Original Notice.

     Preproposal statement of inquiry was filed as WSR 08-22-023.

     Title of Rule and Other Identifying Information: WAC 388-550-5000 Payment method -- Low income disproportionate share hospital (LIDSH), 388-550-5200 Payment method -- Small rural disproportionate share hospital (SRDSH), 388-550-5210 Payment method -- Small rural indigent assistance disproportionate share hospital (SRIADSH), and 388-550-5220 Payment method -- Nonrural indigent assistance disproportionate share hospital (NRIADSH).

     Hearing Location(s): Office Building 2, Auditorium, DSHS Headquarters, 1115 Washington, Olympia, WA 98504 (public parking at 11th and Jefferson. A map is available at http://www1.dshs.wa.gov/msa/rpau/RPAU-OB-2directions.html or by calling (360) 664-6094), on July 27, 2010, at 10:00 a.m.

     Date of Intended Adoption: Not sooner than July 28, 2010.

     Submit Written Comments to: DSHS Rules Coordinator, P.O. Box 45850, Olympia, WA 98504-5850, delivery 4500 10th Avenue S.E., Lacey, WA 98503, e-mail DSHSRPAURulesCoordinator@dshs.wa.gov, fax (360) 664-6185, by 5 p.m. on July 27, 2010.

     Assistance for Persons with Disabilities: Contact Jennisha Johnson, DSHS rules consultant, by July 6, 2010, TTY (360) 664-6178 or (360) 664-6094 or by e-mail at jennisha.johnson@dshs.wa.gov.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The department is amending language in sections in chapter 388-550 WAC that pertain to the disproportionate share hospital (DSH) programs in order to update, clarify, and maintain consistency in rules.

     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: Sandy Stith, P.O. Box 45500, Olympia, WA 98504-5500, (360) 725-1949.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. These rules do not impact small businesses.

     A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Sandy Stith, Medicaid Purchasing Administration, P.O. Box 45500, Olympia, WA 98504-45500 [98504-5500], phone (360) 725-1949, fax (360) 725-9152, e-mail sandy.stith@dshs.wa.gov.

June 21, 2010

Katherine I. Vasquez

Rules Coordinator

     (2) ((Hospitals considered eligible under the criteria in subsection (1) of this section receive LIDSH payments)) To qualify for an LIDSH payment, a hospital must:

     (a) Not be a hospital eligible for public disproportionate share (PHDSH) payments (see WAC 388-550-5400);

     (b) Not be designated as an "institution for mental diseases (IMD)" as defined in WAC 388-550-2600 (2)(d);

     (c) Meet the criteria in WAC 388-550-4900 (4) and (5);

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

     (e) Meet at least one of the following requirements. The hospital must:

     (i) Have a medicaid inpatient utilization rate (MIPUR) as defined in WAC 388-550-4900 (3)(h) at least one standard deviation above the mean medicaid inpatient utilization rate of in-state hospitals that receive medicaid payments; or

     (ii) Have a low income utilization rate (LIUR) as defined in WAC 388-550-4900 (3)(g) that exceeds twenty-five percent.

     (3) The department pays hospitals qualifying for LIDSH payments from a legislatively appropriated pool. The ((total)) maximum amount of LIDSH payments ((amounts equal)) in any state fiscal year (SFY) is 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))) (4) The department determines LIDSH payments to each LIDSH eligible hospital using ((three factors)) the following factors from the specific hospital's base year as defined in WAC 388-550-4900 (3)(a):

     (a) The hospital's medicaid inpatient utilization rate (MIPUR)((;)) (see WAC 388-550-4900 for how the department calculates the MIPUR).

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

     (i) Using the DRG weight for each of the hospital's paid inpatient claims assigned in the year the claim was paid;

     (ii) Summing the DRG weights; and

     (iii) Dividing this total by the number of claims.

     The CMI the department uses for LIDSH calculations is not the same as the CMI the department uses in other hospital rate calculations.

     (c) The number of the hospital's Title XIX medicaid discharges ((for the applicable hospital fiscal year)). The department includes in this number only the discharges pertaining to Washington state medicaid clients.

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

     (a) The department:

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

     (((b))) (ii) Multiplies the result derived in ((subsection)) (a) of this section by the ((hospital's most recent DRG payment method medicaid case mix index)) CMI (see (4)(b) of this section), and then by the ((hospital's base year Title XIX)) discharges (see (4)(c) of this section); then

     (((c))) (iii) Converts the product to a percentage of the sum of all such products for individual hospitals; and

     (((d))) (iv) Multiplies this percentage by the legislatively appropriated amount for LIDSH.

     (((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.))

     (b) If a hospital's calculated LIDSH payment is greater than the hospital-specific DSH cap, the payment to the hospital is limited to the hospital-specific DSH cap, and the department:

     (i) Subtracts the LIDSH payment calculated for the hospital to determine the remaining LIDSH appropriation to distribute to the other qualifying hospitals; and

     (ii) Proportionately distributes the remaining LIDSH appropriation in accordance with the factors in (a) of this subsection.

     (6) ((After each)) A hospital receiving LIDSH payments must comply with a department request for uninsured logs (uninsured logs are documentation of payments, charges, and other information for uninsured patients) to verify its hospital-specific DSH cap.

     (7) The department will not make changes in the LIDSH payment distribution after the applicable ((state fiscal year)) SFY has ended((, the department will not make changes to the LIDSH payment distribution that has resulted from calculations identified in subsection (4) of this section)). The department ((will)) recalculates the LIDSH payment distribution only when the applicable ((state fiscal year)) SFY 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))) (8) Consistent with the provisions of subsection (((6))) (7) 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. 07-14-090, § 388-550-5000, filed 6/29/07, effective 8/1/07; 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.]

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

     (a) Not be ((a peer group E hospital)) participating in the "full cost" public hospital certified public expenditure (CPE) payment program as described in WAC 388-550-4650;

     (b) Not be designated as an "institution for mental diseases (IMD)" as defined in WAC 388-550-2600 (2)(d);

     (c) Meet the criteria in WAC 388-550-4900 (4) and (5);

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

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

     (f) Be located in a city or town with a nonstudent population of no more than seventeen thousand eight hundred six in calendar year 2008, as determined by population data reported by the Washington state office of financial management population of cities, towns, and counties used for the allocation of state revenues. This nonstudent population is used for state fiscal year (SFY) 2010, which began July 1, 2009. For each subsequent SFY, the nonstudent population is increased by two percent.

     (((2) In addition, for the SRDSH program to be implemented for state fiscal year (SFY) 2008, which begins on July 1, 2007, the city or town must have 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.

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

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

     (a) At the time the SRDSH payment is to be made, the department calculates each hospital's profitability margin based on the hospital's base year data and audited financial statements.

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

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

     (4) The department's SRDSH payments to a hospital may not exceed one hundred percent of the projected cost of care for medicaid clients and uninsured patients for that hospital unless an exception is 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. 07-14-090, § 388-550-5200, filed 6/29/07, effective 8/1/07; 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 SRIADSH payment, a hospital must:

     (a) Not be ((a peer group E hospital)) participating in the "full cost" public hospital certified public expenditure (CPE) payment program as described in WAC 388-550-4650;

     (b) Not be designated as an "institution for mental diseases (IMD)" as defined in WAC 388-550-2600 (2)(d);

     (c) Meet the criteria in WAC 388-550-4900 (4) and (5);

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

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

     (((e))) (f) Be located in a city or town with a nonstudent population of no more than seventeen thousand ((one hundred fifteen)) eight hundred six in calendar year ((2006)) 2008, as determined by the Washington State office of financial management ((estimate)) population of cities, towns, and counties used for the allocation of state revenues. This ((estimated)) nonstudent population ((ceiling)) is used for SFY ((2008)) 2010, which begins July 1, ((2007)) 2009. For each subsequent SFY, the nonstudent population ceiling is increased ((cumulatively)) by two percent.

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

     (a) At the time the SRIADSH payment is to be made, the department calculates each hospital's profitability margin based on the hospital's base year data and audited financial statements.

     (b) The department determines the average profitability margin for 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 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 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. 07-14-090, § 388-550-5210, filed 6/29/07, effective 8/1/07; 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 NRIADSH payment, a hospital must:

     (a) Not be ((a peer group E hospital)) participating in the "full cost" public hospital certified public expenditure (CPE) payment program as described in WAC 388-550-4650;

     (b) Not be designated as an "institution of mental diseases (IMD)" as defined in WAC 388-550-2600 (2)(d);

     (c) Meet the criteria in WAC 388-550-4900 (4) and (5);

     (((c))) (d) Be a hospital that does not qualify as a small rural hospital as defined in WAC 388-550-4900 (3)(((m)))(n); and

     (((d))) (e) Be an in-state or designated bordering city hospital that provided charity services to clients during the base year. For DSH purposes, the department considers as nonrural any hospital located in a designated bordering city.

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

     (a) At the time the NRIADSH payment is to be made, the department calculates each hospital's profitability margin based on the hospital's base year data and audited financial statements.

     (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 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 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 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. 07-14-090, § 388-550-5220, filed 6/29/07, effective 8/1/07; 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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