Original Notice.

     Preproposal statement of inquiry was filed as WSR 05-20-082.

     Title of Rule and Other Identifying Information: Amending WAC 388-550-2598 Critical access hospital (CAH) program.

     Hearing Location(s): Blake Office Park East, Rose Room, 4500 10th Avenue S.E., Lacey, WA 98503 (behind Goodyear Courtesy Tire), on January 24, 2006, at 10:00 a.m.

     Date of Intended Adoption: Not earlier than January 25, 2006.

     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 fernaax@dshs.wa.gov, fax (360) 664-6185, by 5:00 p.m., January 24, 2006.

     Assistance for Persons with Disabilities: Contact Stephanie Schiller, DSHS Rules Consultant, by January 20, 2006, 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 health and recovery services administration (HRSA) is amending this rule to add language to clarify that the department uses both the managed care encounter data and fee-for-service data to set prospective department-weighted costs-to-charges (DWCC) rates. HRSA also removed "medical assistance administration" and "MAA" and replaced the terms with "the department."

     Reasons Supporting Proposal: See Purpose above.

     Statutory Authority for Adoption: RCW 74.04.050, 74.08.090, 74.09.5225.

     Statute Being Implemented: RCW 74.04.050, 74.08.090, 74.09.5225.

     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 45533, Olympia, WA 98504-5533, (360) 725-1342; Implementation and Enforcement: Larry Linn, P.O. Box 45510, Olympia, WA 98504-5510, (360) 725-1856.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. The department has analyzed the proposed rule and concluded that no new costs will be imposed on businesses affected by them. The preparation of a comprehensive SBEIS is not required.

     A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Larry Linn, P.O. Box 45510, Health and Recovery Services Administration, Olympia, WA 98504-5510, phone (360) 725-1856, fax (360) 743-9152, e-mail linnld@dshs.wa.gov.

December 20, 2005

Andy Fernando, Manager

Rules and Policies Assistance Unit

     (2) For inpatient and outpatient hospital services provided to clients enrolled in a managed care plan, DWCC rates for each CAH are incorporated into the calculations for the managed care capitated premiums. ((MAA)) The department considers managed care DWCC rates to be cost. Cost settlements are not performed for managed care claims.

     (3) The following definitions and abbreviations and those found in WAC 388-500-0005 and 388-550-1050 apply to this section:

     (a) "CAH," see "critical access hospital."

     (b) "CAH HFY" see "CAH hospital fiscal year."

     (c) "CAH hospital fiscal year" means each individual hospital's fiscal year.

     (d) "Cost settlement" means a reconciliation of the fee-for-service interim CAH payments with a CAH's actual costs determined after the end of the CAH's HFY.

     (e) "Critical access hospital (CAH)" means a hospital that is approved by the department of health (DOH) for inclusion in DOH's critical access hospital program.

     (f) "Departmental weighted costs-to-charges (DWCC) rate" means a rate ((MAA)) the department uses to determine a CAH payment. See subsection (8) for how ((MAA)) the department calculates a DWCC rate.

     (g) "DWCC rate" see "departmental weighted costs-to-charges (DWCC) rate."

     (h) "Interim CAH payment" means the actual payment the department makes for claims submitted by a CAH for services provided during its current hospital fiscal year, using the appropriate DWCC rate, as determined by ((MAA)) the department.

     (4) To be reimbursed as a CAH by ((MAA)) the department, a hospital must be approved by the department of health (DOH) for inclusion in DOH's critical access hospital program. The hospital must provide proof of CAH status to ((MAA)) the department upon request. CAHs reimbursed under the CAH program must meet the general applicable requirements in chapter 388-502 WAC. For information on audits and the audit appeal process, see WAC 388-502-0240.

     (5) A CAH must have and follow written procedures that provide a resolution to complaints and grievances.

     (6) To ensure quality of care:

     (a) A CAH is responsible to investigate any reports of substandard care or violations of the facility's medical staff bylaws; and

     (b) A complaint or grievance regarding substandard conditions or care may be investigated by any one or more of the following:

     (i) Department of health (DOH); or

     (ii) Other agencies with review authority for ((MAA)) department programs.

     (7) ((MAA)) The department may conduct a postpay or on-site review of any CAH.

     (8) ((MAA)) The department prospectively calculates fee-for-service and managed care inpatient and outpatient DWCC rates separately for each CAH. To calculate prospective interim inpatient and outpatient DWCC rates for each hospital currently in the CAH program, ((MAA)) the department:

     (a) Obtains from each CAH its estimated aggregate charge master change for its next HFY;

     (b) Obtains from the Medicare HCFA-2552 Cost Report the CAH initially submits for cost settlement of its most recently completed HFY:

     (i) The costs-to-charges ratio of each respective service cost center; and

     (ii) Total costs, charges, and number of patient days of each respective accommodation cost center.

     (c) Obtains from the Medicaid Management Information System (MMIS) the following fee-for-service summary claims data submitted by each CAH for services provided during the same HFY identified in (b) of this subsection:

     (i) Medical assistance program codes;

     (ii) Inpatient and outpatient claim types;

     (iii) Procedure codes, revenue codes, or diagnosis-related group (DRG) codes;

     (iv) Allowed charges and third party liability/client and ((MAA)) department paid amounts; and

     (v) ((Number of claims; and

     (vi))) Units of service.

     (d) Obtains from the managed care encounter data the following data submitted by each CAH for services provided during the same HFY identified in (b) of this section:

     (i) Medical assistance program codes;

     (ii) Inpatient and outpatient claim types;

     (iii) Procedure codes, revenue codes, or diagnosis-related group (DRG) codes; and

     (iv) Allowed charges.

     (e) Separates the inpatient claims data and outpatient claims data;

     (((e))) (f) Obtains the cost center allowed charges by classifying inpatient and outpatient allowed charges from (c) and (d) of this subsection billed by a CAH (using any one of, or a combination of, procedure codes, revenue codes, or DRG codes) into the related cost center in the CAH's Medicare HCFA-2552 cost report the CAH initially submits to ((MAA)) the department;

     (((f))) (g) Determines the ((MAA)) departmental-weighted costs for each cost center by multiplying the cost center's allowed charges from (c) of this subsection for the appropriate inpatient or outpatient claim type by the related service cost center ratio;

     (((g))) (h) Sums all allowed charges from (e) of this subsection;

     (((h))) (i) Sums all departmental-weighted costs for inpatient and outpatient claims from (((f))) (g) of this subsection;

     (((i))) (j) Multiplies each hospital's total ((MAA)) departmental-weighted costs from (h) of this subsection by the Medicare Market Basket inflation rate. The Medicare Market Basket inflation rate is published and updated periodically by the Centers for Medicare and Medicaid Services (CMS);

     (((j))) (k) Multiplies each hospital's total allowed charges from (((g))) (h) of this subsection by the CAH estimated charge master change from (a) of this subsection. If the charge master change factor is not available from the hospital, ((MAA)) the department will apply a reasonable alternative factor; and

     (((k))) (l) Determines the DWCC inpatient and outpatient rates by dividing the total appropriate ((MAA)) departmental-weighted costs from (((h))) 9i) of this subsection by the total appropriate allowed charges from (((g))) (h) of this subsection.

     (9) For a currently enrolled hospital provider that is new to the CAH program, the basis for calculating DWCC rates for inpatient and outpatient hospital claims for:

     (a) Fee-for-service clients is:

     (i) The hospital's most recently submitted Medicare cost report, and

     (ii) The appropriate MMIS summary claims data for that hospital fiscal year (HFY).

     (b) Managed care clients is:

     (i) The hospital's most recently submitted Medicare cost report; and

     (ii) The appropriate managed care encounter data for that HFY.

     (10) For a newly licensed hospital that is also a CAH, ((MAA)) the department uses the current state-wide average DWCC rates for the initial prospective DWCC rates.

     (11) For a CAH that comes under new ownership, ((MAA)) the department uses the prior owner's DWCC rates.

     (12) ((To calculate prospective managed care inpatient and outpatient DWCC rates, MAA uses the methodology outlined in subsection (8) of this section, except that managed care encounter data are used rather than MMIS fee-for-service summary claims data.)) In addition to the prospective managed care inpatient and outpatient DWCC rates, ((MAA)) the department:

     (a) Incorporates the DWCC rates into the calculations for the managed care capitated premiums that will be paid to the managed care plans; and

     (b) Requires all managed care plans having contract relationships with CAHs to pay the inpatient and outpatient DWCC rates applicable to managed care claims. For purposes of this section, ((MAA)) the department considers the DWCC rates used to reimburse CAHs for care given to clients enrolled in a managed care plan to be cost. Cost settlements are not performed for managed care claims.

     (13) For fee-for-service claims only, ((MAA)) the department performs an interim retrospective cost settlement for each CAH after the end of the CAH's HFY, using Medicare cost report data and claims data from the MMIS related to fee-for-service claims. Specifically, ((MAA)) the department:

     (a) Compares actual ((MAA)) department total interim CAH payments to the departmental-weighted CAH fee-for-service costs for the period being cost settled; and

     (b) Pays the hospital the difference between CAH costs and interim CAH payments if actual CAH costs are determined to exceed the total interim CAH payments for that period. ((MAA)) The department recoups from the hospital the difference between CAH costs and interim CAH payments if actual CAH costs are determined to be less than total interim CAH payments.

     (14) ((MAA)) The department performs finalized cost settlements using the same methodology as outlined in subsection (13) of this section, except that ((MAA)) the department uses the hospital's settled Medicare cost report instead of the initial cost report. Whenever a CAH's Medicare cost report is settled by the Medicare fiscal intermediary, the CAH must send the settled cost report to ((MAA)) the department to be used in a final cost settlement.

[Statutory Authority: RCW 74.04.050, 74.08.090 and 74.09.5225. 05-01-026, § 388-550-2598, filed 12/3/04, effective 1/3/05. Statutory Authority: RCW 74.08.090, 74.04.050, 74.09.5225, and HB 1162, 2001 2nd sp.s. c 2. 02-13-099, § 388-550-2598, filed 6/18/02, effective 7/19/02.]

     Reviser's note: The typographical error in the above section occurred in the copy filed by the agency and appears in the Register pursuant to the requirements of RCW 34.08.040.