCA) in which hospitals participate in competitive bidding to provide hospital services to Medicaid clients. Selective contracting areas are based on historical patterns of hospital use by Medicaid clients.

(2) The department requires Medicaid clients in a selective contracting area obtain their elective (nonemergent) inpatient hospital services from participating or exempt hospitals in the SCA. Elective (nonemergent) inpatient hospital services provided by nonparticipating hospitals in an SCA shall not be reimbursed by the department, except as provided in WAC 388-550-4700.

(3) The department exempts from the selective contracting program those hospitals that are:

(a) In an SCA but designated by the department as remote. The department designates hospitals as remote when they meet the following criteria:

(i) Located more than ten miles from the nearest hospital in the SCA;

(ii) Having fewer than seventy-five beds; and

(iii) Having fewer than five hundred Medicaid admissions in a two-year period.

(b) Owned by health maintenance organizations (HMOs) and providing inpatient services to HMO enrollees only;

(c) Children's hospitals;

(d) State psychiatric hospitals or separate (freestanding) psychiatric facilities;

(e) Out-of-state hospitals located in nonbordering cities, and out-of-state hospitals in bordering cities not designated as selective contracting areas;

(f) Peer group E hospitals; and

(g) Peer group F hospitals (critical access hospitals).

(4) The department:

(a) Negotiates with selectively contracted hospitals a negotiated conversion factor (NCF) for inpatient hospital services provided to Medicaid clients.

(b) Calculates its maximum financial obligation for a Medicaid client under the hospital selective contract in the same manner as DRG payments using cost-based conversion factors (CBCFs).

(c) Applies NCFs to Medicaid clients only. (The department uses CBCFs in calculating payments for medical care services clients.)

[Statutory Authority: RCW 74.08.090, 74.09.500. 06-08-046, 388-550-4600, filed 3/30/06, effective 4/30/06. Statutory Authority: RCW 74.04.050, 74.08.090. 05-12-132, 388-550-4600, filed 6/1/05, effective 7/1/05. 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, 388-550-4600, filed 12/18/97, effective 1/18/98.]

AMENDATORY SECTION(Amending WSR 99-06-046, filed 2/26/99, effective 3/29/99)

WAC 388-550-4700   Payment--Non-SCA participating hospitals.   This section applies only for dates of admission before July 1, 2007. The hospital selective contracting program ends on June 30, 2007.

(1) In a selective contracting area (SCA), MAA pays any qualified hospital for inpatient hospital services provided to an eligible medical care client for treatment of an emergency medical condition.

(2) MAA pays any qualified hospital for medically necessary but nonemergent inpatient hospital services provided to an eligible medical care client deemed by the department to reside an excessive travel distance from a contracting hospital.

(a) The client is deemed to have an excessive travel burden if the travel distance from a client's residence to the nearest contracting hospital exceeds the client's county travel distance standard, as follows:

County Community Travel

Distance Standard

Adams 25 miles
Asotin 15 miles
Benton 15 miles
Chelan 15 miles
Clallam 20 miles
Clark 15 miles
Columbia 19 miles
Cowlitz 15 miles
Douglas 20 miles
Ferry 27 miles
Franklin 15 miles
Garfield 30 miles
Grant 24 miles
Grays Harbor 23 miles
Island 15 miles
Jefferson 15 miles
King 15 miles
Kitsap 15 miles
Kittitas 18 miles
Klickitat 15 miles
Lewis 15 miles
Lincoln 31 miles
Mason 15 miles
Okanogan 29 miles
Pacific 21 miles
Pend Oreille 25 miles
Pierce 15 miles
San Juan 34 miles
Skagit 15 miles
Skamania 40 miles
Snohomish 15 miles
Spokane 15 miles
Stevens 22 miles
Thurston 15 miles
Wahkiakum 32 miles
Walla Walla 15 miles
Whatcom 15 miles
Whitman 20 miles
Yakima 15 miles
(b) If a client must travel outside his/her SCA to obtain inpatient services not available within the community, such as treatment from a tertiary hospital, the client may obtain such services from a contracting hospital appropriate to the client's condition.

(3) MAA requires prior authorization for all nonemergent admissions to nonparticipating hospitals in an SCA. See WAC 388-550-1700 (2)(a).

(4) MAA pays a licensed hospital all applicable Medicare deductible and coinsurance amounts for inpatient services provided to Medicaid clients who are also beneficiaries of Medicare Part A subject to the Medicaid maximum allowable as established in WAC 388-550-1200 (8)(a).

(5) The department pays any licensed hospital DRG-exempt services as listed in WAC 388-550-4400.

[Statutory Authority: RCW 74.08.090, 42 USC 1395 x(v), 42 CFR 447.271, 447.11303, and 447.2652. 99-06-046, 388-550-4700, 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, 388-550-4700, filed 12/18/97, effective 1/18/98.]

Washington State Code Reviser's Office