Original Notice.

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

     Title of Rule and Other Identifying Information: Part 3 of 3; amending WAC 388-550-5000 Payment method -- LIDSH, 388-550-5125 Payment method -- PIIDSH, 388-550-5150 Payment method -- GAUDSH, 388-550-5200 Payment method -- SRDSH, 388-550-5210 Payment method -- SRIADSH, and 388-550-5220 Payment method -- NRHIAPDSH; and new WAC 388-550-4925 Eligibility for DSH programs -- New hospital providers, 388-550-4935 DSH eligibility -- Change in hospital ownership, and 388-550-5130 Payment method -- Institution for mental diseases disproportionate share hospital (IMDDSH).

     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 department is proposing new rules and amendments to existing rules to ensure clear and consistent policies for hospital reimbursement and to ensure compliance with federal and state guidelines. The proposed rules add new sections to ensure all disproportionate share hospital (DSH) programs are identified in rule and ensure that sufficient program detail is provided; amend sections pertaining to DSH requirements to ensure consistency with federal guidelines; describe how hospitals qualify for DSH payments; add definitions that apply to DSH payments; amend sections pertaining to the certified public expenditure (CPE) payment program to clarify CPE payment program policies and ensure consistency with federal guidelines embodied in the state plan; and amend sections pertaining to supplemental distributions to approved trauma centers in response to hospital provider input to the department; and incorporate into rule that the department is terminating the upper payment limit (UPL) program.

     Reasons Supporting Proposal: See above.

     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: Ayuni Wimpee, P.O. Box 45510, Olympia, WA 98504-5510, (360) 725-1835.

     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 Ayuni Wimpee, P.O. Box 45502 [45510], Olympia, WA 98504-5510, phone (360) 725-1835, fax (360) 753-9152, e-mail wimpeah@dshs.wa.gov.

April 26, 2007

Stephanie E. Schiller

Rules Coordinator

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     (2) To be considered eligible for DSH, a hospital whose ownership has changed must notify the department in writing no later than thirty days after the change in ownership becomes final. The notice must include the new entity's fiscal year end.

     (3) A hospital 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, and changes ownership after that date is not eligible for DSH unless it meets the obstetric services requirement. See WAC 388-550-4900 (5)(b). The hospital must also meet the utilization rate requirement. See WAC 388-550-4900 (5)(a).

     (4) If the fiscal year reported on a hospital's medicare cost report does not exactly match the fiscal year reported on the hospital's DSH application to the department, and if therefore the utilization data reported to the department do not agree, the department will use as the data source the document that gives the higher number of total inpatient hospital days for purposes of calculating the hospital's medicaid inpatient utilization rate (MIPUR). See WAC 388-550-4900 (6)(b).

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     (2) Hospitals considered eligible under the criteria in subsection (1) of this section receive LIDSH payments. The total LIDSH payment amounts equal the funding set by the state's appropriations act for LIDSH. The amount that the state appropriates for LIDSH may vary from year to year.

     (3) The department ((distributes)) determines LIDSH payments to each LIDSH eligible hospital using ((a prospective payment method. The department determines the standardized Medicaid inpatient utilization rate (MIPUR) by)) three factors:

     (a) ((Dividing)) The hospital's ((MIPUR by the average MIPUR of all LIDSH-eligible hospitals)) medicaid inpatient utilization rate (MIPUR); ((then))

     (b) ((Multiplying)) The hospital's medicaid case mix index (CMI) as determined by the department; and

     (c) The hospital's Title XIX medicaid discharges for the applicable hospital fiscal year.

     (4) The department calculates the LIDSH payment to an eligible hospital as follows. The department:

     (a) Divides the hospital's MIPUR by the average MIPUR of all LIDSH-eligible hospitals; then

     (b) Multiplies the ((hospital's standardized MIPUR)) result derived in subsection (a) by the hospital's most recent DRG payment method ((rebased)) medicaid case mix index, and then by the hospital's ((most recent fiscal)) base year Title XIX ((admissions)) discharges; then

     (c) ((Multiplying the product by an initial random base amount)) Converts the product to a percentage of the sum of all such products for individual hospitals; and ((then))

     (d) ((Comparing the sum of all annual LIDSH payments to the appropriated amount. If the amounts differ, the department progressively selects a new base amount by successive approximation until the sum of the LIDSH payments to hospitals equals)) Multiplies this percentage by the legislatively appropriated amount for LIDSH.

     (((4))) (5) For DSH program purposes, a hospital's medicaid CMI is the average diagnosis related group (DRG) weight for all of the hospital's medicaid DRG-paid claims during the state fiscal year used as the base year for the DSH application. It is possible that the CMI the department uses for DSH calculations will not be the same as the CMI the department uses in other hospital rate calculations.

     (6) After each applicable state fiscal year has ended, the department will not make changes to the LIDSH payment distribution that has resulted from calculations identified in subsection (((3))) (4) of this section. ((However, hospitals may still submit corrected DSH application data to the department after June 15 and prior to July 1 of the applicable state fiscal year to correct calculation of the MIPUR or low income utilization rate (LIUR) for historical record keeping. See WAC 388-550-5550 for rules regarding public notice for changes in Medicaid payment rates for hospital services)) The department will recalculate the LIDSH payment distribution only when the applicable state fiscal year has not yet ended at the time the alleged need for an LIDSH adjustment is identified, and if the department considers the recalculation necessary and appropriate under its regulations.

     (7) Consistent with the provisions of subsection (6) of this section, the department applies any adjustments to the DSH payment distribution required by legislative, administrative, or other state action, to other DSH programs in accordance with the provisions of WAC 388-550-4900 (13) through (16).

[Statutory Authority: RCW 74.08.090, 74.09.500. 06-08-046, § 388-550-5000, 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, § 388-550-5000, 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, § 388-550-5000, 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, § 388-550-5000, filed 12/18/97, effective 1/18/98.]

     (a) Meets the criteria in WAC 388-550-4900 (((2)(b) through (4)(a))) (5);

     (b) Is ((an in-state or bordering city hospital)) not designated an institution for mental diseases (IMD);

     (c) Provides services to clients eligible under the psychiatric indigent inpatient (PII) program. See WAC 388-865-0217 for more information regarding the PII program; and

     (d) ((Qualifies under Section 1923(d) of the Social Security Act)) Is located within the state of Washington. A hospital located out-of-state, including a hospital located in a designated bordering city, is not eligible to receive PIIDSH payments.

     (2) PIIDSH is available only for emergency, voluntary inpatient psychiatric care. PIIDSH is not available for charges for nonhospital services associated with the inpatient psychiatric care.

     (3) The department ((determines the)) makes PIIDSH ((payment for each eligible hospital using a prospective payment method, in accordance with WAC 388-550-4800)) payments to a hospital on a claim-specific basis.

[Statutory Authority: RCW 74.08.090, 74.09.500. 06-08-046, § 388-550-5125, filed 3/30/06, effective 4/30/06.]

     (2) A free-standing psychiatric facility, regardless of location, is not eligible to receive:

     (a) IMDDSH payments; or

     (b) Any other disproportionate share hospital (DSH) payment from the department.

     (3) A free-standing psychiatric facility within the state of Washington is eligible to receive a state grant amount from the department if the legislature appropriates general funds--state for IMDs. An out-of-state IMD, including an IMD located in a designated bordering city, is not eligible to receive a state grant amount.

     (4) Under federal law, 42 USC 1396r-4 (h)(2), the state's annual IMDDSH expenditures are capped at thirty-three percent of the state's annual statewide DSH cap. This amount represents the maximum that the state can spend in any given fiscal year on IMDDSH, but the state is under no obligation to actually spend that amount.

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     (a) Meets the criteria in WAC 388-550-4900 (((2)(b) through (4)(a)));

     (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 ((low-income utilization rate (LIUR))) medicaid inpatient utilization rate (MIPUR) of one percent or more.

     (2) The department determines the GAUDSH payment for each eligible hospital((, using a prospective payment method,)) in accordance with WAC 388-550-4800((, except that the payment is not reduced by the additional three percent specified in WAC 388-550-4800(4))).

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

[Statutory Authority: RCW 74.08.090, 74.09.500. 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.]

     (2))). To qualify for ((a SRHAPDSH)) an SRDSH payment, a hospital must:

     (a) Not be a peer group E hospital;

     (b) Meet the criteria in WAC 388-550-4900 (((2)(b) through (4)(a))) (5);

     (c) Have fewer than seventy-five acute licensed beds; and

     (d) Be an in-state hospital. A hospital located out-of-state, or in a designated bordering city is not eligible to receive SRDSH payments;

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

     (e))) (2) In addition, for the ((SRHAPDSH)) SRDSH program ((year)) to be implemented for state fiscal year (SFY) ((beginning)) 2008, which begins on July 1, ((2002)) 2007, the city or town must have a nonstudent population of ((fifteen)) no more than seventeen thousand ((five)) one hundred ((or less)) fifteen in calendar year 2006, as determined by the Washington State office of financial management estimate.

     For each subsequent SFY, the nonstudent population ((requirement)) ceiling is increased cumulatively by two percent.

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

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

     (b) The department 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) The department:

     (i) Identifies the medicaid payment amounts made by the department to the individual hospital(('s most recent, completed SFY Medicaid reimbursement amounts)) during the SFY two years prior to the current SFY for which DSH application is being made. These medicaid payment amounts are based on historical data considered to be complete; then

     (ii) Multiplies the total medicaid ((reimbursement)) payment amount determined in subsection (i) by the individual hospital's assigned profit factor (1.1 or 1.0) to identify a revised medicaid ((reimbursement)) payment amount; ((then)) and

     (iii) Divides the revised medicaid ((reimbursement)) payment amount for the individual hospital by the sum of the revised medicaid ((reimbursement)) payment amounts for all qualifying hospitals during the same period.

     (4) The department's ((SRHAPDSH)) SRDSH 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)) required by federal statute or regulation.

     (5) The department reallocates dollars as defined in the state plan.

[Statutory Authority: RCW 74.08.090, 74.09.500. 06-08-046, § 388-550-5200, filed 3/30/06, effective 4/30/06. Statutory Authority: RCW 74.08.090, 74.04.050, and 2003 1st sp.s. c 25. 04-12-044, § 388-550-5200, 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, § 388-550-5200, 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, § 388-550-5200, 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, § 388-550-5200, filed 12/18/97, effective 1/18/98.]

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

     (a) Not be a peer group E hospital;

     (b) Meet the criteria in WAC 388-550-4900 (((2)(b) through (4)(a))) (5);

     (c) Have fewer than seventy-five acute licensed beds; and

     (d) Be an in-state hospital that provided charity services to clients during the ((most recent, completed fiscal)) base year. A hospital located out-of-state or in a designated bordering city is not eligible to receive SRIADSH payments; and

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

     (e) ((For state fiscal year (SFY) beginning July 1, 2003,)) Be located in a city or town ((that has)) with a nonstudent population of ((fifteen)) no more than seventeen thousand ((eight)) one hundred ((ten or less)) fifteen in calendar year 2006, as determined by the Washington State office of financial management estimate. This estimated nonstudent population ceiling is used for SFY 2008, which begins July 1, 2007. For each subsequent SFY, the nonstudent population ((requirement)) ceiling is increased cumulatively by two percent.

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

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

     (b) The department determines the average profitability margin for ((the qualifying)) all hospitals qualifying for SRIADSH.

     (c) Any qualifying 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 qualifying hospitals receive a profit factor of 1.0.

     (d) The department:

     (i) Identifies from historical data considered to be complete, each individual qualifying hospital's allowed charity charges; 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 charity costs; then

     (iii) Multiplies the hospital's 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 charity cost amounts for all qualifying hospitals during the same period.

     (4) The department's ((SRHIAPDSH)) SRIADSH 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)) required by federal regulation. The department reallocates dollars as defined in the state plan.

[Statutory Authority: RCW 74.08.090, 74.09.500. 06-08-046, § 388-550-5210, filed 3/30/06, effective 4/30/06. Statutory Authority: RCW 74.04.050, 74.08.090. 05-12-132, § 388-550-5210, 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, § 388-550-5210, filed 5/28/04, effective 7/1/04.]

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

     (a) Not be a peer group E hospital;

     (b) Meet the criteria in WAC 388-550-4900 (((2)(b) through (4)(a))) (5);

     (c) Be an in-state or bordering city hospital that provided charity services to clients during the ((most recent, completed fiscal)) base year; and

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

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

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

     (b) The department 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) The department:

     (i) Identifies from historical data considered to be complete, each individual qualifying hospital's allowed charity charges; 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 charity costs; then

     (iii) Multiplies the hospital's 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 ((NRHIAPDSH)) NRIADSH revised costs by dividing the hospital's revised cost amount by the total revised charity costs for all qualifying hospitals during the same period.

     (4) The department's ((NRHIAPDSH)) NRIADSH 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)) required by federal statute or regulation. The department reallocates dollars as defined in the state plan.

[Statutory Authority: RCW 74.08.090, 74.09.500. 06-08-046, § 388-550-5220, filed 3/30/06, effective 4/30/06. Statutory Authority: RCW 74.04.050, 74.08.090. 05-12-132, § 388-550-5220, 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, § 388-550-5220, filed 5/28/04, effective 7/1/04.]

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