Effective Date of Rule: Immediately.

     Purpose: Upon order of the 61st legislature, 2010 2nd sp. sess., HB 3225, the medicaid purchasing administration must reduce cost-based encounter payments to federally qualified health centers and rural health clinics by reinstating the federal prospective payment system that was replaced by an alternative payment methodology in 2009.

     Citation of Existing Rules Affected by this Order: Amending WAC 388-548-1400 and 388-549-1400.

     Statutory Authority for Adoption: RCW 74.08.090.

     Under RCW 34.05.350 the agency for good cause finds that immediate adoption, amendment, or repeal of a rule is necessary for the preservation of the public health, safety, or general welfare, and that observing the time requirements of notice and opportunity to comment upon adoption of a permanent rule would be contrary to the public interest; that state or federal law or federal rule or a federal deadline for state receipt of federal funds requires immediate adoption of a rule; and 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: 2011 supplemental omnibus operating budget, under HB 3225, passed by legislature on December 11, 2010, under a 2nd sp. sess., directed the department to reinstate the federal prospective payment system that was replaced by an alternative payment system in 2009. Delaying this adoption could jeopardize the state's ability to maintain the mandatory medicaid services for the majority of DSHS clients.

     Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 2, Repealed 0.

     Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0;      Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 2, Repealed 0.

     Date Adopted: February 14, 2011.

Katherine I. Vasquez

Rules Coordinator

     (2) ((Effective)) For services provided during the period beginning January 1, 2009, and ending February 14, 2011, FQHCs ((have)) had the choice to continue being reimbursed under the PPS or to be reimbursed under an alternative payment methodology (APM), as authorized by 42 U.S.C. 1396a (bb)(6). As required by 42 U.S.C. 1396a (bb)(6), payments made under the APM ((must be)) were at least as much as payments that would have been made under the PPS.

     (3) For services provided on and after February 15, 2011, the department reimburses FQHCs only under the PPS as authorized by 42 U.S.C. 1396 (bb)(2) and (3) and as directed by the legislature. The APM will not be available for any services provided on and after February 15, 2011.

     (4) The department calculates the FQHC's PPS encounter rate as follows:

     (a) Until the FQHC's first audited cost report is available, the department pays an average encounter rate of other similar FQHCs within the state, otherwise known as an interim rate;

     (b) Upon availability of the FQHC's first audited medicaid cost report, the department sets the clinic's encounter rate at one hundred percent of its total reasonable costs as defined in the cost report. The FQHC receives this rate for the remainder of the calendar year during which the audited cost report became available. Thereafter, the encounter rate is then inflated each January 1 by the medicare economic index (MEI) for primary care services.

     (((4))) (5) For FQHCs in existence during calendar years 1999 and 2000, the department sets the payment prospectively using a weighted average of one hundred percent of the center's total reasonable costs for calendar years 1999 and 2000 and adjusted for any increase or decrease in the scope of services furnished during the calendar year 2001 to establish a base encounter rate.

     (a) The department adjusts a PPS base encounter rate to account for an increase or decrease in the scope of services provided during calendar year 2001 in accordance with WAC 388-548-1500.

     (b) The PPS base encounter rates are determined using audited cost reports and each year's rate is weighted by the total reported encounters. The department does not apply a capped amount to these base encounter rates. The formula used to calculate the base encounter rate is as follows:

Specific FQHC Base Encounter Rate =	(1999 Rate x 1999 Encounters) + (2000 Rate x 2000 Encounters)
	(1999 Encounters + 2000 Encounters) for each FQHC

     (c) Beginning in calendar year 2002 and any year thereafter, the encounter rate is increased by the MEI for primary care services, and adjusted for any increase or decrease within the center's scope of services.

     (((5))) (6) The department calculates the FQHC's APM encounter rate as follows:

     (a) ((Beginning January 1, 2009, the)) APM utilizes the FQHC base encounter rates, as described in WAC 388-548-1400 (((4)(b))) (5)(b).

     (i) The base rates are adjusted to reflect any valid changes in scope of service between years 2002 and 2009.

     (ii) The adjusted base rates are then inflated by each annual percentage, from years 2002 through 2009, of the APM index. The result is the year 2009 APM rate for each FQHC that chooses to be reimbursed under the APM.

     (b) The department will ensure that the APM pays an amount that is at least equal to the PPS, the annual inflator used to increase the APM rates is the greater of the APM index or the MEI.

     (c) The department will periodically rebase the APM rates. The department will not rebase rates determined under the PPS.

     (((6))) (7) The department limits encounters to one per client, per day except in the following circumstances:

     (a) The visits occur with different healthcare professionals with different specialties; or

     (b) There are separate visits with unrelated diagnoses.

     (((7))) (8) FQHC services and supplies incidental to the provider's services are included in the encounter rate payment.

     (((8))) (9) Payments for nonFQHC services provided in an FQHC are made on a fee-for-service basis using the department's published fee schedules. NonFQHC services are subject to the coverage guidelines and limitations listed in chapters 388-500 through 557 WAC.

     (((9))) (10) For clients enrolled with a managed care organization, covered FQHC services are paid for by that plan.

     (((10))) (11) Only clients enrolled in Title XIX (medicaid) or Title XXI (CHIP) are eligible for encounter or enhancement payments. The department does not pay the encounter rate or the enhancement rate for clients in state-only medical programs. Services provided to clients in state-only medical programs are considered fee-for-service regardless of the type of service performed.

     (((11))) (12) For clients enrolled with a managed care organization (MCO), the department pays each FQHC a supplemental payment in addition to the amounts paid by the MCO. The supplemental payments, called enhancements, are paid in amounts necessary to ensure compliance with 42 U.S.C. 1396a (bb)(5)(A).

     (a) The FQHCs receive an enhancement payment each month for each managed care client assigned to them by an MCO.

     (b) To ensure that the appropriate amounts are paid to each FQHC, the department performs an annual reconciliation of the enhancement payments. For each FQHC, the department will compare the amount actually paid to the amount determined by the following formula: (Managed care encounters times encounter rate) less FFS equivalent of MCO services. If the center has been overpaid, the department will recoup the appropriate amount. If the center has been underpaid, the department will pay the difference.

[Statutory Authority: RCW 74.08.090, BIPA of 2000 Section 702, sections 201 and 209 of 2009-2011 budget bill, and 42 U.S.C. 1396a(bb). 10-09-002, § 388-548-1400, filed 4/7/10, effective 5/8/10.]

     ((Effective)) (2) For services provided during the period beginning January 1, 2009, and ending February 14, 2011, RHCs ((have)) had the choice to continue being reimbursed under the PPS or be reimbursed under an alternative payment methodology (APM), as authorized by 42 USC 1396a (bb)(6). As required by 42((.U.S.C.)) USC 1396a (bb)(6), payments made under the APM ((must be)) were at least as much as payments that would have been made under the PPS.

     (3) For services provided on and after February 15, 2011, the department reimburses RHCs only under the PPS as authorized by 42 USC 1396a (bb)(2) and (3) and as directed by the legislature. The APM will not be available for any services provided on and after February 15, 2011.

     (((2))) (4) The department calculates the RHC's PPS encounter rate for RHC core services as follows:

     (a) Until the RHC's first audited medicare cost report is available, the department pays an average encounter rate of other similar RHCs (whether the RHC is classified as hospital-based or free-standing) within the state, otherwise known as an interim rate.

     (b) Upon availability of the RHC's audited medicare cost report, the department sets the clinic's encounter rate at one hundred percent of its costs as defined in the cost report divided by the total number of encounters the clinic has provided during the time period covered in the audited cost report. The RHC will receive this rate for the remainder of the calendar year during which the audited cost report became available. The encounter rate is then inflated each January 1 by the medicare economic index (MEI) for primary care services.

     (((3))) (5) For RHCs in existence during calendar years 1999 and 2000, the department sets the payment prospectively using a weighted average of one hundred percent of the clinic's total reasonable costs for calendar years 1999 and 2000 and adjusted for any increase or decrease in the scope of services furnished during the calendar year 2001 to establish a base encounter rate.

     (a) The department adjusts a PPS base encounter rate to account for an increase or decrease in the scope of services provided during calendar year 2001 in accordance with WAC 388-549-1500.

     (b) The PPS base encounter rates are determined using medicare's audited cost reports and each year's rate is weighted by the total reported encounters. The department does not apply a capped amount to these base encounter rates. The formula used to calculate the base encounter rate is as follows:

Specific RHC Base Encounter Rate =	(1999 Rate x 1999 Encounters) + (2000 Rate x 2000 Encounters)
	(1999 Encounters + 2000 Encounters) for each RHC

     (c) Beginning in calendar year 2002 and any year thereafter, the encounter rate is increased by the MEI and adjusted for any increase or decrease in the clinic's scope of services.

     (((4))) (6) The department calculates the RHC's APM encounter rate as follows:

     (a) ((Beginning January 1, 2009, the)) APM utilizes RHC base encounter rates as described in WAC 388-549-1400 (((3)(b))) (5)(b). The base rates are inflated by each annual percentage, from years 2002 through 2009, of the APM index. The result is the year 2009 APM rate for each RHC that chooses to be reimbursed under the APM.

     (b) To ensure that the APM pays an amount that is at least equal to the PPS in accordance with 42 USC 1396a (bb)(6), the annual inflator used to increase the APM rates is the greater of the APM index or the MEI.

     (c) The department periodically rebases the APM rates. The department does not rebase rates determined under the PPS.

     (d) When rebasing the APM encounter rates, the department applies a productivity standard to the number of visits performed by each practitioner group (physicians and mid-levels) to determine the number of encounters to be used in each RHC's rate calculation. The productivity standards are determined by reviewing all available RHC cost reports for the rebasing period and setting the standards at the levels necessary to allow ninety-five percent of the RHCs to meet the standards. The encounter rates of the clinics that meet the standards are calculated using each clinic's actual number of encounters. The encounter rates of the other five percent of clinics are calculated using the productivity standards. This process is applied at each rebasing, so the actual productivity standards may change each time encounter rates are rebased.

     (((5))) (7) The department pays for one encounter, per client, per day except in the following circumstances:

     (a) The visits occur with different healthcare professionals with different specialties; or

     (b) There are separate visits with unrelated diagnoses.

     (((6))) (8) RHC services and supplies incidental to the provider's services are included in the encounter rate payment.

     (((7))) (9) Payments for non-RHC services provided in an RHC are made on a fee-for-service basis using the department's published fee schedules. Non-RHC services are subject to the coverage guidelines and limitations listed in chapters 388-500 through 388-557 WAC.

     (((8))) (10) For clients enrolled with a managed care organization, covered RHC services are paid for by that plan.

     (((9))) (11) The department does not pay the encounter rate or the enhancements for clients in state-only programs. Services provided to clients in state-only programs are considered fee-for-service, regardless of the type of service performed.

     (((10))) (12) For clients enrolled with a managed care organization (MCO), the department pays each RHC a supplemental payment in addition to the amounts paid by the MCO. The supplemental payments, called enhancements, are paid in amounts necessary to ensure compliance with 42 USC 1396a (bb)(5)(A).

     (a) The RHCs receive an enhancement payment each month for each managed care client assigned to them by an MCO.

     (b) To ensure that the appropriate amounts are paid to each RHC, the department performs an annual reconciliation of the enhancement payments. For each RHC, the department will compare the amount actually paid to the amount determined by the following formula: (managed care encounters times encounter rate) less fee-for-service equivalent of MCO services. If the clinic has been overpaid, the department will recoup the appropriate amount. If the clinic has been underpaid, the department will pay the difference.

[Statutory Authority: RCW 74.08.090, 74.09.510, 74.09.522, 42 U.S.C. 1396a(bb), 42 C.F.R. 405.2472, and 42 C.F.R. 491. 10-09-030, § 388-549-1400, filed 4/13/10, effective 5/14/10. Statutory Authority: RCW 74.08.090, 74.09.510, 74.09.522, 42 C.F.R. 405.2472, 42 C.F.R. 491. 08-05-011, § 388-549-1400, filed 2/7/08, effective 3/9/08.]

© Washington State Code Reviser's Office