Other Findings Required by Other Provisions of Law as Precondition to Adoption or Effectiveness of Rule: The earlier effective date is necessary because of imminent peril to the public health, safety, or welfare. The federal government will eliminate intergovernmental transfers (IGT) in the near future which will create an estimated budget gap of $160,000,000 for the state. This will lead to reductions in department programs, which will in turn have a direct negative impact on public health unless the rule is effective on July 1, 2005.

     Purpose: The amended rules allow the department to reimburse certain public hospitals through the "full cost" public hospital certified public expenditure (CPE) payment program. The department is also updating, amending, and repealing other applicable sections. Clarifying language is being added to explain how high cost outliers are paid for state administered program claims. The verbiage, "medically indigent (MI) costs or charges" is being replaced with "charity costs or charges."

     Citation of Existing Rules Affected by this Order: Repealing WAC 388-550-5100, 388-550-5250, 388-550-5300, 388-550-5350 and 388-550-6900; and amending WAC 388-550-330, 388-550-4300, 388-550-4600, 388-550-4650, 388-550-4800, 388-550-4900, 388-550-5210, 388-550-5220, 388-550-5400, and 388-550-6800.

     Statutory Authority for Adoption: RCW 74.04.050, 74.08.090.

      Adopted under notice filed as WSR 05-09-085 and 05-09-086 on April 19, 2005.

     A final cost-benefit analysis is available by contacting Kathy Sayre, P.O. Box 45533, Olympia, WA 98504-5533, phone (360) 725-1342, fax (360) 586-9727, e-mail sayrek@dshs.wa.gov. No changes were made to the preliminary analysis, which will be final.

     Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 10, Repealed 5.

     Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0;      Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 10, Repealed 5.

     Date Adopted: June 1, 2005.

Andy Fernando, Manager

Rules and Policies Assistance Unit

     (2) The ((four)) six medical assistance administration (MAA) hospital peer groups are:

     (a) Group A, rural hospitals;

     (b) Group B, urban hospitals without medical education programs;

     (c) Group C, urban hospitals with medical education program; ((and))

     (d) Group D, specialty hospitals or other hospitals not easily assignable to the other ((three)) five groups;

     (e) Group E, public hospitals participating in the "full cost" public hospital certified public expenditure (CPE) program; and

     (f) Group F, critical access hospitals.

     (3) MAA uses a cost cap at the seventieth percentile for ((a peer group.

     (a) MAA caps at the seventieth percentile the costs of)) hospitals in peer groups B and C ((whose costs exceed the seventieth percentile for their peer group)). All other peer groups are exempt from the cost cap.

     (((b))) (a) MAA exempts peer group A hospitals from the cost cap because they are paid under the ratio of costs-to-charges methodology for Medicaid claims.

     (((c))) (b) MAA exempts peer group D hospitals from the cost cap because they are specialty hospitals without a common peer group on which to base comparisons.

     (c) MAA exempts peer group E hospitals from the cost cap because they are paid under the ratio of costs-to-charges (RCC) methodology for Medicaid and GAU inpatient claims.

     (d) MAA exempts peer group F hospitals from the cost cap because they are paid under the departmental weighted costs-to-charges methodology for Medicaid claims.

     (4) MAA calculates a peer group's cost cap based on the hospitals' base period costs after subtracting:

     (a) Indirect medical education costs, in accordance with WAC 388-550-3250(2), from the aggregate operating and capital costs of each hospital in the peer group; and

     (b) The cost of outlier cases from the aggregate costs in accordance with WAC 388-550-3350(1).

     (5) MAA uses the lesser of each individual hospital's calculated aggregate cost or the peer group's seventieth percentile cost cap as the base amount in calculating the individual hospital's adjusted cost-based conversion factor. After the peer group cost cap is calculated, MAA adds back to the individual hospital's base amount its indirect medical education costs and appropriate outlier costs, as determined in WAC 388-550-3350(2).

     (6) ((In its rate setting process for peer groups A and B, MAA recognizes changes in peer group status and considers DOH's approval or recommendation.)) In cases where corrections or changes in an individual hospital's base-year cost or peer group assignment occur after peer group cost caps are calculated, MAA updates the peer group cost caps involved only if the change in the individual hospital's base-year costs or peer group assignment will result in a five percent or greater change in the seventieth percentile of costs calculated for either its previous peer group category, its new peer group category, or both.

[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, § 388-550-3300, 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, § 388-550-3300, filed 12/18/97, effective 1/18/98.]

     (2) Subject to the restrictions and limitations listed in this section, the department exempts the following hospitals and units from the DRG payment method for inpatient services provided to Medicaid-eligible clients:

     (a) Peer group A hospitals, as ((defined)) described in WAC 388-550-3300(2). Exception: Inpatient services provided to clients eligible under the following programs are reimbursed through the DRG payment method:

     (i) General assistance programs; and

     (ii) ((Medically indigent program (MIP); and

     (iii))) Other state-only administered programs.

     (b) Peer group E hospitals, as described in WAC 388-550-3300(2). See WAC 388-550-4650 for how the department calculates payment to Peer group E hospitals.

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

     (d) Rehabilitation units when the services are provided in medical assistance administration (MAA)-approved acute physical medicine and rehabilitation (acute PM&R) hospitals and designated distinct rehabilitation units in acute care hospitals.

     MAA uses the same criteria as the Medicare program to identify exempt rehabilitation hospitals and designated distinct rehabilitation units. Exception: Inpatient rehabilitation services provided to clients eligible under the following programs are covered and reimbursed through the DRG payment method:

     (i) General assistance programs; and

     (ii) ((Medically indigent program (MIP); and

     (iii))) Other state-only administered programs.

     (((c))) (e) Out-of-state hospitals excluding hospitals located in designated ((border areas)) bordering cities as described in WAC 388-501-0175. Inpatient services provided in out-of-state hospitals to clients eligible under the following programs are not covered or reimbursed by the department:

     (i) General assistance programs; and

     (ii) ((Medically indigent program (MIP); and

     (iii))) Other state-only administered programs.

     (((d))) (f) Military hospitals when no other specific arrangements have been made with the department. Military hospitals may individually elect or arrange for one of the following payment methods in lieu of the RCC payment method:

     (i) A negotiated per diem rate; or

     (ii) DRG.

     (((e))) (g) Nonstate-owned specifically identified psychiatric hospitals and designated hospitals with Medicare certified distinct psychiatric units. The department uses the same criteria as the Medicare program to identify exempt psychiatric hospitals and distinct psychiatric units of hospitals.

     (i) Inpatient psychiatric services provided to clients eligible under the following programs are reimbursed through the DRG payment method:

     (A) General assistance programs; and

     (B) ((Medically indigent program (MIP); and

     (C))) Other state-only administered programs.

     (ii) If the department determines that the psychiatric services provided to a client((s)) eligible under ((the)) a program((s)) listed in subsection (2)(((e)))(g)(i) of this section qualify for a special exemption, the services may be reimbursed by using the ratio of costs-to-charges (RCC) payment method.

     (iii) Regional support networks (RSNs) that arrange to reimburse nonstate-owned psychiatric hospitals and designated distinct psychiatric units of hospitals directly, may use the department's payment methods or contract with the hospitals to reimburse using different methods. Claims not paid directly through an RSN are paid through the department's MMIS payment system.

     (3) The department limits inpatient hospital stays that are exempt from the DRG payment method and identified in subsection (2) of this section to the number of days established at the seventy-fifth percentile in the current edition of the publication, "Length of Stay by Diagnosis and Operation, Western Region," unless the stay is:

     (a) Approved for a specific number of days by the department, or for psychiatric inpatient stays, by the regional support network (RSN);

     (b) For chemical dependency treatment which is subject to WAC 388-550-1100; or

     (c) For detoxification of acute alcohol or other drug intoxication.

     (4) If subsection (3)(c) of this section applies to an eligible client((s)), the department will:

     (a) Pay for three-day detoxification services for an acute alcoholic condition; or

     (b) Pay for five-day detoxification services for acute drug addiction when the services are directly related to detoxification; and

     (c) Extend the three- and five-day limitations for up to six additional days if either of the following is invoked on a client under care in a hospital:

     (i) Petition for commitment to chemical dependency treatment; or

     (ii) Temporary order for chemical dependency treatment.

[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, § 388-550-4300, 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, § 388-550-4300, filed 12/18/97, effective 1/18/98.]

     (2) The department ((shall)) requires ((medical care)) 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 ((shall)) exempts from the selective contracting program those hospitals that are:

     (a) In an SCA but designated by the department as remote. The department ((shall)) designates as remote, hospitals meeting 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; ((and))

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

     (f) Peer group E hospitals; and

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

     (4)(((a) The department shall)) MAA:

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

     (b) ((The department shall)) 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) ((The department shall apply)) Applies NCFs to Medicaid clients only. ((The department shall)) (MAA uses CBCFs in calculating payments for ((MI/))medical care services clients.)

[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.]

     (2) Only the following facilities are reimbursed through the "full cost" public hospital CPE payment program:

     (a) Public hospitals located in the state of Washington that are:

     (i) Owned by public hospital districts; and

     (ii) Not certified by the department of health (DOH) as a critical access hospital;

     (b) Harborview Medical Center; and

     (c) University of Washington Medical Center.

     (3) Payments made under the CPE payment program are limited to inpatient hospital services provided to clients eligible under the Medicaid and general assistance-unemployable (GA-U) fee-for-service programs.

     (4) Each hospital described in subsection (2) of this section is responsible to provide certified public expenditures as the required state match for claiming federal Medicaid funds. Certified public expenditures cannot include federal funds or money used to match federal funds.

     (5) Payments made by MAA under the CPE payment program equal the hospital's RCC rate times allowable charges times the state's Medicaid federal match percentage.

     (6) Client responsibility and third party liability as identified on the hospital claim or by MAA are deducted from the basic payment to determine MAA's actual payment for that admission.

[]

     (a) ((Medically indigent (MI) program;

     (b))) Who qualifies for the general assistance unemployable (GAU) program; or

     (((c) Alcoholism and Drug Addiction Treatment and Support Act (ADATSA) program; and

     (d))) (b) Is involuntarily detained under the Involuntary Treatment Act (ITA)((-Q program. (The ITA-Q program covers ITA services for non-Medicaid eligible clients.)))

     (2) MAA exempts the following services from the state-administered programs' payment methods and/or reduced rates:

     (a) Detoxification services when the services are provided under an MAA-assigned provider number starting with "thirty-six." (MAA reimburses these services using the Title XIX Medicaid RCC payment method.)

     (b) Program services provided by MAA-approved critical access hospitals (CAHs) to clients eligible under state-administered programs. (MAA reimburses these services through cost settlement as described in WAC 388-550-2598.)

     (c) Program services provided by Peer group E hospitals to clients eligible under the GAU program. (MAA reimburses these services through the "full cost" public hospital certified public expenditure (CPE) program (see WAC 388-550-4650)).

     (3) MAA determines:

     (a) A state-administered program RCC payment by reducing a hospital's Title XIX Medicaid RCC rate using the hospital's ratable.

     (b) A state-administered program DRG payment by reducing a hospital's Title XIX Medicaid DRG cost based conversion factor (CBCF) using the hospital's ratable and equivalency factor (EF).

     (4) MAA determines:

     (a) The RCC rate for the state-administered programs mathematically as follows:

     State-administered programs' RCC rate = current Title XIX Medicaid RCC rate x (one minus the current hospital ratable)

     (b) The DRG conversion factor (CF) for the state-administered programs mathematically as follows:

     State-administered programs' DRG CF = current Title XIX Medicaid DRG CBCF x (one minus the current hospital ratable) x EF

     (5) MAA determines payments to hospitals for covered services provided to clients eligible under the state-administered programs mathematically as follows:

     (a) Under the RCC payment method:

     State-administered programs' RCC payment = state-administered programs' RCC Rate x allowed charges

     (b) Under the DRG payment method:

     State-administered programs' DRG payment = state-administered programs' DRG CF x all patient DRG relative weight (((to include any necessary high-cost outlier payment))) (See subsection (6) of this section for how MAA determines payment for state-administered program claims that qualify as DRG high-cost outliers.)

     (6) For state-administered program claims that qualify as DRG high-cost outliers, MAA determines:

     (a) In-state children's hospital payments for state-administered program claims that qualify as DRG high-cost outliers mathematically as follows:

     Eighty-five percent of the allowed charges above the outlier threshold x the specific hospital's RCC rate x (one minus the current hospital ratable) plus the DRG allowed amount

     (b) Psychiatric DRG high-cost outlier payments for DRGs 424 through 432 mathematically as follows:

     One hundred percent of the allowed charges above the outlier threshold x the specific hospital's RCC rate x (one minus the current hospital ratable) plus the applicable DRG allowed amount

     (c) Payments for all other claims that qualify as DRG high-cost outliers as follows:

     Sixty percent x the specific hospital's RCC rate x (one minus the current hospital ratable) plus the applicable DRG allowed amount

High-cost Outlier Calculations for Qualifying Claims State-administered Programs (for admission dates January 1, 2001 and after)

In-state Children's Hospitals Allowed charges

(-)

> of $33000 or 3 x DRG

(=)

Charges > threshold

(x)

RCC

(x)

1 (-) Ratable

(x)

85%

(=)

Outlier Add-on Amount

(+)

*DRG Allowed Amount

Psychiatric DRGs 424-432 Allowed charges

(-)

> of $33000 or 3 x DRG

(=)

Charges > threshold

(x)

RCC

(x)

1 (-) Ratable

(x)

100%

(=)

Outlier Add-on Amount

(+)

* DRG Allowed Amount

All other qualifying claims Allowed charges

(-)

> of $33000 or 3 x DRG

(=)

Charges > threshold

(x)

RCC

(x)

1 (-) Ratable

(x)

60%

(=)

Outlier Add-on Amount

(+)

* DRG Allowed Amount

*Basic DRG allowed amount calculation: DRG relative weight x conversion factor = DRG allowed amount

     (7) See WAC 388-550-3700(5) for how claims qualify as low-cost outliers.

     (8) MAA determines payments for claims that qualify as DRG low-cost outliers mathematically as follows:

     Allowed charges for the claim x the specific hospital's RCC rate x (one minus the current hospital ratable)

     (9) To calculate a hospital's ratable that is applied to both the Title XIX Medicaid RCC rate and the Title XIX Medicaid DRG CBCF used to determine the respective state-administered program's reduced rates, MAA:

     (a) Adds the hospital's Medicaid revenue (Medicaid revenue as reported by department of health (DOH) includes all Medicaid revenue and all other medical assistance revenue) and Medicare revenue to the value of the hospital's charity care and bad debts, all of which is taken from the most recent complete calendar year data available from DOH at the time of the ratable calculation; then

     (b) Deducts the hospital's low-income disproportionate share hospital (LIDSH) revenue from the amount derived in (a) of this subsection to arrive at the hospital's community care dollars; then

     (c) Subtracts the hospital-based physicians revenue that is reported in the hospital's most recent HCFA-2552 Medicare cost report received by MAA at the time of the ratable calculation, from the total hospital revenue reported by DOH from the same source as discussed in (a) of this subsection, to arrive at the net hospital revenue; then

     (d) Divides the amount derived in (b) of this subsection by the amount derived in (c) of this subsection to obtain the ratio of community care dollars to net hospital revenue (also called the preliminary ratable factor); then

     (e) Subtracts the amount derived in (d) of this subsection from 1.0 to obtain the hospital's preliminary ratable; then

     (f) Determines a neutrality factor by:

     (i) Multiplying hospital-specific Medicaid revenue that is reported by DOH from the same source as discussed in (a) of this subsection by the preliminary ratable factor; then

     (ii) Multiplying that same hospital-specific Medicaid revenue by the prior year's final ratable factor; then

     (iii) Summing all hospital Medicaid revenue from the hospital-specific calculations that used the preliminary ratable factor discussed in (f)(i) of this subsection; then

     (iv) Summing all hospital revenue from the hospital-specific calculations that used the prior year's final ratable factor discussed in (f)(ii) of this subsection; then

     (v) Comparing the two totals; and

     (vi) Setting the neutrality factor at 1.0 if the total using the preliminary ratable factor is less than the total using the prior year's final ratable factor; or

     (vii) Establishing a neutrality factor that is less than 1.0 that will reduce the total using the preliminary ratable factor to the level of the total using the prior year's final ratable factor, if the total using the preliminary ratable factor is greater than the total using the prior year's ratable factor; then

     (g) Multiplies, for each specific hospital, the preliminary ratable by the neutrality factor to establish hospital-specific final ratables for the year; then

     (h) Subtracts each hospital-specific final ratable from 1.0 to determine hospital-specific final ratable factors for the year; then

     (i) Calculates an instate-average ratable and an instate-average ratable factor used for new hospitals with no prior year history.

     (((7))) (10) MAA updates each hospital's ratable annually on August 1.

     (((8))) (11) MAA:

     (a) Uses the equivalency factor (EF) to hold the hospital specific state-administered programs' DRG CF at the same level prior to rebasing, adjusted for inflation; and

     (b) Calculates a hospital's EF as follows:

     EF = State-administered programs' prior DRG CF divided by current Title XIX Medicaid DRG CBCF x (one minus the prior ratable)

     (((9) Effective December 1, 1991, for hospital admissions of clients eligible under the state-administered MI program, MAA:

     (a) Further reduces RCC and DRG payments to a hospital for covered services provided to clients eligible under the MI program by multiplying the respective payment referred to in subsection (5) of this section by ninety-seven percent; and

     (b) Applies this payment reduction to the medically indigent disproportionate share hospital (MIDSH) payment methodology in accordance with section 3(b) of the "Medicaid Voluntary Contributions and Provider-Specific Tax Amendment of 1991."))

[Statutory Authority: RCW 74.08.090 and 74.09.500. 04-19-113, § 388-550-4800, filed 9/21/04, effective 10/22/04. Statutory Authority: RCW 74.08.090, 74.09.500, 74.09.035(1), and 43.88.290. 02-21-019, § 388-550-4800, filed 10/8/02, effective 11/8/02. 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, § 388-550-4800, filed 7/31/01, effective 8/31/01. Statutory Authority: RCW 74.09.080, 74.09.730, 42 U.S.C. 1395x(v) and 1396r-4, 42 C.F.R. 447.271 and 2652. 99-14-026, § 388-550-4800, filed 6/28/99, effective 7/1/99. Statutory Authority: RCW 74.08.090, 42 USC 1395 x(v), 42 CFR 447.271, 447.11303, and 447.2652. 99-06-046, § 388-550-4800, 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, § 388-550-4800, filed 12/18/97, effective 1/18/98.]

     (1) To qualify for a DSH payment for each state fiscal year (SFY), an instate or ((border area)) bordering city hospital provider must submit to MAA, the hospital's completed and final DSH application by the due date specified in that year's application letter. The application due date will not be less than sixty days after MAA makes the application available.

     (2) A hospital is a disproportionate share hospital eligible for the low-income disproportionate share hospital (LIDSH) program for a specific SFY if the hospital submits a DSH application for that specific year in compliance with subsection (1) and if both the following apply:

     (a) The hospital's Medicaid inpatient utilization rate (MIPUR) is at least one standard deviation above the mean Medicaid inpatient utilization rate for hospitals receiving Medicaid payments in the state, or its low-income utilization rate (LIUR) exceeds twenty-five percent; and

     (b) At least two obstetricians who have staff privileges at the hospital ((and)) have agreed to provide obstetric services to eligible individuals at the hospital. For the purpose of establishing DSH eligibility, "obstetric services" is defined as routine nonemergency delivery of babies. This requirement for two obstetricians with staff privileges does not apply to a hospital:

     (i) That provides inpatient services predominantly to individuals under eighteen years of age; or

     (ii) That 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.

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

     (4) MAA may consider a hospital a disproportionate share hospital for programs other than the LIDSH program if the hospital submits a DSH application for the specific year and meets the following criteria for the year specified in the application:

     (a) The hospital has a MIPUR of not less than one percent; and

     (b) The hospital meets the requirement of subsection (2)(b) of this section.

     (5) MAA administers the low-income disproportionate share (LIDSH) program and may administer any of the following DSH programs:

     (a) ((Medically indigent disproportionate share hospital (MIDSH);

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

     (((c))) (b) Small rural hospital assistance program disproportionate share hospital (SRHAPDSH);

     (((d))) (c) Small rural hospital indigent adult assistance program disproportionate share hospital (SRHIAAPDSH);

     (((e))) (d) Nonrural hospital indigent adult assistance program disproportionate share hospital (NRHIAAPDSH);

     (((f) Teaching hospital assistance program disproportionate share hospital (THAPDSH);

     (g) State teaching hospital financing program disproportionate share hospital (STHFPDSH);

     (h) County teaching hospital financing program disproportionate share hospital (CTHFPDSH); and

     (i))) and

     (e) Public hospital ((district)) disproportionate share hospital (((PHDDSH))) (PHDSH).

     (6) MAA allows a hospital to receive any one or all of the DSH payment adjustments discussed in subsection (5) of this section when the hospital:

     (a) Meets the requirements in subsection (4) of this section; and

     (b) Meets the eligibility requirements for the particular DSH payment program, as discussed in WAC 388-550-5000 through 388-550-5400.

     (7) MAA ensures each hospital's total DSH payments do not exceed the individual hospital's DSH limit, defined as:

     (a) The cost to the hospital of providing services to Medicaid clients, including clients served under Medicaid managed care programs;

     (b) Less the amount paid by the state under the non-DSH payment provision of the state plan;

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

     (d) Less any cash payments made by uninsured clients; and

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

     (8) MAA's total annual DSH payments must not exceed the state's DSH allotment for the federal fiscal year.

     If the MAA statewide allotment is exceeded, MAA may adjust future DSH payments to each hospital to compensate for the amount overpaid. Adjustments will be made in the following program order:

     (a) ((PHDDSH;

     (b) THAPDSH;

     (c) CTHFPDSH;

     (d) STHFPDSH;

     (e))) SRHAPDSH;

     (((f))) (b) NRHIAAPDSH;

     (((g))) (c) SRHIAAPDSH;

     (((h) MIDSH;

     (i))) (d) GAUDSH; ((and

     (j))) (e) LIDSH;and

     (f) PHDSH.

[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.]

     (2) To qualify for an SRHIAAPDSH payment, a hospital must:

     (a) Meet the criteria in WAC 388-550-4900 (2)(b) and (4);

     (b) Be an in-state hospital that provided charity services to clients ((eligible under the medically indigent (MI) program)) during the most recent, completed fiscal year;

     (c) Be a small rural hospital with fewer than seventy-five acute licensed beds; and

     (d) For state fiscal year (SFY) beginning July 1, 2003, be located in a city or town that has a nonstudent population of fifteen thousand eight hundred ten or less. For each subsequent SFY, the nonstudent population requirement is increased cumulatively by two percent.

     (3) MAA pays hospitals qualifying for SRHIAAPDSH payments from a legislatively appropriated pool. MAA determines each hospital's individual SRHIAAPDSH payment from the total dollars in the pool using percentages established through the following prospective payment method:

     (a) At the time the SRHIAAPDSH payment is to be made, MAA calculates each hospital's profitability margin based on the most recent, completed year-end data using audited financial statements from the hospital.

     (b) MAA determines the average profitability margin for the qualifying hospitals.

     (c) Any hospital with a profitability margin of less than one hundred ten percent of the average profitability margin for qualifying hospitals receives a profit factor of 1.1. All other hospitals receive a profit factor of 1.0.

     (d) MAA:

     (i) Identifies from historical data considered to be complete, each individual qualifying hospital's ((inpatient and outpatient)) allowed charity charges ((for MAA's MI clients)); then

     (ii) Multiplies the total allowed charity charges by the hospital's ratio of costs-to-charges (RCC), limiting the RCC to a value of 1, to determine the hospital's ((MI)) charity costs; then

     (iii) Multiplies the hospital's ((MI)) charity costs by the hospital's profit factor assigned in (c) of this subsection to identify a revised cost amount; then

     (iv) Determines the hospital's percentage of revised costs by dividing its revised cost amount by the sum of the revised ((MI)) charity cost amounts for all qualifying hospitals during the same period.

     (4) MAA's SRHIAAPDSH payments to a hospital may not exceed one hundred percent of the projected cost of care for Medicaid clients and uninsured indigent patients for that hospital unless an exception is identified by federal regulation. MAA reallocates dollars as defined in the state plan.

[Statutory Authority: RCW 74.08.090, 74.04.050, and 2003 1st sp.s. c 25. 04-12-044, § 388-550-5210, filed 5/28/04, effective 7/1/04.]

     (2) To qualify for an NRHIAAPDSH payment, a hospital must:

     (a) Meet the criteria in WAC 388-550-4900 (2)(b) and (4);

     (b) Be an in-state or ((border area)) bordering city hospital that provided charity services to clients ((eligible under the medically indigent (MI) program)) during the most recent, completed fiscal year; and

     (c) Be a hospital that does not qualify as a small rural hospital as defined in WAC 388-550-5210.

     (3) MAA pays hospitals qualifying for NRHIAAPDSH payments from a legislatively appropriated pool. MAA determines each hospital's individual NRHIAAPDSH payment from the total dollars in the pool using percentages established through the following prospective payment method:

     (a) At the time the NRHIAAPDSH payment is to be made, MAA calculates each hospital's profitability margin based on the most recent, completed year-end data using audited financial statements from the hospital.

     (b) MAA determines the average profitability margin for the qualifying hospitals.

     (c) Any hospital with a profitability margin of less than one hundred ten percent of the average profitability margin for qualifying hospitals receives a profit factor of 1.1. All other hospitals receive a profit factor of 1.0.

     (d) MAA:

     (i) Identifies from historical data considered to be complete, each individual qualifying hospital's ((inpatient and outpatient)) allowed charity charges ((for MAA's MI clients)); then

     (ii) Multiplies the total allowed charity charges by the hospital's ratio of costs-to-charges (RCC), limiting the RCC to a value of 1, to determine the hospital's ((MI)) charity costs; then

     (iii) Multiplies the hospital's ((MI)) charity costs by the hospital's profit factor assigned in (c) of this subsection to identify a revised cost amount; then

     (iv) Determines the hospital's percentage of the NRHIAAPDSH revised costs by dividing the hospital's revised cost amount by the total ((MI)) charity costs for all qualifying hospitals during the same period.

     (4) MAA's NRHIAAPDSH payments to a hospital may not exceed one hundred percent of the projected cost of care for Medicaid clients and uninsured indigent patients for the hospital unless an exception is identified by federal regulation. MAA reallocates dollars as defined in the state plan.

[Statutory Authority: RCW 74.08.090, 74.04.050, and 2003 1st sp.s. c 25. 04-12-044, § 388-550-5220, filed 5/28/04, effective 7/1/04.]

     (2) Using a prospective payment method, MAA pays hospitals considered eligible under the criteria in subsection (1) of this section a PHDDSH payment amount from the legislatively appropriated PHDDSH pool)) public hospital disproportionate share hospital (PHDSH) program is a public hospital program for:

     (a) Public hospitals located in the state of Washington that are:

     (i) Owned by public hospital districts; and

     (ii) Not certified by the department of health (DOH) as a critical access hospital;

     (b) Harborview Medical Center; and

     (c) University of Washington Medical Center.

     (2) MAA pays hospitals eligible under this program a payment equal to the hospital's individual disproportionate share hospital (DSH) payment limit calculated according to WAC 388-550-4900. The resulting amount is multiplied by the federal matching assistance percentage in effect for Washington State at the time of the payment. This amount is sent to the hospital.

     (3) Hospitals receiving payment in this DSH program must certify that funds have been spent on uncompensated care at the hospital equal to or in excess of the payment amount before applying the federal matching assistance percentage. Certified funds cannot include federal funds or money used to match federal funds.

[Statutory Authority: RCW 74.08.090, 74.09.500, 74.09.035(1), and 43.88.290. 03-13-055, § 388-550-5400, 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, § 388-550-5400, 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, § 388-550-5400, filed 12/18/97, effective 1/18/98.]

     (a) Washington state-owned or state-operated hospital; or

     (b) Nonstate government-owned hospital.

     (2) Prior to payment, proportionate share payments for inpatient hospital services are subject to:

     (a) Federal approval for federal matching funds;

     (b) A department analysis of the Medicare upper limit; and

     (c) The federal Medicare upper payment limit for hospital payment.

     (3) The medical assistance administration (MAA) determines each payment year's total proportionate share payment for inpatient hospital services by:

     (a) Using the charge and payment data from MAA's Medicaid Management Information System (MMIS) for inpatient hospital services for the base years; and

     (b) Calculating the cumulative difference between covered Title XIX inpatient charges, Title XIX payments, and third party liability payments for all eligible hospitals during the most recent federal fiscal year.

     (4) Proportionate share payments for inpatient hospital services:

     (a) Are determined and paid periodically to participating eligible hospitals during each federal fiscal year; and

     (b) Must be used to improve health care services to low income patients.

[Statutory Authority: RCW 74.08.090, 74.09.500, 74.09.035(1), and 43.88.290. 03-13-055, § 388-550-6800, filed 6/12/03, effective 7/13/03.]

     The following sections of the Washington Administrative Code are repealed:

WAC 388-550-5100	Payment method--MIDSH.
WAC 388-550-5250	Payment method -- THAPDSH.
WAC 388-550-5300	Payment method--STHFPDSH.
WAC 388-550-5350	Payment method--CTHFPDSH.
WAC 388-550-6900	Proportionate share payments for outpatient hospital services.

© Washington State Code Reviser's Office