Original Notice.

     Preproposal statement of inquiry was filed as WSR 06-22-054.

     Title of Rule and Other Identifying Information: Part 5 of 6; amending WAC 388-550-4400 Services -- Exempt from DRG payment, 388-550-4500 Payment method -- Inpatient RCC and administrative day rate and outpatient rate, and 388-550-6700 Hospital services provided out-of-state.

     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 http://www1.dshs.wa.gov/msa/rpau/docket.html or by calling (360) 664-6097), on June 5, 2007, at 10:00 a.m.

     Date of Intended Adoption: Not earlier than June 6, 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 schilse@dshs.wa.gov, fax (360) 664-6185, by 5:00 p.m. on June 5, 2007.

     Assistance for Persons with Disabilities: Contact Stephanie Schiller by June 1, 2007, TTY (360) 664-6178 or (360) 664-6097 or by e-mail at schilse@dshs.wa.gov.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The proposed rules describe policy regarding the department's hospital services coverage, rate-setting methods, and payment methods, based on recommendations made in the navigant study and supported by the state legislature. In addition, the proposed rules replace "medical assistance administration (MAA)" with "the department," and update and clarify other language.

     Reasons Supporting Proposal: In 2005, ESSB 6090, recommended that a study be done by navigant to look at the department's inpatient payment system and include recommendations on the design. These rules are written to incorporate into rule the results of the navigant study, and to update information on the department's hospital coverage, rate-setting, and payment processes. At the same time and for the same reasons, the department is proposing rule making to reflect changes and new sections in chapter 388-550 WAC.

     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 linnld@dshs.wa.gov.

April 26, 2007

Stephanie E. Schiller

Rules Coordinator

     (2) Subject to the restrictions and limitations in this section, for dates of admission before August 1, 2007, the department exempts the following services for medicaid clients from the DRG payment method:

     (a) Neonatal services for DRGs 602-619, 621-628, 630, 635, and 637-641.

     (b) Acquired immunodeficiency syndrome (AIDS)-related inpatient services for those cases with a reported diagnosis of AIDS-related complex and other human immunodeficiency virus infections. These services are also exempt from the DRG payment method when funded by the department through the general assistance programs and any other state((-only)) administered program.

     (c) Alcohol or other drug detoxification services when provided in a hospital having a detoxification provider agreement with the department to perform these services. These services are also exempt from the DRG payment method when funded by the department through the general assistance programs and any other state((-only)) administered program.

     (d) Hospital-based intensive inpatient detoxification, medical stabilization, and drug treatment services provided to chemically dependent pregnant women (CUP program) by a certified hospital. These are medicaid program services and are not funded by the department ((through)) for the general assistance programs or any other state((-only)) administered program.

     (e) Acute physical medicine and rehabilitation services provided in ((MAA)) department-approved rehabilitation hospitals and hospital distinct units, and services for physical medicine and rehabilitation patients. See WAC 388-550-4300 (2)(d). Rehabilitation services provided to clients under the general assistance programs and any other state-only administered program are also reimbursed through the RCC payment method.

     (f) Psychiatric services provided in nonstate-owned psychiatric hospitals and designated distinct psychiatric units of hospitals. Inpatient psychiatric services provided to clients eligible under the following programs are reimbursed through the DRG payment method:

     (i) General assistance programs; and

     (ii) Other state administered programs.

     (g) Chronic pain management treatment provided in department-approved pain treatment facilities.

     (h) Administrative day services. The department ((reimburses)) pays administrative days based on the statewide average medicaid nursing facility per diem rate, which is adjusted annually each November 1. The department applies this rate to patient days identified as administrative days on the hospital's notice of rates. Hospitals must request an administrative day designation on a case-by-case basis.

     (i) Inpatient services recorded on a claim that is grouped by ((MAA)) the department to a DRG for which ((MAA)) the department has not published an all patient DRG relative weight, except that claims grouped to DRGs 469 and 470 will be denied payment. This policy also applies to covered services paid through the general assistance programs and any other state((-only)) administered program.

     (j) Organ transplants that involve the heart, kidney, liver, lung, allogeneic bone marrow, pancreas, autologous bone marrow, or simultaneous kidney/pancreas. These services are also exempt from the DRG payment method when funded by ((MAA)) the department through the general assistance programs and any other state((-only)) administered program.

     (k) Bariatric surgery performed in hospitals that meet the criteria in WAC 388-550-2301. ((MAA)) The department pays hospitals for bariatric surgery on a ((single)) per case rate basis. See WAC 388-550-3470.

     (3) Inpatient services provided through a managed care plan contract are ((reimbursed)) paid by the managed care plan.

     (4) Subject to the restrictions and limitations in this section, for dates of admission on and after August 1, 2007, the department exempts the following services for medicaid and SCHIP clients from the DRG payment method. This policy also applies to covered services paid through the general assistance programs and any other state-administered program, except when otherwise indicated in this section. The exempt services are:

     (a) Alcohol or other drug detoxification services when provided in a hospital having a detoxification provider agreement with the department to perform these services.

     (b) Hospital-based intensive inpatient detoxification, medical stabilization, and drug treatment services provided to chemically-using pregnant (CUP) women program by a certified hospital. These are medicaid program services and are not covered or funded by the department through the general assistance programs or any other state-administered program.

     (c) Acute physical medicine and rehabilitation (acute PM&R) services.

     (d) Psychiatric services. A mental health division (MHD) designee that arranges to pay a hospital directly for psychiatric services, may use the department's payment methods or contract with the hospital to pay using different methods. Claims not paid directly through a MHD designee are paid through the department's payment system.

     (e) Chronic pain management treatment provided in a hospital approved by the department to provide that service.

     (f) Administrative day services. The department pays administrative days based on the statewide average medicaid nursing facility per diem rate, which is adjusted annually. The department applies this rate to patient days identified as administrative days on the hospital's notice of rates. A hospital must request an administrative day designation on a case-by-case basis. The department may designate part of a client's stay to be paid an administrative day rate upon review of the claim and/or client's medical record.

     (g) Inpatient services recorded on a claim that is grouped by the department to a DRG for which the department has not published an all patient DRG (AP DRG) relative weight. Claims grouped to DRG 469 or DRG 470 will be denied payment.

     (h) Organ transplants that involve heart, kidney, liver, lung, allogeneic bone marrow, autologous bone marrow, pancreas, or simultaneous kidney/pancreas. The department pays hospitals for these organ transplants using the ratio of costs-to-charges (RCC) payment method.

     (i) Bariatric surgery performed in hospitals that meet the criteria in WAC 388-550-2301. The department pays hospitals for bariatric surgery on a per case rate basis. See WAC 388-550-3020 and 388-550-3470.

     (j) Services provided by a critical access hospital (CAH).

     (k) Services provided by a hospital participating in the certified public expenditure (CPE) payment program. The CPE "hold harmless" provision allows a reconciliation that is described in WAC 388-550-4670.

     (l) Services provided by a long term acute care (LTAC) hospital.

[Statutory Authority: RCW 74.08.090, 74.09.520. 05-12-022, § 388-550-4400, filed 5/20/05, effective 6/20/05. 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, § 388-550-4400, filed 7/31/01, effective 8/31/01. 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, § 388-550-4400, filed 12/18/97, effective 1/18/98.]

     (a) The ((medical assistance administration (MAA))) department calculates a hospital's RCC rate by dividing allowable ((operating)) costs by patient-related revenues associated with these allowable costs. The department determines the allowable costs and associated revenues.

     (b) ((MAA)) The department bases ((these figures)) the RCC rate calculation on data from the hospital's "as filed" annual medicare cost report (Form 2552-96) and applicable patient revenue reconciliation data provided by the hospital.

     (c) ((MAA)) The department updates a hospital's inpatient RCC rate annually ((with)) after the ((submittal of new CMS 2552)) hospital sends its "as filed" hospital fiscal year medicare cost report ((data)) to the centers for medicare and medicaid services (CMS) and to the department.

     (i) In situations where a delay in submission of the CMS medicare cost report to the medicare fiscal intermediary is granted by medicare, the department may adjust the RCC rate based on a department-determined method.

     (ii) Prior to ((computing the ratio, MAA)) calculating the RCC rate, the department excludes ((increases in operating)) department nonallowed costs ((or total rate-setting revenue)) and nonallowable revenues. Costs and revenues attributable to a change in ownership are one example of what the department does not allow in the calculation process.

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

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

     (4) For dates of admission:

     (a) Before August 1, 2007, the department uses the RCC payment method to ((reimburse)) pay:

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

     (((b))) (ii) Any hospital for DRG-exempt services ((described)) identified in WAC 388-550-4400. See the services identified in WAC 388-550-4400 (2)(g), (h), and (k) for an exception to this policy.

     (b) For dates of admission on and after August 1, 2007, the department uses the RCC payment method to pay:

     (i) Transplant services identified in WAC 388-550-4400;

     (ii) DRG and per diem payment method high outlier payments;

     (iii) Long term acute care (LTAC) hospital services not covered under the LTAC per diem rate; and

     (iv) Other services specified by the department.

     (5) ((In-state and border area)) For dates of admission before August 1, 2007, the department pays instate and bordering city hospitals that lack sufficient ((CMS 2552)) medicare cost report data to establish a hospital specific RCC ((are reimbursed)), using the weighted average in-state:

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

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

     (6) The department pays out-of-state hospitals ((are also reimbursed for the respective)) for covered 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)) as described in WAC 388-550-4000.

     (7) ((MAA)) The department identifies all in-state hospitals that have hospital specific RCC rates, and calculates the weighted average in-state RCC rate annually by dividing the department-determined total allowable ((operating)) costs of these hospitals by the department-determined total ((respective)) patient-related revenues associated with those costs.

     (8) The department ((pays)) allows hospitals an all-inclusive administrative day rate for those days of hospital stay in which a client ((no longer needs an)) does not meet criteria for 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)) Upon request, the department's nursing facility rate-setting staff provides the department's hospital rate-setting staff with the statewide weighted average nursing facility medicaid payment rate each year to update the all-inclusive administrative day rate on November 1.

     (b) The department does not pay for 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 with the date of hospital admission if the admission is solely for a stay until an appropriate sub-acute placement can be made.

     (9) ((MAA)) The department calculates the weighted average in-state hospital outpatient rate annually 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)) the department calculates the hospital's specific hospital 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. ((This update causes an additional update of)) At the time the outpatient adjustment factor is updated, the hospital outpatient rate for ((each)) the hospital is adjusted.

     (12) ((MAA)) The department establishes the basic hospital outpatient ((payment)) allowed amount for a claim as provided in WAC 388-550-6000 and 388-550-7200. ((MAA)) The department deducts any client responsibility (((spend-down))) and any third-party liability (TPL) ((from)), and makes any other applicable payment program adjustments to the ((basic payment)) allowed amount to determine the actual payment due.

     (13) The department allows hospitals a swing bed day rate for those days when a client is receiving department-approved nursing service level of care in a swing bed. The department's aging and disability services administration (ADSA) determines the swing bed day rate.

     (a) The department does not allow payment for acute inpatient level of care for swing bed days when a client is receiving department-approved nursing service level of care in a swing bed.

     (b) The department's allowed amount for those ancillary services not covered under the swing bed day rate is based on the payment methods provided in WAC 388-550-6000 and 388-550-7200, and may be billed by the hospital on an outpatient hospital claim, except for pharmacy services and pharmaceuticals.

     (c) The department allows pharmacy services and pharmaceuticals not covered under the swing bed day rate, that are provided to a client receiving department-approved nursing service level of care, to be billed directly by a pharmacy through the point of sale system. The department does not allow those pharmacy services and pharmaceuticals to be paid to the hospital through submission of a hospital outpatient claim.

[Statutory Authority: RCW 74.08.090, 74.09.500, 74.09.035(1), and 43.88.290. 03-13-055, § 388-550-4500, filed 6/12/03, effective 7/13/03. 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.]

     (a) For dates of admission before August 1, 2007 for only emergency care for an eligible medicaid and SCHIP client who goes to another state, except specified border cities, specifically for the purpose of obtaining medical care that is available in the state of Washington. See WAC 388-501-0175 for a list of border cities.

     (b) For dates of admission on and after August 1, 2007, for both emergency and nonemergency out-of-state hospital services, including those provided in bordering city hospitals and critical border hospitals, for eligible medicaid and SCHIP clients based on the medical necessity and utilization review standards and limits established by the department.

     (i) Prior authorization by the department is required for the nonemergency out-of-state hospital medical care provided to medicaid and SCHIP clients.

     (ii) Bordering city hospitals are considered the same:

     (A) As instate hospitals for coverage of hospital services; and

     (B) As out-of-state hospitals for payment methodology. Department designated critical border hospitals are paid as instate hospitals. See WAC 388-550-3900 and 388-550-4000.

     (c) For out-of-state voluntary psychiatric inpatient hospital services for eligible medicaid and SCHIP clients based on authorization by a mental health division designee.

     (d) Based on the department's limitations on hospital coverage under WAC 388-550-1100 and 388-550-1200 and other applicable rules.

     (2) The department ((shall)) authorizes and ((provide)) pays for comparable ((medical care)) hospital services ((to)) for a medicaid and SCHIP client who is temporarily outside the state to the same extent that such ((medical care)) services are furnished to an eligible medicaid client in the state, subject to the exceptions and limitations in this section. See WAC 388-550-3900 and 388-550-4000.

     (3) The department ((shall not authorize payment for out-of-state medical care furnished to state-funded clients (medically indigent/medical care services), but may authorize medical services in designated bordering cities)) limits out-of-state hospital coverage for clients eligible under state-administered programs as follows:

     (a) For a client eligible under the psychiatric indigent inpatient (PII) program or who receives services under the Involuntary Treatment Act (ITA), the department does not pay for hospital services provided in any hospital outside the state of Washington (including bordering city and critical border hospitals).

     (b) For a client eligible under a department's general assistance program, the department pays only for hospital services covered under the client's medical care services' program scope of care that are provided in a bordering city hospital or a critical border hospital. The department does not pay for hospital services provided to clients eligible under a general assistance program in other hospitals located outside the state of Washington. The department or its designee may require prior authorization for hospital services provided in a bordering city hospital or a critical border hospital. See WAC 388-550-1200.

     (4) The department ((shall)) covers hospital care provided to medicaid or SCHIP clients in areas of Canada as described in WAC 388-501-0180, and based on the limitations described in the state plan.

     (5) The department ((shall)) may review all cases involving out-of-state ((medical care)) hospital services, including those provided in bordering city hospitals and critical border hospitals, to determine whether the services are within the scope of the client's medical assistance program.

     (6)(((a))) If the client can claim deductible or coinsurance portions of medicare, the provider ((shall)) must submit the claim to the intermediary or carrier in the provider's own state on the appropriate medicare billing form.

     (((b))) If the state of Washington is checked on the form as the party responsible for medical bills, the intermediary or carrier may bill on behalf of the provider or may return the claim to the provider for submission to the state of Washington.

     (7) For ((reimbursement)) payment for out-of-state inpatient hospital services, see WAC 388-550-3900 and 388-550-4000.

     (8) ((The department shall reimburse out-of-state outpatient hospital services billed under the physician's current procedural terminology codes at an amount that is the lower of:

     (a) The billed amount; or

     (b) The rate paid by the Washington state Title XIX Medicaid program.

     (9))) Out-of-state providers ((shall)), including bordering city hospitals and critical border hospitals, must present final charges to ((MAA)) the department within three hundred sixty-five days of the ((date of service)) "statement covers period from date" shown on the claim. ((In no case shall)) The state of Washington ((be)) is not liable for payment of charges received beyond ((one year)) three hundred sixty-five days from the ((date services were rendered)) "statement covers period from date" shown on the claim.

[Statutory Authority: RCW 74.08.090. 01-02-075, § 388-550-6700, filed 12/29/00, effective 1/29/01. 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, § 388-550-6700, filed 12/18/97, effective 1/18/98.]

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