Effective Date of Rule: July 1, 2009.

     Purpose: In accordance with sections 201 and 209 of the operating budget for fiscal years 2010 and 2011, the department is amending language in sections in chapter 388-550 WAC that pertain to the disproportionate share hospital (DSH) programs in order to meet the legislature's targeted budget expenditure levels. These changes include the elimination of the small rural, small rural indigent, and nonrural indigent DSH programs, and reducing the certified public expenditure payment program hold harmless payments.

     Citation of Existing Rules Affected by this Order: Repealing WAC 388-550-5200, 388-550-5210 and 388-550-5220; and amending WAC 388-550-4670, 388-550-4900, and 388-550-5150.

     Statutory Authority for Adoption: RCW 74.04.050, 74.04.057, 74.08.090, and 74.09.500.

     Other Authority: 2009-11 omnibus operating budget (ESHB 1244).

     Under RCW 34.05.350 the agency for good cause finds that in order to implement the requirements or reductions in appropriations enacted in any budget for fiscal years 2009, 2010, or 2011, which necessitates the need for the immediate adoption, amendment, or repeal of a rule, and that observing the time requirements of notice and opportunity to comment upon adoption of a permanent rule would be contrary to the fiscal needs or requirements of the agency.

     Reasons for this Finding: Emergency rule adoption is required in order for the department to comply with sections 201 and 209 of the operating budget for fiscal years 2010 and 2011 with respect to the determination of payment rates for inpatient and outpatient hospital services. A CR-101 for the permanent rules was filed as WSR 09-04-072 on February 2, 2009.

     Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 3, Repealed 3.

     Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0;      Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 3, Repealed 3.

     Date Adopted: June 17, 2009.

Stephanie E. Schiller

Rules Coordinator

     (1) The department:

     (a) Uses historical cost and payment data trended forward to calculate prospective hold harmless grant payment amounts for the current state fiscal year (SFY); and

     (b) Reconciles these hold harmless grant payment amounts when the actual claims data ((is)) are available for the current fiscal year.

     (2) For ((each state fiscal year)) SFYs 2006 through 2009, the department calculates what the hospital would have been paid under the methodologies otherwise in effect for the ((state fiscal year ())SFY(())) as the sum of:

     (a) The total payments for inpatient claims for patients admitted during the fiscal year, calculated by repricing the claims using:

     (i) For SFYs 2006 and 2007, the inpatient payment method in effect during SFY 2005; or

     (ii) For SFYs 2008 and ((beyond)) 2009, the payment method that would otherwise be in effect during the CPE payment program year if the CPE payment program had not been enacted.

     (b) The total net disproportionate share hospital and state grant payments paid for SFY 2005.

     (3) For SFY 2010 and beyond, the department calculates what the hospital would have been paid under the methodologies otherwise in effect for the SFY as the sum of:

     (a) The total of the inpatient claim payment amounts that would have been paid during the SFY had the hospital not been in the CPE program;

     (b) One-half of the indigent assistance disproportionate share hospital payment amounts paid to and retained by each hospital during SFY 2005; and

     (c) All of the other disproportionate share hospital payment amounts paid to and retained by each hospital during SFY 2005 to the extent the same disproportionate share hospital programs exist in the 2009-2011 biennium.

     (4) For each SFY, the department determines total state and federal payments made under the program, including:

     (a) Inpatient claim payments;

     (b) Disproportionate share hospital (DSH) payments; and

     (c) Supplemental upper payment limit payments ((made for SFY 2006 and 2007)), as applicable.

     (((4) The amount determined in subsection (3) of this section is subtracted from the amount calculated in subsection (2) of this section to determine the gross state grant amount necessary to hold the hospital harmless. If the resulting number is positive, the hospital is entitled to a grant in that amount, subject to legislative directives and appropriations.

     (a))) (5) A hospital may receive a hold harmless grant, subject to legislative directives and appropriations, when the following calculation results in a positive number:

     (a) For SFY 2006 through SFY 2009, the amount derived in subsection (4) of this section is subtracted from the amount derived in subsection (2) of this section; or

     (b) For SFY 2010 and beyond, the amount derived in subsection (4) of this section is subtracted from the amount derived in subsection (3) of this section.

     (6) The department calculates interim hold harmless and final hold harmless grant amount as follows:

     (a) An interim hold harmless grant amount is calculated approximately ten months after the SFY to include the paid claims for the same SFY admissions. Claims are subject to utilization review prior to the interim hold harmless calculation. Prospective grant payments made under subsection (1) of this section are deducted from the calculated interim hold harmless grant amount to determine the net grant payment amount due to or due from the hospital.

     (b) The ((department calculates the)) final hold harmless grant amount is calculated at such time as the final allowable federal portions of program payments are determined. The procedure is the same as the interim grant calculation but it includes all additional claims that have been paid or adjusted since the interim hold harmless calculation. Claims are subject to utilization review and audit prior to the final calculation of the hold harmless amount. Interim grant payments determined under (a) of this subsection are deducted from this final calculation to determine the net final hold harmless amount due to or due from the hospital.

[Statutory Authority: RCW 74.08.090 and 74.09.500. 08-20-032, § 388-550-4670, filed 9/22/08, effective 10/23/08; 07-14-090, § 388-550-4670, filed 6/29/07, effective 8/1/07. Statutory Authority: RCW 74.08.090, 74.09.500, and 2005 c 518 § 209(9). 06-11-100, § 388-550-4670, filed 5/17/06, effective 6/17/06.]

     (2) No hospital has a legal entitlement to any DSH payment. A hospital may receive DSH payments only if:

     (a) It satisfies the requirements of 42 USC 1396r-4;

     (b) It satisfies all the requirements of department rules and policies; and

     (c) The legislature appropriates sufficient funds.

     (3) For purposes of eligibility for DSH payments, the following definitions apply:

     (a) "Base year" means ((the hospital fiscal year or)) the twelve-month medicare cost report year that ended during the calendar year immediately preceding the year in which the state fiscal year (SFY) for which the DSH application is being made begins.

     (b) "Case mix index (CMI)" means the average of diagnosis related group (DRG) weights for all of an individual hospital's DRG-paid medicaid claims during the state fiscal year (SFY) two years prior to the SFY for which the DSH application is being made.

     (c) "Charity care" means necessary hospital care rendered to persons unable to pay for the hospital services or unable to pay the deductibles or coinsurance amounts required by a third-party payer. The charity care amount is determined in accordance with the hospital's published charity care policy.

     (d) (("Disproportionate share hospital (DSH) cap" means the maximum amount per state fiscal year that the state can distribute in DSH payments to hospitals (statewide DSH cap), or the maximum amount of DSH payments a hospital may receive during a state fiscal year (hospital-specific DSH cap).

     (e))) "DSH reporting data file (DRDF)" means the information submitted by hospitals to the department which the department uses to verify medicaid ((patient)) client eligibility and ((patient)) applicable inpatient days.

     (((f))) (e) "Hospital-specific DSH cap" means the maximum amount of DSH payments a hospital may receive from the department during a state fiscal year. ((For a critical access hospital (CAH), the DSH cap is based strictly on the net cost to the hospital of providing services to uninsured patients)) If a hospital does not qualify for DSH, the department will not calculate the hospital-specific DSH cap and the hospital will not receive DSH payments.

     (((g))) (f) "Inpatient medicaid days" means inpatient days attributed to clients eligible for Title XIX medicaid programs. Excluded from this count are inpatient days attributed to clients eligible for state administered programs, medicare Part A, Title XXI, the refugee program and the take charge program.

     (g) "Low income utilization rate (LIUR)" ((means)) the sum of ((these)) two percentages: (((1)))

     (i) The ratio of payments received by the hospital for patient services provided to clients under medicaid (including managed care) ((and state-administered programs)), plus cash subsidies received by the hospital from state and local governments for patient services, divided by total payments received by the hospital from all patient categories; plus (((2)))

     (ii) The ratio of inpatient charity care charges (((excluding contractual allowances))) less inpatient cash subsidies received by the hospital from state and local governments, less contractual allowances and discounts, divided by total ((billed)) charges for inpatient services. ((The department uses LIUR as one criterion to determine a hospital's eligibility for the low income disproportionate share hospital (LIDSH) program. To qualify for LIDSH, a hospital's LIUR must be greater than twenty-five percent.))

     (h) "Medicaid inpatient utilization rate (MIPUR)" ((means the number of inpatient days of service provided by a hospital to medicaid clients during its hospital fiscal year or medicare cost report year, divided by the number of inpatient days of service provided by that hospital to all patients during the same period)) is calculated as a fraction (expressed as a percentage), the numerator of which is the hospital's number of inpatient days attributable to clients who (for such days) were eligible for medical assistance during the base year (regardless of whether such clients received medical assistance on a fee-for-service basis or through a managed care entity), and the denominator of which is the total number of the hospital's inpatient days in that period. "Inpatient days" include each day in which a person (including a newborn) is an inpatient in the hospital, whether or not the person is in a specialized ward and whether or not the person remains in the hospital for lack of suitable placement elsewhere.

     (i) "Medicare cost report year" means the twelve-month period included in the annual cost report a medicare-certified hospital or institutional provider is required by law to submit to its fiscal intermediary.

     (j) (("Nonrural hospital" means a hospital that is not a peer group E hospital or a small rural hospital and is located inside the state of Washington or in a designated bordering city. For DSH purposes, the department considers as nonrural any hospital located in a designated bordering city.

     (k))) "Obstetric services" means routine, nonemergency obstetric services and the delivery of babies.

     (((l))) (k) "Service year" means the one year period used to measure the costs and associated charges for hospital services. The service year may refer to a hospital's fiscal year or medicare cost report year, or to a state fiscal year.

     (l) "Statewide disproportionate share hospital (DSH) cap" is the maximum amount per state fiscal year (SFY) that the state can distribute in DSH payments to all qualifying hospitals during a SFY.

     (m) (("Small rural hospital" means a hospital that is not a peer group E hospital, has fewer than seventy-five acute licensed beds, is located inside the state of Washington, and is located in a city or town with a nonstudent population of no more than seventeen thousand one hundred fifteen in calendar year 2006 as determined by the Washington State office of financial management estimate. The nonstudent population ceiling increases cumulatively by two percent each succeeding state fiscal year.

     (n))) "Uninsured patient" ((means an individual who does not have health insurance that would apply to the hospital service the individual sought and received. An individual who did have health insurance that applied to the hospital service the individual sought and received, is considered an insured individual for DSH program purposes, even if the insurer did not pay the full charges for the services. When determining the cost of a hospital service provided to an uninsured patient, the department uses as a guide whether the service would have been covered under medicaid)) is a person without health insurance coverage for the service that the person sought and received. (An "insured patient," for DSH program purposes, is a person with health insurance coverage for the service that the person sought and received, even if the insurer did not pay the full charges for the service.) To determine whether a service provided to an uninsured patient may be included for DSH application and calculation purposes, the department considers only services that would have been covered and paid through the department's fee-for-service process.

     (4) To be considered for a DSH payment for each SFY, a hospital ((located in the state of Washington or in a designated bordering city)) must ((submit to the department a completed and final DSH application by the due date. The due date will be posted on the department's web site)) meet the criteria in this section:

     (a) DSH application requirement.

     (i) Only a hospital located in the state of Washington or in a designated bordering city is eligible to apply for and receive DSH payments. An institution for mental disease (IMD) owned and operated by the state of Washington is exempt from the DSH application requirement.

     (ii) A hospital that meets DSH program criteria is eligible for DSH payments in any SFY only if the department receives the hospital's DSH application by the deadline posted on the department's website.

     (b) DSH application review and correction period.

     (i) This subsection applies only to DSH applications that meet the requirements under (a) of this subsection.

     (ii) The department reviews and may verify any information provided by the hospital on a DSH application. However, each hospital has the responsibility for ensuring its DSH application is complete and accurate.

     (iii) If the department finds that a hospital's application is incomplete or contains incorrect information, the department will notify the hospital. The hospital must resubmit a new, corrected application. The department must receive the new DSH application from the hospital by the deadline for corrected DSH applications posted on the department's website.

     (iv) If a hospital finds that its application is incomplete or contains incorrect information, it may choose to submit changes and/or corrections to the DSH application. The department must receive the corrected, complete, and signed DSH application from the hospital by the deadline for corrected DSH applications posted on the department's website.

     (c) Official DSH application.

     (i) The department considers as official the last signed DSH application submitted by the hospital as of the deadline for corrected DSH applications. A hospital cannot change its official DSH application. Only those hospitals with an official DSH application are eligible for DSH payments.

     (ii) If the department finds that a hospital's official DSH application is incomplete or contains inaccurate information that affects the hospital's LIDSH payment(s), the hospital does not qualify for, will not receive, and cannot retain, LIDSH payment(s). Refer to WAC 388-550-5000.

     (5) A hospital is a disproportionate share hospital for a specific SFY if the hospital ((submits a completed DSH application for that specific year, if it)) satisfies the ((utilization rate)) MIPUR requirement (discussed in (a) of this subsection), and the obstetric services requirement (discussed in (b) of this subsection).

     (a) The hospital must have a ((medicaid inpatient utilization rate ())MIPUR(())) greater than one percent; and

     (b) Unless one of the exceptions described in (i)(A) or (B) of this subsection applies, the hospital must have at least two obstetricians who have staff privileges at the hospital and who have agreed to provide obstetric services to eligible individuals.

     (i) The obstetric services requirement does not apply to a hospital that:

     (A) Provides inpatient services predominantly to individuals younger than age eighteen; or

     (B) 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.

     (ii) For hospitals located in rural areas, "obstetrician" means any physician with staff privileges at the hospital to perform nonemergency obstetric procedures.

     (6) ((To determine a hospital's eligibility for any DSH program, the department uses the criteria in this section and the information obtained from the DSH application submitted by the hospital, subject to the following:

     (a) Charity care. If the hospital's DSH application and audited financial statements for the relevant fiscal year do not agree on the amount for charity care, the department uses the lower amount listed. For purposes of calculating a hospital's LIUR, the department allows a hospital to claim charity care amounts related to inpatient services only. A hospital must submit a copy of its charity care policy for the relevant fiscal year as part of the hospital's DSH application.

     (b) Total inpatient hospital days. If the hospital's DSH application and its medicare cost report do not agree on the number of total inpatient hospital days, the department uses the higher number listed to determine the hospital's MIPUR. Labor and delivery days count towards total inpatient hospital days. Nursing facility and swing bed days do not count towards total inpatient hospital days)) To determine a hospital's MIPUR, the department uses inpatient days.

     (a) The total inpatient days on the official DSH application if this number is greater than the total inpatient hospital days on the medicare cost report; and

     (b) The MMIS medicaid days as determined by the DRDF process if the Washington state medicaid days on the official DSH application do not match the eligible days on the final DRDF. If the hospital did not submit a DRDF, the department uses paid medicaid days from MMIS.

     (7) The department administers the following DSH programs (depending on legislative budget appropriations):

     (a) Low income disproportionate share hospital (LIDSH);

     (b) Institution for mental diseases disproportionate share hospital (IMDDSH):

     (c) General assistance-unemployable disproportionate share hospital (GAUDSH);

     (d) ((Small rural disproportionate share hospital (SRDSH);

     (e) Small rural indigent assistance disproportionate share hospital (SRIADSH);

     (f) Nonrural indigent assistance disproportionate share hospital (NRIADSH);

     (g))) Public hospital disproportionate share hospital (PHDSH); and

     (((h))) (e) Psychiatric indigent inpatient disproportionate share hospital (PIIDSH).

     (8) Except for IMDDSH, the department allows a hospital to receive any one or all of the DSH payment ((adjustments)) it qualifies for, up to the individual hospital's DSH cap (see subsection (10) of this section) and provided that total DSH payments do not exceed the statewide DSH cap. See WAC 388-550-5130 regarding IMDDSH. To be eligible for payment under multiple DSH programs, a hospital must meet:

     (a) The basic requirements in subsection (5) of this section; and

     (b) The eligibility requirements for the particular DSH payment, as discussed in the applicable DSH program WAC.

     (9) For each SFY, the department calculates DSH payments ((due an)) for each DSH program for eligible hospitals using data from ((the)) each hospital's base year. The department does not use base year data for GAUDSH and PIIDSH payments, which are calculated based on specific claims data.

     (10) The department's total DSH payments to a hospital for any given SFY cannot exceed the ((individual hospital's annual DSH limit (also known as the)) hospital-specific DSH cap(())) for that SFY. Except for critical access hospitals (CAHs), the department determines a hospital's DSH cap as follows. The department:

     (a) ((The cost to the hospital of providing services to medicaid clients, including clients served under medicaid managed care organization (MCO) plans)) Uses the overall ratio of costs-to-charges (RCC) to determine costs for:

     (i) Medicaid services, including medicaid services provided under managed care organization (MCO) plans; and

     (ii) Uninsured charges; then

     (b) ((Less the amount paid by the state under the non-DSH payment provision of the medicaid state plan)) Subtracts all payments related to the costs derived in (a) of this subsection; then

     (c) ((Plus the cost to the hospital of providing services to uninsured patients;

     (d) Less any cash payments made by or on behalf of uninsured patients; and

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

     (11) A CAH's DSH cap is based strictly on the cost to the hospital of providing services to ((uninsured patients. In calculating a CAH's DSH cap, the department deducts payments received by the hospital from and on behalf of the uninsured patients from the hospital's costs of services for the uninsured patients)) medicaid clients, including those medicaid clients served under MCO plans, and uninsured patients. To determine a CAH's DSH cap amount, the department:

     (a) Uses the overall RCC to determine costs for:

     (i) Medicaid services provided under MCO plans; and

     (ii) Uninsured charges; then

     (b) Subtracts the total payments made by, or on behalf of, the medicaid clients serviced under MCO plans, and uninsured patients.

     (12) In any given federal fiscal year, the total of the department's DSH payments cannot exceed the statewide DSH cap as published in the federal register.

     (13) If the department's DSH payments for any given federal fiscal year exceed the statewide DSH cap, the department will adjust DSH payments to each hospital to account for the amount overpaid. The department makes adjustments in the following program order:

     (a) PHDSH;

     (b) ((SRIADSH;

     (c) SRDSH;

     (d) NRIADSH;

     (e))) GAUDSH;

     (((f))) (c) PIIDSH;

     (((g))) (d) IMDDSH; and

     (((h))) (e) LIDSH.

     (14) If the statewide DSH cap is exceeded, the department will recoup DSH payments made under the various DSH programs, in the order of precedence described in subsection (13) of this section, starting with PHDSH, until the amount exceeding the statewide DSH cap is reduced to zero. See specific program WACs for description of how amounts to be recouped are determined.

     (15) The total amount the department may distribute annually under a particular DSH program is capped by legislative appropriation, except for PHDSH, GAUDSH, and PIIDSH, which are not fixed ((pools)) amounts. Any changes in payment amount to a hospital in a particular DSH ((pool)) program means a redistribution of payments within that DSH ((pool)) program. When necessary, the department will recoup from hospitals to make additional payments to other hospitals within that DSH ((pool)) program.

     (16) If funds in a specific DSH program need to be redistributed because of legislative, administrative, or other state action, only those hospitals eligible for that DSH program will be involved in the redistribution.

     (a) If an individual hospital has been overpaid by a specified amount, the department will recoup that overpayment amount from the hospital and redistribute it among the other eligible hospitals in the DSH ((pool)) program. The additional DSH payment to be given to each of the other hospitals from the recouped amount is proportional to each hospital's share of the particular DSH ((pool)) program.

     (b) If an individual hospital has been underpaid by a specified amount, the department will pay that hospital the additional amount owed by recouping from the other hospitals in the DSH ((pool)) program. The amount to be recouped from each of the other hospitals is proportional to each hospital's share of the particular DSH ((pool)) program.

     (17) All information ((submitted by a hospital)) related to ((its)) a hospital's DSH application is subject to audit by the department or its designee. ((The department may audit any, none, or all DSH applications for a given state fiscal year.)) The department determines the extent and timing of the audits. For example, the department or its designee may choose to do a desk review ((upon receipt)) of an individual hospital's DSH application and/or supporting documentation, or audit all hospitals that qualified for a particular DSH program after payments have been distributed under that program.

     (18) If a hospital's submission of incorrect information or failure to submit correct information results in DSH overpayment to that hospital, the department will recoup the overpayment amount, in accordance with the provisions of RCW 74.09.220 and 43.20B.695.

     (19) DSH calculations use fiscal year data, and DSH payments are distributed based on funding for a specific state fiscal year. Therefore, unless otherwise specified, changes and clarifications to DSH program rules apply for the full state fiscal year in which the rules are adopted.

[Statutory Authority: RCW 74.08.090, 74.09.500. 07-14-090, § 388-550-4900, filed 6/29/07, effective 8/1/07; 06-08-046, § 388-550-4900, filed 3/30/06, effective 4/30/06. Statutory Authority: RCW 74.04.050, 74.08.090. 05-12-132, § 388-550-4900, filed 6/1/05, effective 7/1/05. Statutory Authority: RCW 74.08.090, 74.04.050, and 2003 1st sp.s. c 25. 04-12-044, § 388-550-4900, filed 5/28/04, effective 7/1/04. 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;

     (b) Is an in-state or designated bordering city hospital;

     (c) Provides services to clients eligible under the medical care services program; and

     (d) Has a medicaid inpatient utilization rate (MIPUR) of one percent or more.

     (2) The department determines the GAUDSH payment for each eligible hospital in accordance with:

     (a) WAC 388-550-4800 for inpatient hospital claims submitted for general assistance unemployable (GAU) clients; and

     (b) WAC 388-550-5800 through 388-550-6450 and WAC 388-550-7000 through 388-550-7600 for outpatient hospital claims submitted for GAU clients.

     (3) The department makes GAUDSH payments to a hospital on a claim-specific basis.

[Statutory Authority: RCW 74.08.090, 74.09.500. 07-14-090, § 388-550-5150, filed 6/29/07, effective 8/1/07; 06-08-046, § 388-550-5150, filed 3/30/06, effective 4/30/06. Statutory Authority: RCW 74.08.090, 74.09.500, 74.09.035(1), and 43.88.290. 03-13-055, § 388-550-5150, 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, § 388-550-5150, 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, § 388-550-5150, filed 12/18/97, effective 1/18/98.]

     The following sections of the Washington Administrative Code are repealed:

WAC 388-550-5200	Payment method--Small rural disproportionate share hospital (SRDSH).
WAC 388-550-5210	Payment method -- Small rural indigent assistance disproportionate share hospital (SRIADSH) program.
WAC 388-550-5220	Payment method -- Nonrural indigent assistance disproportionate share hospital (NRIADSH).

© Washington State Code Reviser's Office