Original Notice.

Preproposal statement of inquiry was filed as WSR 00-19-049 and 00-19-042.

Title of Rule: WAC 388-550-1050 Hospital services definitions, 388-550-1100 Hospital coverage, 388-550-2800 Inpatient payment methods and limits, 388-550-2900 Payment limits -- Inpatient hospital services, 388-550-3300 Hospital peer groups and cost caps, 388-550-3600 Diagnosis-related group (DRG) payment -- Hospital transfers, 388-550-3700 DRG high-cost and low-cost outliers, 388-550-3800 Rebasing and recalibration, 388-550-4300 Hospitals and units exempt from the DRG payment method, 388-550-4400 Services -- Exempt from DRG payments, 388-550-4500 Payment method -- Inpatient RCC and administrative day rate and outpatient rate and 388-550-4800 Hospital payment method -- State-only programs; and repealing WAC 388-550-2700 Substance abuse detoxification services.

Purpose: To update and clarify: Payment methodology for DRG exempt hospitals and DRG exempt services for Title XIX and state programs; hospital payment method for state programs; outpatient services record retention language; effective dates for high-cost and low-cost outlier thresholds; policies with the department's Division of Alcohol and Substance Abuse (DASA) and the Mental Health Division (MHD); effective dates for recalibrating relative weights; those hospitals, units, and services exempt from DRG payment; and the method by which the department calculates hospital ratio of costs-to-charges (RCC). Also, to repeal a rule that no longer reflects current program policy.

Statutory Authority for Adoption: RCW 74.08.090.

Statute Being Implemented: RCW 74.08.090, 42 U.S.C. 1395x(v), 42 C.F.R. 447.271, .11303, and .2652.

Summary: This amendment updates and clarifies the payment methodology used for reimbursing hospital providers for services provided to MAA clients. It also (1) clarifies the requirements for outpatient services record retention language; (2) updates and clarifies high-cost and low-cost outlier thresholds; (3) updates effective dates for recalibrating relative weights; (4) coordinates policies with DASA and MHD; and (5) repeals WAC 388-550-2700 because it no longer reflects current program policy.

Reasons Supporting Proposal: It will provide hospital providers with a clearer understanding of current department policy and business practices.

Name of Agency Personnel Responsible for Drafting: Kathy Sayre, P.O. Box 45533, Olympia, WA 98504, (360) 725-1342; Implementation and Enforcement: Larry Linn, P.O. Box 45510, Olympia, WA 98504, (360) 725-1856.

Name of Proponent: Department of Social and Health Services, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: This rule amendment updates the payment methodology used to reimburse hospital providers for services provided to MAA clients. It also (1) clarifies the requirements for outpatient services record retention language; (2) updates and clarifies high-cost and low-cost outlier thresholds; (3) updates effective dates for recalibrating relative weights; (4) coordinates policies with DASA and MHD; and (5) repeals WAC 388-550-2700 because it no longer reflects current program policy. The purpose is to inform hospital providers of current MAA policy, and to make that policy clear and understandable. It is anticipated that this amendment will lessen the confusion and misunderstanding that hospital providers may have regarding MAA policy.

Proposal Changes the Following Existing Rules: The proposed rule amendment clarifies and updates current MAA operational policies for reimbursing hospitals for services provided to eligible clients.

No small business economic impact statement has been prepared under chapter 19.85 RCW. The department has analyzed the proposed rule amendments and concluded that no new costs will be imposed on businesses affected by them.

RCW 34.05.328 does not apply to this rule adoption. The rule does not fit the definition of a significant legislative rule.

Hearing Location: Blake Office Park (behind Goodyear Courtesy Tire), 4500 10th Avenue S.E., Rose Room, Lacey, WA 98503, on June 26, 2001, at 10:00 a.m.

Assistance for Persons with Disabilities: Contact Kelly Cooper, DSHS Rules Coordinator, by June 21, 2001, phone (360) 664-6094, TTY (360) 664-6178, e-mail coopeKD@dshs.wa.gov.

Submit Written Comments to: Identify WAC Numbers, DSHS Rules Coordinator, Rules and Policies Assistance Unit, P.O. Box 45850, Olympia, WA 98504-5850, fax (360) 664-6185, by June 26, 2001.

Date of Intended Adoption: Not sooner than June 27, 2001.

April 13, 2001

Brian H. Lindgren, Manager

Rules and Policies Assistance Unit

"Accommodation costs" means the expenses incurred by a hospital to provide its patients services for which a separate charge is not customarily made((, such as, but not limited to, a regular hospital room, special care hospital room, dietary and nursing services, medical and surgical supplies,)). These expenses include, but are not limited to, room and board, medical social services, psychiatric social services, and the use of certain hospital equipment and facilities.

"Acute" means a medical condition of severe intensity with sudden onset.

"Acute care" means care provided ((by an agency for clients)) for patients who are not medically stable or have not attained a satisfactory level of rehabilitation. These ((clients)) patients require frequent monitoring by a health care professional in order to maintain their health status (see WAC 248-27-015).

"Acute physical medicine and rehabilitation (Acute PM&R)" means a ((comprehensive inpatient rehabilitative program coordinated by a multidisciplinary team at an MAA-approved rehabilitation facility. The program provides twenty-four-hour specialized nursing services and an intense level of therapy for a diagnostic category for which the client shows significant potential functional improvement)) twenty-four hour inpatient comprehensive program of integrated medical and rehabilitative services provided during the acute phase of a client's rehabilitation.

"ADATSA/DASA assessment center" means an agency contracted by the division of alcohol and substance abuse (DASA) to provide chemical dependency assessment for clients and pregnant women in accordance with the ((alcohol)) alcoholism and drug addiction treatment and support act (ADATSA). Full plans for a continuum of drug and alcohol treatment services for pregnant women are also developed in ADATSA/DASA assessment centers.

"Add-on procedure(s)" means ((a)) secondary procedure(s) that ((is)) are performed in addition to another procedure.

"Administrative day" means a day of a hospital stay in which an acute inpatient level of care is no longer necessary, and noninpatient hospital placement is appropriate.

"Admitting diagnosis" means the ((diagnosis, coded according to the International Classification of Diseases, 9th Revision, Clinical Modifications (ICD-9-CM), indicating the medical condition which precipitated the client's admission to an inpatient hospital facility)) medical condition before study, which is initially responsible for the client's admission to the hospital, as defined by the ICD-9-CM diagnostic code.

"Advance directive" means a document, such as a living will((,)) executed by a client((, that)). The advanced directive tells the client's health care providers and others the client's decisions regarding ((his or her)) the client's medical care, particularly whether the client or client's representative wishes to accept or refuse extraordinary measures to prolong ((his or her)) the client's life.

"Aggregate capital cost" means the total cost or the sum of all capital costs.

"Aggregate cost" means the total cost or the sum of all constituent costs.

"Aggregate operating cost" means the total cost or the sum of all operating costs.

"((Alcohol)) Alcoholism and drug addiction treatment and support act (ADATSA)" means the law and the state-funded program it established which provides medical services for persons who are incapable of gainful employment due to alcoholism or substance addiction.

"Alcoholism and/or alcohol abuse treatment" means the provision of medical social services to an eligible client designed to mitigate or reverse the effects of alcoholism or alcohol abuse and to reduce or eliminate alcoholism or alcohol abuse behaviors and restore normal social, physical, and psychological functioning. Alcoholism or alcohol abuse treatment is characterized by the provision of a combination of alcohol education sessions, individual therapy, group therapy, and related activities to detoxified alcoholics and their families.

"All-patient grouper (AP-DRG)" means a computer program that determines the ((diagnosis-related group ())DRG(())) assignments.

"Allowed charges" means the maximum amount for any procedure that the department ((will recognize)) allows as the basis for payment computation.

"Ancillary hospital costs" means the expenses incurred by a hospital to provide additional or supporting services to its patients during their hospital stay. See "ancillary services."

"Ancillary services" means additional or supporting services((, such as)) provided by a hospital to a patient during the patient's hospital stay. These services include, but are not limited to, laboratory, radiology, drugs, delivery room, operating room, postoperative recovery rooms, and other special items and services((, provided by a hospital to a patient during his or her hospital stay)).

"Approved treatment facility" means a treatment facility, either public or private, profit or nonprofit, approved by DSHS.

"Audit" means an assessment, evaluation, examination, or investigation of a health care provider's accounts, books and records, including:

(1) Medical, financial and billing records pertaining to billed services paid by the department through Medicaid or other state programs, by a person not employed or affiliated with the provider, for the purpose of verifying the service was provided as billed and was allowable under program regulations; and

(2) Financial, statistical and medical records, including mathematical computations and special studies conducted supporting Medicare cost reports, HCFA Form 2552, submitted to ((the department)) MAA for the purpose of establishing program rates of reimbursement to hospital providers.

"Audit claims sample" means a subset of the universe of paid claims from which the sample is drawn, whether based upon judgmental factors or random selection. The sample may consist of any number of claims in the population up to one hundred percent. See also "random claims sample" and "stratified random sample."

(("Authorization number" means a nine-digit number assigned by MAA that identifies individual requests for approval of services or equipment. The same authorization number is used throughout the history of the request, whether it is approved, pended, or denied.))

"Authorization ((requirement))" ((means MAA's requirement that a provider present proof of medical necessity to MAA, prior to providing certain medical services or equipment to a client. This takes the form of a request for authorization of the service(s) and/or equipment, including a complete, detailed description of the client's diagnosis and/or any disabling conditions, justifying the need for the equipment or the level of service being requested.)) - See "prior authorization" and "expedited prior authorization (EPA)."

"Average hospital rate" means the average of hospital rates for any particular type of rate that MAA uses.

"Bad debt" means an operating expense or loss incurred by a hospital because of uncollectible accounts receivables.

"Beneficiary" means a recipient of Social Security benefits, or a person designated by an insuring organization as eligible to receive benefits.

"Billed charge"(( - See "usual and customary charge.")) means the charge submitted to the department by the provider.

"Blended rate" means a mathematically weighted average rate.

"Border area hospital" means a hospital located ((in an area defined by state law as:

(1) Oregon - Astoria, Hermiston, Hood River, Milton-Freewater, Portland, Rainier, or The Dalles; and

(2) Idaho - Coeur d'Alene, Lewiston, Moscow, Priest River or Sandpoint)) outside Washington state and located in one of the border areas listed in WAC 388-501-0175.

"Bundled services" mean interventions which are ((incidental)) integral to the major procedure and are not ((separately)) reimbursable separately.

"Buy-in premium" means a monthly premium the state pays so a client is enrolled in part A and/or part B Medicare.

"By report" means a method of reimbursement in which MAA determines the amount it will pay for a service ((that)) when the rate for that service is not included in MAA's published fee schedules ((by requiring)). Upon request the provider ((to)) must submit a "report" ((describing)) which describes the nature, extent, time, effort and/or equipment necessary to deliver the service.

"Callback" means keeping ((physician)) hospital staff members on duty beyond their regularly scheduled hours, or having them return to the facility after hours to provide unscheduled services((;)) which are usually associated with hospital emergency room, surgery, laboratory and radiology services.

"Capital-related costs" mean the component of operating costs related to capital assets, including, but not limited to:

(1) Net adjusted depreciation expenses;

(2) Lease and rentals for the use of depreciable assets;

(3) The costs for betterment and improvements;

(4) The cost of minor equipment;

(5) Insurance expenses on depreciable assets;

(6) Interest expense; and

(7) Capital-related costs of related organizations that provide services to the hospital.

((It excludes)) Capital costs due solely to changes in ownership of the provider's capital assets are excluded.

"Case mix complexity" means, from the clinical perspective, the condition of the treated patients and the difficulty associated with providing care. Administratively, it means the resource intensity demands that patients place on an institution.

"Case mix index (CMI)" means ((a measure of the costliness of cases treated by a hospital relative to the cost of the average of all Medicaid hospital cases, using diagnosis-related group weights as a measure of relative cost)) the arithmetical index that measures the average relative weight of a case treated in a hospital during a defined period.

"Charity care" means necessary hospital health care rendered to indigent persons, ((as defined in this section,)) to the extent that these persons are unable to pay for the care or to pay the deductibles or coinsurance amounts required by a third-party payer, as determined by the department.

"Chemical dependency" means an alcohol or drug addiction; or dependence on alcohol and one or more other psychoactive chemicals.

"Children's hospital" means a hospital primarily serving children.

"Client" means a person who receives or is eligible to receive services through department of social and health services (DSHS) programs.

"Comorbidity" means of, relating to, or caused by a disease other than the principal disease.

"Complication" means a disease or condition occurring subsequent to or concurrent with another condition and aggravating it.

"Comprehensive hospital abstract reporting system (CHARS)" means the department of health's hospital data collection, tracking and reporting system.

"Contract hospital" means a licensed hospital located in a selective contracting area, which is awarded a contract to participate in ((the department's)) MAA's hospital selective contracting ((hospital)) program.

"Contractual adjustment" means the difference between the amount billed at established charges for the services provided and the amount received or due from a third-party payer under a contract agreement. A contractual adjustment is similar to a trade discount.

(("Conversion factor" means a hospital-specific dollar amount that reflects the average cost of treating Medicaid clients in a given hospital. See "cost-based conversion factor (CBCF)" and "negotiated conversion factor (NCF)."))

"Cost proxy" means an average ratio of costs to charges for ancillary charges or per diem for accommodation cost centers used to determine a hospital's cost for the services where the hospital has Medicaid claim charges for the services, but does not report costs in corresponding centers in its Medicare cost report.

"Cost report" means the HCFA Form 2552, Hospital and Hospital Health Care Complex Cost Report, completed and submitted annually by a provider:

(1) To Medicare intermediaries at the end of a provider's selected fiscal accounting period to establish hospital reimbursable costs for per diem and ancillary services; and

(2) To Medicaid to establish appropriate DRG and RCC reimbursement.

"Costs" mean MAA-approved operating, medical education, and capital-related costs as reported and identified on the HCFA 2552 form.

"Cost-based conversion factor (CBCF)" means a hospital-specific dollar amount that reflects ((the)) a hospital's average cost of treating Medicaid clients ((in a given hospital)). It is calculated from the hospital's cost report by dividing the hospital's costs for treating Medicaid clients during a base period by the number of Medicaid discharges during that same period and adjusting for the hospital's case mix. See also "hospital conversion factor" and "negotiated conversion factor."

"County hospital" means a hospital established under the provisions of chapter 36.62 RCW.

(("Covered service" means a service that is included in the Medicaid program and is within the scope of the eligible client's medical care program.

"Critical care services" mean services for critically ill or injured patients in a variety of medical emergencies that require the constant attendance of the physician (e.g., cardiac arrest, shock, bleeding, respiratory failure, postoperative complications). For Medicaid reimbursement purposes, critical care services must be provided in a Medicare qualified critical care area, such as the coronary care unit, intensive care unit, respiratory care unit, or the emergency care facility, to qualify for reimbursement as a special care level of service.))

"Current procedural terminology (CPT)" means a systematic listing of descriptive terms and identifying codes for reporting medical services, procedures, and interventions performed by physicians((; it is)). CPT is copyrighted and published annually by the American Medical Association (AMA).

"Customary charge payment limit" means the limit placed on aggregate ((diagnosis-related group ())DRG(())) payments to a hospital during a given year to assure that DRG payments do not exceed the hospital's charges to the general public for the same services.

"Day outlier" means a case that requires MAA to make additional payment to the hospital provider but which does not qualify as a high-cost outlier. See "day outlier payment" and "day outlier threshold."

"Day outlier payment" means the additional amount paid to a disproportionate share hospital for a client five years old or younger who has a prolonged inpatient stay which exceeds the day outlier threshold but whose covered charges for care fall short of the high cost outlier threshold. The amount is determined by multiplying the number of days in excess of the day outlier threshold and the administrative day rate.

"Day outlier threshold" means the average number of days a client stays in the hospital for an applicable DRG before being discharged, plus twenty days.

"Deductible" means the amount a beneficiary is responsible for, before Medicare starts paying; or the initial specific dollar amount for which the applicant or client is responsible.

"Department" means the state department of social and health services (DSHS).

"Detoxification" means treatment provided to persons who are recovering from the effects of acute or chronic intoxication or withdrawal from alcohol or other drugs.

"Diabetic education program" means a comprehensive, multidisciplinary program of instruction offered by an MAA-approved facility to diabetic clients on dealing with diabetes, including instruction on nutrition, foot care, medication and insulin administration, skin care, glucose monitoring, and recognition of signs/symptoms of diabetes with appropriate treatment of problems or complications.

"Diagnosis code" means a set of ((alphabetic,)) numeric((,)) or alpha((-))numeric characters assigned by the ((International Classification of Diseases, 9th Revision, Clinical Modification ())ICD-9-CM(())), or successor document, as a shorthand symbol to represent the nature of a disease.

"Diagnosis-related group (DRG)" means a classification system which categorizes hospital patients into clinically coherent and homogenous groups with respect to resource use, i.e., similar treatments and statistically similar lengths of stay for patients with related medical conditions. Classification of patients is based on the International Classification of Diseases (ICD-9), the presence of a surgical procedure, patient age, presence or absence of significant co-morbidities or complications, and other relevant criteria.

"Direct medical education costs" means the direct costs of providing an approved medical residency program as recognized by Medicare.

"Discharging hospital" means the institution releasing a client from the acute care hospital setting.

"Disproportionate share payment" means additional payment(s) made by the department to a hospital which serves a disproportionate number of Medicaid and other low-income clients and which qualifies for one or more of the disproportionate share hospital programs identified in the state plan.

"Disproportionate share program" means a program that provides additional payments to hospitals which serve a disproportionate number of Medicaid and other low-income clients.

"Dispute conference" ((means a hospital rate appeal meeting for deliberation during a provider administrative appeal.

(1) At the first level of appeal it is usually a meeting between auditors and the audited provider and/or staff to resolve disputed audit findings, clarify interpretation of regulations and policies, provide additional supporting information and/or documentation.

(2) At the second level of appeal the dispute conference is an informal administrative hearing conducted by an MAA administrator for the purpose of resolving contractor/provider rate disagreements with any of the department's action at the first level of appeal. The dispute conference in this regard is not a formal adjudicative process held in accordance with the Administrative Procedure Act, chapter 34.05 RCW.)) - See "hospital dispute conference."

"Distinct unit" means a Medicare-certified distinct area for psychiatric or rehabilitation services within ((a general)) an acute care hospital or a department-designated unit in a children's hospital.

"Division of alcohol and substance abuse (DASA)" is the division within DSHS responsible for providing alcohol and drug-related services to help clients recover from alcoholism and drug addiction.

"DRG" - See "diagnosis-related group."

"DRG-exempt services" means services which are paid for through other methodologies than those using cost-based conversion factors (CBCF) or negotiated conversion factors (NCF).

"DRG payment" means the payment made by ((MAA)) the department for a client's inpatient hospital stay((; it is)). This payment calculated by multiplying the hospital-specific conversion factor by the DRG relative weight for the client's medical diagnosis.

"DRG relative weight" means the average cost or charge of a certain DRG divided by the average cost or charge, respectively, for all cases in the entire data base for all DRGs.

"Drug addiction and/or drug abuse treatment" means the provision of medical and rehabilitative social services to an eligible client designed to mitigate or reverse the effects of drug addiction or drug abuse and to reduce or eliminate drug addiction or drug abuse behaviors and restore normal physical and psychological functioning. Drug addiction or drug abuse treatment is characterized by the provision of a combination of drug and alcohol education sessions, individual therapy, group therapy and related activities to detoxified addicts and their families.

"DSHS" means the department of social and health services.

"Elective procedure or surgery" means a nonemergent procedure or surgery that can be scheduled at convenience.

"Emergency room" or "emergency facility" means an organized, distinct hospital-based facility available twenty-four hours a day for the provision of unscheduled episodic services to patients who present for immediate medical attention, and is capable of providing emergency services including trauma care.

"Emergency services" means medical services((, including maternity services,)) required by and provided to a patient after the sudden onset of a medical condition manifesting itself by acute symptoms of sufficient severity (((including severe pain))) that the absence of immediate medical attention could reasonably be expected to result in placing the patient's health in serious jeopardy; serious impairment to bodily functions; or serious dysfunction of any bodily organ or part. For hospital reimbursement purposes, inpatient maternity services are treated as emergency services.

"Equivalency factor (EF)" means a conversion factor used, in conjunction with two other factors (cost-based conversion factor and the ratable factor), to determine the level of state-only program payment.

"Exempt hospital -- DRG payment method" means a hospital that for a certain patient category is reimbursed for services to MAA clients through methodologies other than those using cost-based or negotiated conversion factors.

"Exempt hospital -- Hospital selective contracting program" means a hospital that is either not located in a selective contracting area or is exempted by the department ((and is reimbursed for services to MAA clients through methodologies other than those using cost-based or negotiated conversion factors)) from the selective contracting program.

"Expedited prior authorization (EPA)" means the MAA-delegated process of creating an authorization number for selected medical/dental procedures and related supplies and services in which providers use a set of numeric codes to indicate which MAA-acceptable indications, conditions, diagnoses, and/or MAA-defined criteria are applicable to a particular request for service.

"Expedited prior authorization (EPA) number" means an authorization number created by the provider that certifies that MAA-published criteria for the medical/dental procedures and related supplies and services have been met.

"Experimental ((treatment))" means a ((course of treatment or procedure that)) term to describe a procedure, or course of treatment, which lacks scientific evidence of safety and effectiveness. See WAC 388-531-0500. A service is not "experimental" if the service:

(1) Is ((not)) generally accepted by the medical profession as effective and ((proven)) appropriate; and

(2) ((Is not recognized by professional medical organizations as conforming to accepted medical practice;

(3) Has not)) Has been approved by the ((federal Food and Drug Administration ())FDA(())) or other requisite government body if such approval is required;

(((4) Is still in clinical trials, or has been judged to need further study;

(5) Is covered by the federal law requiring provider institutional review of patient consent forms, and such review did not occur; or

(6) Is rarely used, novel, or relatively unknown, and lacks authoritative evidence of safety and effectiveness.))

"Facility triage fee" means the amount ((the medical assistance administration)) MAA will pay a hospital for a medical evaluation or medical screening examination, performed in the hospital's emergency department, ((of)) for a nonemergent condition of a healthy options client covered under the primary care case management (PCCM) program. This amount corresponds to the professional care level A or level B service.

"Fee-for-service" means the general payment method ((MAA)) the department uses to reimburse providers for covered medical services provided to medical assistance clients ((other than for those)) when these services ((provided through MAA's per capita)) are not covered under MAA's healthy options program.

"Fiscal intermediary" means Medicare's designated fiscal intermediary for a region and/or category of service.

"Fixed per diem rate" means a ((contracted nonnegotiated)) daily amount((,)) used to determine payment ((to a hospital)) for specific services.

"Global surgery days" means the number of preoperative and follow-up days that are included in the reimbursement to the physician for the major surgical procedure.

"Graduate medical education costs" means the direct and indirect costs of providing medical education in teaching hospitals.

"Grouper" - See "all-patient grouper (AP-DRG)."

"HCFA 2552" - See "cost report."

"Health care team" means a ((team of professionals and/or paraprofessionals)) group of health care providers involved in the care of a client.

"High-cost outlier" means a ((case with)) claim paid under the DRG method that did not meet the definition of "administrative day," and has extraordinarily high costs when compared to other ((cases)) claims in the same DRG, in which the allowed charges ((prior to July 1, 1999)), before January 1, 2001, exceed three times the applicable DRG payment ((or)) and exceed twenty-eight thousand dollars((, whichever is greater. On and after July 1, 1999)). For dates of service January 1, 2001 and after, to qualify as a high-cost outlier, the allowed charges must exceed three times the applicable DRG payment ((or)) and exceed thirty-three thousand dollars((, whichever is greater)).

"Hospice" means a medically-directed, interdisciplinary program of palliative services ((which)) for terminally ill clients and the clients' families. Hospice is provided under arrangement with a Title XVIII Washington state-licensed and Title XVIII-certified Washington state hospice(( for terminally ill clients and the clients' families)).

"Hospital" means an entity which is licensed as an acute care hospital in accordance with applicable state laws and regulations, and which is certified under Title XVIII of the federal Social Security Act.

(("Hospital admission" means admission as an inpatient to a hospital, for a stay of twenty-four hours or longer.))

"Hospital base period" means, for purposes of establishing a provider rate, a specific period or timespan used as a reference point or basis for comparison.

"Hospital base period costs" means costs incurred in or associated with a specified base period.

"Hospital conversion factor" means a hospital-specific dollar amount that reflects the average cost for a DRG paid case of treating Medicaid clients in a given hospital. See cost-based conversion factor (CBCF) and negotiated conversion factor (NCF).

"Hospital covered service" means a service that is provided by a hospital, included in the medical assistance program and is within the scope of the eligible client's medical care program.

"Hospital cost report" - See "cost report."

"Hospital dispute resolution conference" means a meeting for deliberation during a provider administrative appeal.

(1) The first dispute resolution conference is usually a meeting between medical assistance administration and hospital staff, to discuss a department action or audit finding(s). The purpose of the meeting is to clarify interpretation of regulations and policies relied on by the department or hospital, provide an opportunity for submission and explanation of additional supporting documentation or information, and/or to verify accuracy of calculations and application of appropriate methodology for findings or administrative actions being appealed. Issues appealed by the provider will be addressed in writing by the department.

(2) At the second level of dispute resolution:

(a) For hospital rates issues, the dispute resolution conference is an informal administrative hearing conducted by an MAA administrator for the purpose of resolving contractor/provider rate disagreements with the department's action at the first level of appeal. The dispute resolution conference in this regard is not a formal adjudicative process held in accordance with the Administrative Procedure Act.

(b) For hospital audit issues, the audit dispute resolution hearing will be held by the office of administrative hearings in accordance with WAC 388-560-1000. This hearing is a formal proceeding and is governed by chapter 34.05 RCW.

"Hospital facility fee" - See "facility triage fee."

"Hospital market basket index" means a measure, expressed as a percentage, of the annual inflationary costs for hospital services, as measured by Data Resources, Inc.((,)) (DRI).

"Hospital peer group" means the peer group categories adopted by the former Washington state hospital commission for rate-setting purposes:

(1) Group A - rural hospitals paid under a ratio((-)) of((-)) costs-to-charges (RCC) methodology (same as peer group 1);

(2) Group B - urban hospitals without medical education programs (same as peer group 2);

(3) Group C - urban hospitals with medical education programs; and

(4) Group D - specialty hospitals and/or hospitals not easily assignable to the other three peer groups.

"Hospital selective contracting program" or "selective contracting" means a negotiated bidding program for hospitals within specified geographic areas to provide inpatient hospital services to medical assistance clients.

"Indigent patient" means a patient who has exhausted any third-party sources, including Medicare and Medicaid, and whose income is equal to or below two hundred percent of the federal poverty standards (adjusted for family size), or is otherwise not sufficient to enable the individual to pay for his or her care, or to pay deductibles or coinsurance amounts required by a third-party payor.

"Indirect medical education costs" means the indirect costs of providing an approved medical residency program as recognized by Medicare.

"Inflation adjustment" means, for cost inflation, the hospital inflation adjustment. This adjustment is determined by using the inflation factor method and guidance indicated by the legislature in the budget notes to the biennium appropriations bill. For charge inflation, it means the inflation factor determined by comparing average discharge charges for the industry from one year to the next, as found in the comprehensive hospital abstract reporting system (CHARS) standard reports three and four.

"Informed consent" means that an individual consents to a procedure after the provider who obtained a properly completed consent form has done all of the following:

(1) Disclosed and discussed the patient's diagnosis;

(2) Offered the patient an opportunity to ask questions about the procedure and to request information in writing;

(3) Given the patient a copy of the consent form;

(4) Communicated effectively using any language interpretation or special communication device necessary per 42 C.F.R. 441.257; and

(5) Given the patient oral information about all of the following:

(a) The patient's right to not obtain the procedure, including potential risks, benefits, and the consequences of not obtaining the procedure;

(b) Alternatives to the procedure including potential risks, benefits, and consequences; and

(c) The procedure itself, including potential risks, benefits, and consequences.

"Inpatient hospital" means a hospital authorized by the department of health to provide inpatient services.

"Inpatient hospital admission" means admission as an inpatient to a hospital for a stay longer than twenty-four hours, or for a stay twenty-four hours or less with cases including:

(1) The death of a client;

(2) Obstetrical delivery;

(3) Initial care of a newborn; or

(4) Transfer to another acute care facility.

To qualify for inpatient reimbursement, even when the stay is longer than twenty-four hours, the medical care record must evidence the need for inpatient care.

"Inpatient services" means all services provided directly or indirectly by the hospital to a patient subsequent to admission and prior to discharge, and includes, but is not limited to, the following services: Bed and board; medical, nursing, surgical, pharmacy and dietary services; maternity services; psychiatric services; all diagnostic and therapeutic services required by the patient; the technical and/or professional components of certain services; use of hospital facilities, medical social services furnished by the hospital, and such drugs, supplies, appliances and equipment as required by the patient; transportation services subsequent to admission and prior to discharge; and services provided by the hospital within twenty-four hours of the patient's admission as an inpatient.

(("Interdisciplinary group (IDG)" means the team, including a physician, a registered nurse, a social worker, and a pastoral or other counselor, which is primarily responsible for the provision or supervision of care and services for a Medicaid client.))

"Inpatient stay" - See "inpatient hospital admission."

"Intermediary" - See "fiscal intermediary."

"International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) Edition" means the systematic listing that transforms verbal descriptions of diseases, injuries, conditions and procedures into numerical or alpha((-))numerical designations (coding).

(("Intervention" means any medical or dental service provided to a client that modifies the medical or dental outcome for that client.))

"Length of stay (LOS)" means the number of days of inpatient hospitalization. ((The phrase more commonly means the average length of hospital stay for patients based on diagnosis and age, as determined by the Commission of Professional and Hospital Activities and published in a book entitled Length of Stay by Diagnosis, Western Region.)) See also "((professional activity study (PAS))) PAS length of stay (LOS)."

"Length of stay extension request" means a request from a hospital provider for ((MAA)) the department, or in the case of psychiatric admission, the appropriate regional support network (RSN), to approve a client's hospital stay exceeding the average length of stay for the client's diagnosis and age.

"Lifetime hospitalization reserve" means, under the Medicare Part A benefit, the nonrenewable sixty hospital days that a beneficiary is entitled to use during his or her lifetime for hospital stays extending beyond ninety days per benefit period. See also "reserve days."

"Low-cost outlier" means a case with extraordinarily low costs when compared to other cases in the same DRG, in which the allowed charges ((for the case prior to July 1, 1999, is)) before January 1, 2001, are less than ((or equal to)) ten percent of the applicable DRG payment or less than four hundred dollars((, whichever is greater)). For dates of service on and after ((July 1, 1999)) January 1, 2001, to qualify as a low-cost outlier, the allowed charges must be less than ((or equal to)) ten percent of the applicable DRG payment or less than four hundred and fifty dollars((, whichever is greater. Reimbursement in such cases is determined by multiplying the case's allowed charges by the hospital's RCC ratio)).

"Low income utilization rate" means a formula represented as (A/B)+(C/D) in which:

(1) The numerator A is the hospital's total patient services revenue under the state plan, plus the amount of cash subsidies for patient services received directly from state and local governments in a period;

(2) The denominator B is the hospital's total patient services revenue (including the amount of such cash subsidies) in the same period as the numerator;

(3) The numerator C is the hospital's total inpatient service charge attributable to charity care in a period, less the portion of cash subsidies described in (1) of this definition in the period reasonably attributable to inpatient hospital services. The amount shall not include contractual allowances and discounts (other than for indigent patients not eligible for medical assistance under the state plan); and

(4) The denominator D is the hospital's total charge for inpatient hospital services in the same period as the numerator.

"Major diagnostic category (MDC)" means one of the twenty-five mutually exclusive groupings of principal diagnosis areas in the DRG system. The diagnoses in each MDC correspond to a single major organ system or etiology and, in general, are associated with a particular medical specialty.

"Market basket index" - See "hospital market basket index."

"Medicaid" is the state and federally funded aid program that covers the categorically needy (CNP) and medically needy (MNP) programs.

"Medicaid cost proxy" means a figure developed to approximate or represent a missing cost figure.

"Medicaid inpatient utilization rate" means a formula represented as X/Y in which:

(1) The numerator X is the hospital's number of inpatient days attributable to patients who (for such days) were eligible for medical assistance under the state plan in a period.

(2) The denominator Y is the hospital's total number of inpatient days in the same period as the numerator's. Inpatient day includes each day in which an individual (including a newborn) is an inpatient in the hospital, whether or not the individual is in a specialized ward and whether or not the individual remains in the hospital for lack of suitable placement elsewhere.

"Medical assistance administration (MAA)" is the administration within DSHS authorized by the secretary to administer the acute care portion of the Title XIX Medicaid, Title XXI children's health insurance program (CHIP), and the state-funded medical care programs, with the exception of certain nonmedical services for persons with chronic disabilities.

"Medical assistance program" means both Medicaid and medical care services programs.

"Medical care services" means the limited scope of care financed by state funds and provided to general assistance-unemployable (GAU) and ADATSA clients.

"Medical education costs" means the expenses incurred by a hospital to operate and maintain a formally organized graduate medical education program.

"Medical screening evaluation" means the service(s) provided by a physician or other practitioner to determine whether an emergent medical condition exists. See also "facility triage fee."

"Medical stabilization" means a return to a state of constant and steady function. It is commonly used to mean the ((client)) patient is adequately supported to prevent further deterioration.

"Medically indigent person" means a person certified by the department of social and health services as eligible for the limited casualty program-medically indigent (LCP-MI) program. See also "indigent patient."

"Medicare cost report" means the annual cost data reported by a hospital to Medicare on the HCFA form 2552.

"Medicare crossover" means a claim involving a client who is eligible for both Medicare benefits and Medicaid.

"Medicare fee schedule (MFS)" means the official HCFA publication of Medicare policies and relative value units for the resource based relative value scale (RBRVS) reimbursement program.

"Medicare Part A" means that part of the Medicare program that helps pay for inpatient hospital services, which may include, but are not limited to:

(1) A semi-private room;

(2) Meals;

(3) Regular nursing services;

(4) Operating room;

(5) Special care units;

(6) Drugs and medical supplies;

(7) Laboratory services;

(8) X-ray and other imaging services; and

(9) Rehabilitation services.

Medicare hospital insurance also helps pay for post-hospital skilled nursing facility care, some specified home health care, and hospice care for certain terminally ill beneficiaries.

"Medicare part B" means that part of the Medicare program that helps pay for, but is not limited to:

(1) Physician services;

(2) Outpatient hospital services;

(3) Diagnostic tests and imaging services;

(4) Outpatient physical therapy;

(5) Speech pathology services;

(6) Medical equipment and supplies;

(7) Ambulance;

(8) Mental health services; and

(9) Home health services.

"Medicare buy-in premium" - See "buy-in premium."

"Medicare payment principles" means the rules published in the federal register regarding reimbursement for services provided to Medicare clients.

"Mentally incompetent" means a ((client)) person who has been declared mentally incompetent by a federal, state, or local court of competent jurisdiction for any purpose, unless the ((client)) person has been declared competent for purposes which include the ability to consent to sterilization.

"Multiple occupancy rate" means the rate customarily charged for a hospital room with two ((or more)) to four patient beds.

"Negotiated conversion factor (NCF)" means a negotiated hospital-specific dollar amount which is used in lieu of the cost-based conversion factor as the multiplier for the applicable DRG weight to determine the DRG payment for a selective contracting program hospital. See also "hospital conversion factor" and "cost-based conversion factor."

"Nonallowed service or charge" means a service or charge that is not recognized for payment by the department, and cannot be billed to the ((department or)) client.

"Noncontract hospital" means a licensed hospital located in a selective contracting area (SCA) but which does not have a contract to participate in the hospital selective contracting ((hospital)) program.

"Noncovered service or charge" means a service or charge that is not ((covered by medical assistance, including, but not limited to, such services or charges as a private room, circumcision, and video recording of the procedure)) reimbursed by the department.

"Nonemergent hospital admission" means any inpatient hospitalization of a ((client)) patient who does not have an emergent condition, as defined in WAC 388-500-0005, Emergency services.

"Nonparticipating hospital" means a noncontract hospital((, as defined in this section)). See "noncontract hospital."

"Operating costs" means all expenses incurred in providing accommodation and ancillary services, excluding capital and medical education costs.

"OPPS" - See "outpatient prospective payment system."

"OPPS adjustment" means the legislative mandated reduction in the outpatient adjustment factor made to account for the delay of OPPS implementation.

"OPPS outpatient adjustment factor" means the outpatient adjustment factor reduced by the OPPS and adjustment factor as a result of legislative mandate.

"Orthotic device" or "orthotic" means a ((fitted surgical apparatus designed to activate or supplement a weakened or atrophied limb or bodily function)) corrective or supportive device that:

(1) Prevents or corrects physical deformity or malfunction; or

(2) Supports a weak or deformed portion of the body.

"Out-of-state hospital" means any hospital located outside the state of Washington ((or)) and outside the designated border areas in Oregon and Idaho.

"Outlier set-aside factor" means the amount by which a hospital's cost-based conversion factor is reduced for payments of high cost outlier cases.

"Outlier set-aside pool" means the total amount of payments for high cost outliers which are funded annually based on payments for high cost outliers during the year.

"Outliers" means cases with extraordinarily high or low costs when compared to other cases in the same DRG.

"Outpatient" means a ((client)) patient who is receiving medical services in other than an inpatient hospital setting.

"Outpatient care" means medical care provided other than inpatient services in a hospital setting.

"Outpatient hospital" means a hospital authorized by the department of health to provide outpatient services.

"Outpatient prospective payment system (OPPS)" means a classification system that groups outpatient visits according to the clinical characteristics, and typical resource use and costs associated with their diagnoses and the procedures performed.

"Outpatient short stay" means an acute hospital stay of twenty-four hours or less, with the exception of cases involving:

(1) The death of a client;

(2) Obstetrical delivery;

(3) Initial care of a new born; or

(4) Transfer to another acute care facility.

When the department determines that the need for inpatient care is not evidenced in the medical record, even in stays longer than twenty-four hours, the department considers and reimburses the stay as an outpatient short stay.

"Outpatient stay" ((means a hospital stay of less than or approximating twenty-four hours, except that cases involving the death of a client, delivery or initial care of a newborn, or transfer to another acute care facility are not deemed outpatient stays.)) - See "outpatient short stay."

"Pain treatment facility" means an MAA-approved inpatient facility for pain management, in which a multidisciplinary approach is used to teach clients various techniques to live with chronic pain.

"Participating hospital" means a licensed hospital that accepts MAA clients.

"PAS length of stay (LOS)" means the average length of an inpatient hospital stay for patients based on diagnosis and age, as determined by the Commission of Professional and Hospital Activities and published in a book entitled Length of Stay by Diagnosis, Western Region. See also "professional activity study (PAS)." ((and "length of stay."))

"Patient consent" means the informed consent of the ((client)) patient and/or the ((client's)) patient's legal guardian ((to)), as evidenced by the patient's or guardians's signature on a consent form, for the procedure(s) to be performed upon or for the treatment to be provided to the ((client, evidenced by the client's or guardian's signature on a consent form)) patient.

"Peer group" - See "hospital peer group."

"Peer group cap" means the reimbursement limit set for hospital peer groups B and C, established at the seventieth percentile of all hospitals within the same peer group for aggregate operating, capital, and direct medical education costs.

"Per diem charge" means the daily room charge, per client ((that a)), billed by the facility ((may bill or is allowed to receive as payment for its services.)) for room and board services that are covered by the department. This is sometimes referred to as "room rate."

"Personal comfort items" means items and services which do not contribute meaningfully to the treatment of an illness or injury or the functioning of a malformed body member.

"PM&R" - See "Acute PM&R."

"Physician standby" means physician attendance without direct face-to-face patient contact and does not involve provision of care or services.

"Physician's current procedural terminology (CPT)" - See "CPT."

"Plan of treatment" or "plan of care" means the written plan of care for a patient which includes, but is not limited to, the physician's order for treatment and visits by the disciplines involved, the certification period, medications, and rationale indicating need for services.

"Pregnant and postpartum women (PPW)" means eligible female clients who are pregnant or ((within the first one hundred sixty days following delivery)) until the end of the month which includes the sixtieth day following the end of the pregnancy.

"Principal diagnosis" means the ((medical)) condition ((determined)) established after study ((of the patient's medical records to be the principal cause of the patient's hospital stay)) to be chiefly responsible for the admission of the patient to the hospital for care.

"Principal procedure" means a procedure performed for definitive treatment rather than diagnostic or exploratory purposes, or because it was necessary due to a complication.

"Prior authorization" means a process by which clients or providers must request and receive MAA approval for certain medical services, equipment, or supplies, based on medical necessity, before the services are provided to clients, as a precondition for provider reimbursement. Expedited prior authorization and limitation extension are forms of prior authorization.

"Private room rate" means the rate customarily charged by a hospital for a one-bed room.

"Professional activity study (PAS)" means the compilation of inpatient hospital data by diagnosis and age, conducted by the Commission of Professional and Hospital Activities, which resulted in the determination of an average length of stay for patients. The data are published in a book entitled Length of Stay by Diagnosis, Western Region.

"Professional component" means the part of a procedure or service that relies on the physician's professional skill or training, or the part of a reimbursement that recognizes the physician's cognitive skill.

(("Profitability factor" means a factor used to calculate a hospital's low income disproportionate share (LIDSH) payment. The methods used to determine the profitability factor are:

(1) Determine the net revenue of each LIDSH qualified hospital. The net revenue amount will be the "net revenue" figure identified on the MAA hospital disproportionate share application submitted by the hospital. (Net revenue may be calculated using a three year average net revenue using "net revenue" figures from the most recent three years' MAA hospital disproportionate share applications.);

(2) Add the net revenue figures for all hospitals together to determine one total net revenue figure for all hospitals together to determine one total net revenue figure for all LIDSH qualified hospitals;

(3) Divide the hospital specific net revenue figure by the net revenue total for all hospitals; and

(4) Subtract the resulting amount from 1.00. The outcome is the profitability factor.))

"Prognosis" means the probable outcome of a patient's illness, including the likelihood of improvement or deterioration in the severity of the illness, the likelihood for recurrence, and the patient's probable life span as a result of the illness.

"Prolonged service" means direct face-to-face patient services provided by a physician, either in the inpatient or outpatient setting, which involve time beyond what is usual for such services.

"Prospective payment system (PPS)" means a system that sets payment rates for a pre-determined period for defined services, before the services are provided. The payment rates are based on economic forecasts and the projected cost of services for the pre-determined period.

"Prosthetic device" or "prosthetic" means a replacement, corrective, or supportive device prescribed by a physician or other licensed practitioner of the healing arts, within the scope of his or her practice as defined by state law, to:

(1) Artificially replace a missing portion of the body;

(2) Prevent or correct physical deformity or malfunction;

(3) Support a weak or deformed portion of the body.

"Psychiatric hospitals" means ((designated psychiatric facilities, state psychiatric hospitals, designated)) Medicare-certified distinct part ((pediatric)) psychiatric units, ((and)) Medicare-certified psychiatric hospitals, and state-designated pediatric distinct part psychiatric units in acute care hospitals. State-owned psychiatric hospitals are excluded.

"Public hospital district" means a hospital district established under chapter 70.44 RCW.

"Random claims sample" means a sample in which all of the items are selected randomly, using a random number table or computer program, based on a scientific method of assuring that each item has an equal chance of being included in the sample. See also "audit claims sample" and "stratified random sample."

"Ratable" means a hospital-specific adjustment factor applied to the cost-based conversion factor (CBCF) to determine state-only program payment rates to hospitals.

"Ratio of costs-to-charges (RCC)" means ((the methodology)) a method used to pay hospitals for services exempt from the DRG payment method. It also refers to the factor applied to a hospital's allowed charges for medically necessary services to determine payment to the hospital for these DRG-exempt services.

(("Readmission" means the situation in which a client who was admitted as an inpatient and discharged from the hospital is back as an inpatient within seven days as a result of one or more of the following: A new flair of illness, complication(s) from the first admission, a therapeutic admission following a diagnostic admission, a planned readmission following discharge, or a premature hospital discharge.))

"RCC" - See "ratio of costs-to-charges."

"Rebasing" means the process of recalculating the hospital cost-based conversion factors or RCC using ((more current)) historical data.

"Recalibration" means the process of recalculating DRG relative weights using ((more current)) historical data.

"Regional support network (RSN)" means a county authority or a group of county authorities recognized and certified by the department, that contracts with the department per chapters 38.52, 71.05, 71.24, 71.34, and 74.09 RCW and chapters 275-54, 275-55, and 275-57 WAC.

"Rehabilitation units" means specifically identified rehabilitation hospitals and designated rehabilitation units of general hospitals that meet Medicare criteria for distinct part rehabilitation units.

"Relative weights" - See "DRG relative weights."

"Remote hospitals" means hospitals ((located outside selective contracting areas (SCAs), or which)) that meet the following criteria during the Hospital Selective Contracting (HSC) waiver application period:

(1) Are located within Washington state;

(2) Are more than ten miles from the nearest ((contract)) hospital in the ((SCA)) HSC competitive area; and

(((2))) (3) Have fewer than seventy-five beds; and

(((3))) (4) Have fewer than five hundred Medicaid admissions ((in a two-year)) within the previous waiver period.

"Reserve days" means the days beyond the ninetieth day of hospitalization of a Medicare patient for a benefit period or spell of illness. See also "lifetime hospitalization reserve."

"Retrospective payment system" means a system that sets payment rates for defined services according to historic costs. The payment rates reflect economic conditions experienced in the past.

"Revenue code" means a nationally-((used)) assigned three-digit coding system for billing inpatient and outpatient hospital services, home health services, and hospice services.

"Room and board" means the services ((provided in a nursing facility, including:

(1) Assistance in the activities of daily living.

(2) Socialization activities.

(3) Administration of medication.

(4) Maintenance of the resident's room.

(5) Supervision and assistance in the use of durable medical equipment and prescribed therapies.

See "accommodation costs" for services included in the hospital room and board category)) a hospital facility provides a patient during the patient's hospital stay. These services include, but are not limited to, a routine or special care hospital room and related furnishings, routine supplies, dietary and nursing services, and the use of certain hospital equipment and facilities.

"Rural health clinic" means a clinic that is located in ((a rural area designated as a shortage area, and is not a rehabilitation agency or a facility primarily for the care and treatment of mental diseases)) areas designed by the Bureau of Census as rural and by the Secretary of the Department of Health, Education and Welfare (DHEW) as medically underserved.

"Rural hospital" means a rural health care facility capable of providing or assuring availability of health services in a rural area.

"Secondary diagnosis" means a diagnosis other than the principal diagnosis for which an inpatient is admitted to a hospital.

"Selective contracting area (SCA)" means an area in which hospitals participate in ((competitive)) negotiated bidding for hospital contracts. The boundaries of an SCA are based on historical patterns of hospital use by Medicaid patients.

(("Selective hospital contracting program" or "selective contracting" means a competitive bidding program for hospitals within a specified geographic area to provide inpatient hospital services to medical assistance clients.))

"Semi-private room rate" means a rate customarily charged for a hospital room with two to four beds; this charge is generally lower than a private room rate and higher than a ward room. See also "multiple occupancy rate."

"Seven-day readmission" means the situation in which a patient who was admitted as an inpatient and discharged from the hospital has returned to inpatient status to the same or a different hospital within seven days as a result of one or more of the following:

(1) A new spell of illness;

(2) Complication(s) from the first admission;

(3) A therapeutic admission following a diagnostic admission;

(4) A planned readmission following discharge; or

(5) A premature hospital discharge.

"Short stay" ((means a hospital stay of less than or approximating twenty-four hours where an inpatient admission was not appropriate.)) - See "outpatient short stay."

"Special care unit" means a department of health (DOH) or Medicare-certified hospital unit where intensive care, coronary care, psychiatric intensive care, burn treatment or other specialized care is provided.

"Specialty hospitals" means children's hospitals, psychiatric hospitals, cancer research centers or other hospitals which specialize in treating a particular group of ((clients)) patients or diseases.

"Spenddown" means the ((amount)) process of assigning excess income ((MAA has determined that a client has available to meet his or her medical expenses. The client becomes eligible for Medicaid coverage only after he or she meets the spenddown requirement)) for the medically needy program, or excess income and/or resources for the medically indigent program, to the client's cost of medical care. The client must incur medical expenses equal to the excess income (spenddown) before medical care can be authorized.

"Stat laboratory charges" means the charges by a laboratory for performing a test or tests immediately. "Stat." is the abbreviation for the Latin word "statim" meaning immediately.

"State plan" means the plan filed by the department with the Health Care Financing Administration (HCFA), Department of Health and Human Services (DHHS), outlining how the state will administer Medicaid services, including the hospital program.

"Stratified random sample" means a sample consisting of claims drawn randomly, using statistical formulas, from each stratum of a universe of paid claims stratified according to the dollar value of the claims. See also "audit claims sample" and "random claims sample."

"Subacute care" means care provided to a patient which is less ((intrusive)) intensive than that given at an acute care hospital. Skilled nursing, nursing care facilities and other facilities provide subacute care services.

"Surgery" means the medical diagnosis and treatment of injury, deformity or disease by manual and instrumental operations. For reimbursement purposes, surgical procedures are those designated in CPT as procedure codes 10000 to 69999.

"Swing-bed day((s))" means a ((bed)) day ((on)) in which an inpatient is receiving skilled nursing services in a hospital designated swing bed at the hospital's census hour. The hospital swing bed must be certified by the health care financing administration (HCPA) for both acute care and skilled nursing services.

"Teaching hospital" means, for purposes of the teaching hospital assistance program disproportionate share hospital (THAPDSH), the University of Washington Medical Center and Harborview Medical Center.

"Technical component" means the part of a procedure or service that relates to the equipment set-up and technician's time, or the part of a reimbursement that recognizes the equipment cost and technician time.

"Tertiary care hospital" means a specialty care hospital providing highly specialized services to clients with more complex medical needs than acute care services.

"Total patient days" means all patient days in a hospital for a given reporting period, excluding days for skilled nursing, nursing care, and observation days.

"Transfer" means to move a client from one acute care facility or distinct unit to another.

"Transferring hospital" means the hospital ((transferring)) or distinct unit that transfers a client to another acute care facility.

"Trauma care facility" means a facility certified by the department of health as a level I, II, III, IV, or V facility. See chapter 246-976 WAC.

"Trauma care service" - See department of health's WAC 246-976-935.

"UB-92" means the uniform billing document intended for use nationally by hospitals, nonhospital-based acute PM&R (Level B) nursing facilities, hospital-based skilled nursing facilities, home health, and hospice agencies in billing third party payers for services provided to ((clients)) patients.

"Unbundled services" means services which are excluded from the DRG payment to a hospital((, including but not limited to, physician professional services and certain nursing services)).

"Uncompensated care" - See "charity care."

"Uniform cost reporting requirements" means a standard accounting and reporting format as defined by Medicare.

"Uninsured indigent patient" means an individual ((who receives hospital inpatient and/or outpatient services and who cannot meet the cost of services provided because the individual has no or)) who has no health insurance coverage or has insufficient health insurance or other resources to cover the cost of provided inpatient and/or outpatient services.

"Usual and customary charge (UCC)" means the charge customarily made to the general public for a procedure or service, or the rate charged other contractors for the service if the general public is not served.

"Vendor rate increase" means an inflation adjustment determined by the legislature, used to periodically increase reimbursement to vendors, including health care providers, that do business with the state.

[Statutory Authority: RCW 74.08.090, 74.09.730, 42 U.S.C. 1395 x(v), 42 C.F.R. 447.271, .11303 and .2652. 99-14-039, 388-550-1050, filed 6/30/99, 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, 388-550-1050, 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, 388-550-1050, filed 12/18/97, effective 1/18/98.]

Reviser's note: RCW 34.05.395 requires the use of underlining and deletion marks to indicate amendments to existing rules. The rule published above varies from its predecessor in certain respects not indicated by the use of these markings.
AMENDATORY SECTION(Amending WSR 98-01-124 [01-02-075], filed 12/18/97 [12/29/00], effective 1/18/98 [1/29/01])

WAC 388-550-1100   Hospital coverage.   (1) The medical assistance administration (MAA) covers the admission of a medical ((care)) assistance client to a hospital ((shall be covered)) only when ((the admission is requested by the client's attending physician)) the client's attending physician orders admission and when the admission and treatment provided meet the requirements of this chapter. For nonemergent hospital admissions, "attending physician" ((shall)) means the client's primary care provider, or the primary provider of care to the ((patient)) client at the time of hospitalization. For emergent admissions, "attending physician" ((shall)) means the staff member who has hospital admitting privileges ((who)) and evaluates the client's medical condition upon the client's arrival at the hospital.

(2) Medical record documentation of hospital services must meet the requirements in WAC 388-502-0020(1), Records and reports--Medical record system.

(3) In areas where the choice of hospitals is limited by managed care or selective contracting, the department ((shall)) is not ((be)) responsible for payment under fee-for-service for hospital care and/or services:

(a) Provided to ((managed care)) clients enrolled in ((the department's)) an MAA managed care plan, unless the services are excluded from the health carrier's capitation contract with ((the department)) MAA and are covered under the medical assistance program; or

(b) Received by a ((medical care)) Medicaid-eligible client from a nonparticipating hospital in a selective contracting area (SCA) unless exclusions in WACs 388-550-4600 and 388-550-4700 apply.

(((3))) (4) The department ((shall)) provides chemical-dependent pregnant Medicaid-eligible clients up to twenty-six days of inpatient hospital care for hospital-based detoxification, medical stabilization, and drug treatment when:

(a) An ((alcohol)) alcoholism, drug addiction and treatment support act (ADATSA) assessment center verifies the need for the inpatient care; and

(b) The hospital chemical dependency treatment unit is certified by the division of alcohol and substance abuse.

See WAC 388-550-6250 for outpatient hospital services for chemical-dependent pregnant Medicaid clients.

(((4))) (5) The department covers detoxification of acute alcohol or other drug intoxication only in a hospital having a detoxification provider agreement with MAA to perform these services.

(6) The department ((shall cover)) covers medically necessary services provided to eligible clients in a hospital setting for the care or treatment of teeth, jaws, or structures directly supporting the teeth:

(a) If the procedure requires hospitalization; and

(b) A physician or dentist ((gives)) provides or directly supervises such services.

(((5))) (7) The department ((shall)) pays hospitals for services provided in special care units when the provisions ((of)) in WAC 388-550-2900 (((9)(c)))(13) are met.

(((6))) (8) All services ((shall be)) are subject to review and approval as stated in WAC ((388-87-025)) 388-501-0050.

(((7))) (9) For inpatient voluntary or involuntary psychiatric admissions, ((whether voluntary or involuntary,)) see WAC 388-550-2600 and chapter 246-318 WAC.

[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, 388-550-1100, filed 12/18/97, effective 1/18/98.]

Reviser's note: RCW 34.05.395 requires the use of underlining and deletion marks to indicate amendments to existing rules. The rule published above varies from its predecessor in certain respects not indicated by the use of these markings.

Reviser's note: The bracketed material preceding the section above was supplied by the code reviser's office.
AMENDATORY SECTION(Amending WSR 99-14-027, filed 6/28/99, effective 7/1/99)

WAC 388-550-2800   Inpatient payment methods and limits.   (1) ((MAA pays)) The department reimburses hospitals for inpatient hospital services using the rate setting methods identified in the department's approved state plan that includes:

Method	Used for
DRG negotiated conversion factor	Hospitals participating in the Medicaid hospital selective contracting program under waiver from the federal government
DRG cost-based conversion factor	Hospitals not participating in or exempt from the Medicaid hospital selective contracting program (((DRG method)))
Ratio of costs-to-charges (RCC)	Hospitals or services exempt from DRG payment methods
Fixed per diem rate	Acute Physical Medicine and Rehabilitation (Acute PM&R) Level B contracted facilities

(2) ((MAA's)) The department's annual aggregate Medicaid payments to each hospital for inpatient hospital services provided to Medicaid clients ((must)) will not exceed the hospital's usual and customary charges to the general public for the services (42 CFR 447.271). ((MAA will recoup amounts)) The department recoups annual aggregate Medicaid payments that are in excess of ((annual aggregate Medicaid payments to hospitals)) the usual and customary charges.

(3) ((MAA's)) The department's annual aggregate payments for inpatient hospital services, including state-operated hospitals, ((must)) will not exceed the estimated amounts that ((MAA)) the department would have paid using Medicare payment principles.

(4) When hospital ownership changes, ((MAA's)) the department's payment to the hospital ((must)) will not exceed the amount allowed under 42 U.S.C. Section 1395x (v)(1)(O).

(5) Hospitals participating in the medical assistance program must annually submit to the ((department)) medical assistance administration:

(a) A copy of the hospital's HCFA 2552 Medicare Cost Report; and

(b) A disproportionate share hospital application.

(6) Reports referred to in subsection (5) of this section must be completed according to:

(a) Medicare's cost reporting requirements;

(b) The provisions of this chapter; and

(c) Instructions issued by MAA.

(7) ((MAA)) The department requires hospitals to follow generally accepted accounting principles unless federally or state((-)) regulated.

(8) Participating hospitals must permit ((MAA)) the department to conduct periodic audits of their financial and statistical records.

(9) Payments for trauma services may be enhanced per WAC 246-976-935.

(10) The department reimburses hospitals for claims involving clients with third-party liability insurance:

(a) At the lesser of either the DRG:

(i) Billed amount minus the third-party payment amount; or

(ii) Allowed amount minus the third-party payment amount; or

(b) The RCC allowed payment minus the third-party payment amount.

[Statutory Authority: RCW 74.09.090, 42 U.S.C. 1395x(v) and 1396r-4, 42 C.F.R. 447.271, 11303 and 2652. 99-14-027, 388-550-2800, 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, 388-550-2800, 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, 388-550-2800, filed 12/18/97, effective 1/18/98.]

(c) Out-of-state hospitals, subject to conditions specified in WAC 388-550-6700)) To receive reimbursement for covered inpatient hospital services, a hospital must:

(a) Have a core-provider agreement with the department; and

(b) Be an in-state or border area hospital that meets the definition in RCW 70.41.020 and is certified under Title XVIII of the federal Social Security Act; or

(c) Be an out-of-state hospital that meets the conditions in WAC 388-550-6700.

(2) ((MAA does not pay for hospital care and/or services provided to an MAA client enrolled with a managed care plan, when the plan covers those services. Plans have the authority to determine the treatment regimen of coverage as long as they cover all the Medicaid services that MAA reimburses them to cover. Plans may also provide coverage of services beyond that for which Medicaid reimburses them)) The department does not pay a hospital for inpatient care and/or services when the managed care plan is contracted to cover those services.

(3) ((MAA)) The department does not pay a hospital for care or services provided to a client enrolled in the hospice program,((except as provided under chapter 388-551 WAC, subchapter I, Hospice services)) unless the care or services are completely unrelated to the terminal illness that qualifies the client for the hospice benefit.

(4) ((MAA)) The department does not pay hospitals for ((inpatient)) ancillary services in addition to the DRG payment. ((The DRG payment includes ancillary services that include, but are not limited to, the following:

(a) Laboratory services;

(b) Diagnostic X-ray and other imaging services, including, but not limited to, magnetic resonance imaging, magnetic resonance angiography, computerized axial tomography, and ultrasound;

(c) Drugs and pharmacy services;

(d) Respiratory therapy and related services;

(e) Physical therapy and related services;

(f) Occupational therapy;

(g) Speech therapy and related services;

(h) Durable medical equipment and medical supplies, including infusion equipment and supplies;

(i) Prosthetic devices used during the client's hospital stay or permanently implanted during the hospital stay, such as artificial heart or replacement hip joints; and

(j) Service charges for handling and processing blood or blood derivatives.

(5) Neither MAA nor the client is responsible for payment for additional days of hospitalization when:

(a) A client exceeds the professional activities study (PAS) length of stay (LOS) limitations; and

(b) The provider has not obtained MAA approval for the LOS extension, as specified in WAC 388-550-1700(4)))

(5) When the hospital is paid by the RCC method, the department and the client are not financially responsible for payment of the additional days of hospitalization when:

(a) The additional days exceed the seventy-fifth percentile of the professional activities study (PAS) length of stay (LOS) limitations; and

(b) The hospital has not requested and/or received approval from the department as specified in WAC 388-550-1700; or for psychiatric inpatient stays, the appropriate regional support network (RSN).

(6) ((The LOS limit for a hospitalization is the seventy-fifth percentile of the PAS length of stay for that diagnosis code or combination of codes, published in the PAS Length of Stay-Western Region edition, as periodically updated)) LOS extensions are not required for claims reimbursed by the DRG method.

(7) ((Neither MAA nor the client is)) The department is not financially responsible for payment of elective or nonemergent inpatient services ((which)) that are included in ((MAA's)) the department's selective contracting program and ((which)) for those that a client receives in a nonparticipating hospital in a selective contracting area (SCA) unless the provider ((received prior approval from MAA as required by)) meets the department's authorization requirement in WAC 388-550-1700 (((2)(a)))(12). The client((, however,)) may only be held responsible for payment of such services ((if the client contracts in writing with the hospital at least seventy-two hours in advance of the hospital admission to be responsible for payment)) in accordance with WAC 388-502-0160. See WAC 388-550-4600((, Selective)) for selective contracting program requirements.

(8) ((MAA may)) The department considers hospital stays of twenty-four hours or less outpatient short stays, and does not pay such stays under the DRG ((methodology. The exception for stays of twenty-four hours or less involving the following situations are paid under the DRG system)) or ratio of costs-to-charges (RCC) methods unless one of the following situations apply:

(a) Death of a client;

(b) Obstetrical delivery;

(c) Initial care of a newborn; or

(d) Transfer of a client to another acute care hospital.

(9)(((a) Under the ratio of costs-to-charges (RCC) method, MAA does not pay for inpatient hospital services provided more than one day prior to the date of a scheduled or elective surgery. These services must not be charged to the client.

(b) Under the DRG method, MAA considers all services provided the day before a scheduled or elective surgery to be included in the hospital's DRG payment for the case.

(c) MAA)) When the department determines that the need for inpatient care is not evidenced in the medical record, even in stays longer than twenty-four hours, the department considers and reimburses the stay as an outpatient short stay.

(10) When the stay does not meet the definition of an inpatient hospital admission, the department limits reimbursement to the first twenty-four hours of allowed services, and uses the outpatient payment method.

(11) The department considers all services provided by the hospital within twenty-four hours of admission for a scheduled or elective surgery to be included in the hospital's inpatient payment. These services must not be charged to the client. Clients may only be held financially responsible for services in accordance with WAC 388-502-0160.

(12) The department does not count toward the threshold for hospital outlier status:

(((i))) (a) Any charges for extra days of inpatient stay prior to a scheduled or elective surgery; and

(((ii))) (b) The associated services provided during those extra days.

(((10) MAA applies the following rules to RCC cases and high-cost DRG outlier cases for costs that exceed the high-cost outlier threshold:

(a) MAA covers hospital stat charges only for specific laboratory procedures determined and published by MAA as qualified stat procedures. Tests generated in the emergency room do not automatically justify a stat order.

(b) MAA pays hospitals for special care charges only when:

(i) The hospital has a department of health (DOH) or Medicare-certified special care unit;

(ii) The special care service being billed, such as intensive care, coronary care, burn unit, psychiatric intensive care, or other special care, was provided in the special care unit;

(iii) The special care service provided is the kind of service for which the special care unit has been DOH- or Medicare-certified; and

(iv) The client's medical condition required the care be provided in the special care unit.

(11) MAA determines its actual payment for a hospital admission by deducting from the basic hospital reimbursement amount those charges which are the client's responsibility (referred to as spend-down) and any third party liability.

(12) MAA reduces reimbursement rates to hospitals for services provided to MI/GAU clients according to the hospital specific ratable and/or equivalency factors, as provided in WAC 388-550-4800.

(13) MAA pays for the hospitalization of a client who is eligible for Medicare and Medicaid only when the client has exhausted the Medicare part A benefits, including the nonrenewable lifetime hospitalization reserve of sixty days.

(14) MAA pays in-state and border area hospital accommodation charges by multiplying the hospital's RCC rate to the lesser of the room rate submitted by the hospital to MAA or the accommodation charges billed on the claim.

(15) MAA pays out-of-state accommodation charges at the in-state average RCC rate times the hospital's billed charge.

(16) With regard to room rate submittals to MAA:

(a) A hospital must submit changes on the room rate change form, DSHS 13-687;

(b) Charges must not exceed the hospital's usual and customary charges to the public as required by 42 CFR 447.271;

(c) New room rates take effect on the effective date stated on the room rate change form, or fourteen calendar days after MAA receives the form, whichever is later;

(d) MAA does not make retroactive room rate changes; and

(e) MAA pays private rooms at the semi-private room rate))

(13) Accommodation charges: The department reimburses charges related to accommodation costs by multiplying the hospital's appropriate room rate charge by the hospital's RCC rate.

(a) Effective January 1, 2001, the department no longer requires a hospital to provide a room rate change form to indicate its usual and customary accommodation charge. Charges must not exceed the hospital's usual and customary charges to the general public as required by 42 C.F.R. 447.271.

(b) The department does not pay hospitals for private room accommodations. The department pays a semi-private room rate and requires the hospital to bill using a semi-private room revenue code when the hospital has:

(i) Only private rooms; or

(ii) Both private and semi-private rooms and provides an MAA client accommodations in a private room.

(14) The department determines its actual payment for a hospital admission by deducting from the basic hospital reimbursement the client responsibility amount (referred to as spend-down) and any third party liability amount.

(15) The department reduces reimbursement rates to hospitals for services provided to clients eligible under the state-only medically indigent (MI) and medical care services (MCS) programs according to the hospital specific equivalency factor and/or ratable, as provided in WAC 388-550-4800.

(16) The department pays for the hospitalization of a client who is eligible for Medicare and Medicaid only when the client has exhausted the Medicare Part A benefits.

[Statutory Authority: RCW 74.09.090, 42 U.S.C. 1395x(v) and 1396r-4, 42 C.F.R. 447.271, 11303 and 2652. 99-14-027, 388-550-2900, 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, 388-550-2900, 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, 388-550-2900, filed 12/18/97, effective 1/18/98.]

(2) ((The department shall use the Washington state department of health's (DOH) four hospital peer groupings for rate-setting purposes.)) The four 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 groups.

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

(a) ((The department shall cap)) 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.

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

(c) ((The department shall exempt)) 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.

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

(a) Indirect medical education costs, ((as determined)) 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)(((a))) ((The department shall use)) 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. (((b))) After the peer group cost cap is calculated, ((the department shall add)) 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) ((The department shall recognize)) In its rate((-)) setting process for peer groups A and B, MAA recognizes changes in peer group status ((as a result of DOH)) and considers DOH's approval or recommendation. ((However,)) In cases where corrections or changes in individual ((hospitals')) hospital's base-year cost or peer group assignment occur after peer group cost caps are calculated, ((the department shall update)) MAA updates the peer group cost caps involved only if the change in the individual hospital's base-year costs or peer group assignment ((would)) will result in a five percent or greater change in the seventieth percentile of costs calculated for its peer group.

[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.]

(1) The department ((shall deny payment to a hospital that transfers a nonemergent case)) does not reimburse a hospital for a nonemergent case when the hospital transfers the client to another hospital ((without the department's)).

(2) The department ((shall pay a hospital transferring a client to another acute care)) pays a hospital that transfers emergent cases to another hospital, the lesser of:

(a) The appropriate diagnosis-related group (DRG) payment; or

(b) A per diem rate multiplied by the number of medically necessary days ((at)) the client stays at the transferring hospital. The department ((shall)) determines the per diem rate by dividing the hospital's ((diagnosis-related group ())DRG(())) payment amount for the appropriate DRG by that DRG's average length of stay((; or

(b) The appropriate DRG payment)).

(3) The department ((shall use)) uses:

(a) The hospital's midnight census to determine the number of days a client stayed in the transferring hospital prior to the transfer ((. The department shall use the medical assistance administration's)); and

(b) MAA's length of stay data to determine the number of medically necessary days for a client's hospital stay.

(4) The department ((shall pay)):

(a) Pays the hospital that ultimately discharges the client to any residence other than a hospital (e.g., home, nursing facility, etc.) the full DRG payment((. The department shall apply)); and

(b) Applies the outlier payment methodology if a transfer case qualifies as a high- or low-cost outlier.

(5) The department ((shall)) does not pay a discharging hospital any additional amounts as a transferring hospital if it transfers a client to another hospital (intervening hospital) which subsequently sends the client back ((to the original hospital from which the client is discharged)).

(((6)))(a) The ((extent of the)) department's maximum payment to the discharging hospital ((shall be)) is the full DRG payment.

(b) The department ((shall pay)) pays the intervening hospital(s) a per diem payment based on the method described in subsection (2) of this section.

[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, 388-550-3600, filed 12/18/97, effective 1/18/98.]

Reviser's note: RCW 34.05.395 requires the use of underlining and deletion marks to indicate amendments to existing rules. The rule published above varies from its predecessor in certain respects not indicated by the use of these markings.
AMENDATORY SECTION(Amending WSR 99-06-046, filed 2/26/99, effective 3/29/99)

WAC 388-550-3700   DRG high-cost and low-cost outliers ((and administrative day rates)).   (1) ((MAA calculates high-cost)) A claim qualifies as a diagnosis-related group (DRG) high-cost outlier ((payments for qualifying cases as follows)) when:

(a) ((To qualify as a DRG high-cost outlier the allowed charges for a case:

(i) With an admission date prior to July 1, 1999, must exceed a threshold of three times the applicable DRG payment or twenty-eight thousand dollars, whichever is greater; and

(ii) For an admission date on and after July 1, 1999, must exceed a threshold of three times the applicable DRG payment or thirty-three thousand dollars, whichever is greater.

(b) Payment for high-cost outlier cases other than those in subsections (1)(c) and (d) of this section is the applicable DRG payment amount, plus seventy-five percent of the hospital's ratio of costs-to-charges (RCC) rate applied to the allowed charges exceeding the outlier threshold.

(c) Payment for psychiatric high-cost outliers for DRGs 424-432 is at the applicable DRG rate plus one hundred percent of the hospital RCC applied to the allowed charges exceeding the outlier threshold.

(d) Payment for high-cost outlier cases at in-state childrens hospitals is the applicable DRG payment amount, plus eighty-five percent of the hospital's RCC applied to the allowed charges exceeding the outlier threshold)) The admission date for the claim is before January 1, 2001, the stay did not meet the definition of "administrative day," and the allowed charges exceed:

(i) A threshold of twenty-eight thousand dollars; and

(ii) A threshold of three times the applicable DRG payment amount.

(b) The admission date for the case is January 1, 2001, or after, the stay did not meet the definition of "administrative day," and the allowed charges exceed:

(i) A threshold of thirty-three thousand dollars; and

(ii) A threshold of three times the applicable DRG payment amount.

(2) ((MAA calculates low-cost DRG outlier payments for qualifying cases as follows:

(a) To qualify as a DRG low-cost outlier, the allowed charges for a case:

(i) With an admission date prior to July 1, 1999, must be less than or equal to ten percent of the applicable DRG payment or four hundred dollars, whichever is greater; and

(ii) With an admission date on and after July 1, 1999, must be less than or equal to ten percent of the applicable DRG payment or four hundred fifty dollars, whichever is greater.

(b) MAA's payment for low-cost DRG outlier claims is the allowed charges multiplied by the hospital's RCC.

(3) MAA pays hospitals an all-inclusive administrative day rate for those days of hospital stay in which a client no longer needs an acute inpatient level of care, but is not discharged because an appropriate noninpatient hospital placement is not available.

(a) MAA sets payment for administrative days at the statewide average Medicaid nursing facility per diem rate. The administrative day rate is adjusted annually effective November 1.

(b) Ancillary services are not paid during administrative days.

(c) For a DRG payment case, MAA does not pay administrative days until the case exceeds the high-cost outlier threshold for that case.

(d) For DRG-exempt cases, MAA identifies administrative days during the length of stay review process after the client's discharge from the hospital.

(e) If the hospital admission is solely for a stay until an appropriate sub-acute placement can be made, MAA pays the hospital at the administrative day rate from the date of admission.

(4) MAA makes day outlier payments to hospitals, in accordance with section 1923 (a)(2)(C) of the Social Security Act, for exceptionally long-stay clients. A hospital is eligible for the day outlier payment if it meets all of the following criteria:

(a) The hospital is a disproportionate share (DSH) hospital and the client served is under the age of six, or the hospital may not be a DSH hospital but the client served is a child under age one;

(b) The payment methodology for the admission is DRG;

(c) The charge for the hospitalization is below the high-cost outlier threshold as defined in subsection (1)(a) of this section; and

(d) The client's length of stay is over the day outlier threshold for the applicable DRG. The day outlier threshold is defined as the number of an average length of stay for a discharge (for an applicable DRG), plus twenty days.

(5) MAA bases the day outlier payment on the number of days exceeding the day outlier threshold, multiplied by the administrative day rate.

(6) MAA's total payment for day outlier claims is the applicable DRG payment plus the day outlier or administrative days payment.

(7) Day outliers are only paid for cases that do not reach high-cost outlier status. A client's outlier claim is either a day outlier or a high-cost outlier, but not both)) If the claim qualifies as a DRG high-cost outlier, the high cost outlier threshold is the amount in subsection (1)(a)(i) or (ii), whichever is greater, for an admission date before January 1, 2001; or subsection (1)(b)(i) or (ii), whichever is greater, for an admission date January 1, 2001 or after.

(3) The department determines payment for claims qualifying as DRG high-cost outliers as follows:

(a) Payment for all qualifying claims, except for claims in psychiatric DRGs 424-432 and in-state childrens hospitals, are paid seventy-five percent of the allowed charges above the outlier threshold, multiplied by the hospital's RCC rate, plus the applicable DRG payment.

(b) In-state children's hospitals are paid eighty-five percent of the allowed charges above the outlier threshold, multiplied by the hospital's RCC rate, plus the applicable DRG payment.

(c) Psychiatric DRG high-cost outliers for DRGs 424-432 are paid one hundred percent of the allowed charges above the outlier threshold, multiplied by the hospital's RCC rate, plus the applicable DRG payment.

Examples for DRG high cost outlier claim qualification and payment calculation (admission dates are January 1, 2001, or after).
DRG Allowed Charges		Applicable DRG Payment		Three times App. DRG Payment		DRG Allowed Charges > $33,000?	DRG Allowed Charges > Three times App. DRG Payment?	DRG High-Cost Outlier Payment	Hospital's Individual RCC Rate
$17,000		$ 5, 000		$15,000		No	Yes	N/A	64%
*33,500		5,000		15,000		Yes	Yes	**$5,240	64%
10,740		35,377		106,131		No	No	N/A	64%

Payment calculation example for DRG allowed charges of:		Nonpsych DRGs/Nonin-state children's hospital (RCC is 64%)
*$33,500		DRG allowed charges
- $33,000 $ 500		The greater amount of 3x app. DRG pymt ($15,000) or $33,000
x 48%		75% of allowed charges x hospital RCC rate (nonpsych DRGs/nonin-state children's) (75% x 64%= 48%)
$ 240		Outlier portion
+ $ 5,000		Applicable DRG payment
**$ 5,240		Outlier payment

(4) A claim qualifies as a DRG low-cost outlier if:

(a) The admission date for the claim is before January 1, 2001, and the and allowed charges are:

(i) Less than ten percent of the applicable DRG payment; or

(ii) Less than four hundred dollars.

(b) The admission date for the claim is January 1, 2001, or after, and the allowed charges are:

(i) Less than ten percent of the applicable DRG payment; or

(ii) Less than four hundred fifty dollars.

(5) If the claim qualifies as a DRG low-cost outlier:

(a) For an admission date before January 1, 2001, the low-cost outlier amount is the amount in subsection (4)(a)(i) or (ii), whichever is greater; or

(b) For an admission date on January 1, 2001, or after, the low-cost outlier amount is the amount in subsection (4)(b)(i) or (ii), whichever is greater.

(6) The department's payment for a claim that qualifies as a DRG low-cost outlier is the allowed charges for the claim multiplied by the hospital's RCC rate.

(7) The department does not pay administrative days until the case exceeds the DRG high-cost outlier threshold for that claim.

(8) The department makes day outlier payments to hospitals in accordance with section 1923 (a)(2)(C) of the Social Security Act, for clients who have exceptionally long stays. A hospital is eligible for the day outlier payment if it meets all of the following criteria:

(a) The hospital is a disproportionate share hospital (DSH) and the client served is under age six, or the hospital may not be a DSH hospital but the client served is a child under age one;

(b) The payment methodology for the admission is DRG;

(c) The allowed charges for the hospitalization are less than the DRG high-cost outlier threshold as defined in subsection (1) of this section; and

(d) The client's length of stay exceeds the day outlier threshold for the applicable DRG payment amount. The day outlier threshold is defined as the number of days in an average length of stay for a discharge (for an applicable DRG payment), plus twenty days.

(9) The department bases the day outlier payment on the number of days that exceed the day outlier threshold, multiplied by the administrative day rate.

(10) The department's total payment for day outlier claims is the applicable DRG payment plus the day outlier or administrative days payment.

(11) The department pays day outliers only for claims that do not reach a DRG high-cost outlier status. A client's outlier claim is either a day outlier or a high-cost outlier, but not both.

[Statutory Authority: RCW 74.08.090, 42 USC 1395 x(v), 42 CFR 447.271, 447.11303, and 447.2652. 99-06-046, 388-550-3700, 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, 388-550-3700, filed 12/18/97, effective 1/18/98.]

(2) ((The department shall recalibrate diagnosis-related group)) MAA recalibrates DRG relative weights periodically, as described in WAC 388-550-3100, but no less frequently than each time rebasing is ((done)) conducted. The department ((shall make)) makes recalibrated relative weights effective ((July 1 of that year)) on the rate implementation date, which can change with each rebasing.

[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, 388-550-3800, filed 12/18/97, effective 1/18/98.]

(b) The stay is for chemical dependency treatment which is subject to WAC 388-550-1100(3))) Except when otherwise specified, inpatient services provided by hospitals and units that are exempt from the diagnosis-related group (DRG) payment method are reimbursed by the RCC payment method described in WAC 388-550-4500.

(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 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;

(ii) Medically indigent program (MIP); and

(iii) Other state-only administered programs.

(b) 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;

(ii) Medically indigent program (MIP); and

(iii) Other state-only administered programs.

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

(i) General assistance programs;

(ii) Medically indigent program (MIP); and

(iii) Other state-only administered programs.

(d) 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) 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;

(B) Medically indigent program (MIP); and

(C) Other state-only administered programs.

(ii) If the department determines that the psychiatric services provided to clients eligible under the programs listed in subsection (2)(e)(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, 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 eligible clients, 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, 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) Except when otherwise specified, the department shall reimburse hospitals and services exempt from the DRG payment method under the RCC method, as described in WAC 388-550-4500)) Except when otherwise specified, inpatient services exempt from the diagnosis-related group (DRG) payment method are reimbursed by the RCC payment method described in WAC 388-550-4500.

(2) Subject to the restrictions and limitations in this section, the department exempts the following services for Medicaid clients from the DRG payment method:

(a) Neonatal services for DRGs 602-619, 621-628, 630, 635, and 637-641.

(b) Acquired immunodeficiency syndrome (AIDS)-related inpatient services for those cases with a reported diagnosis of AIDS-related complex and other human immunodeficiency virus infections. These services are also exempt from the DRG payment method when funded by the department through the general assistance programs, medically indigent program, and any other state-only administered program.

(c) Alcohol or other drug detoxification services when provided in a hospital having a detoxification provider agreement with the department to perform these services. These services are also exempt from the DRG payment method when funded by the department through the general assistance programs, medically indigent program, and any other state-only administered program.

(d) Hospital-based intensive inpatient detoxification, medical stabilization, and drug treatment services provided to chemically-dependent pregnant women (CUP program) by a certified hospital. These are Medicaid program services and are not funded by the department through the general assistance programs, medically indigent program, or any other state-only administered program.

(e) Acute physical medicine and rehabilitation services provided in MAA-approved rehabilitation hospitals and hospital distinct units, and services for physical medicine and rehabilitation patients. Rehabilitation services provided to clients under the general assistance programs, medically indigent program, and any other state-only administered program are also reimbursed through the RCC payment method.

(f) Psychiatric services provided in nonstate-owned psychiatric hospitals and designated distinct psychiatric units of hospitals.

(g) Chronic pain management treatment provided in department-approved pain treatment facilities.

(h) Administrative day services. The department reimburses administrative days based on the statewide average Medicaid nursing facility per diem rate, which is adjusted annually each November 1. The department applies this rate to patient days identified as administrative days on the hospital's notice of rates. Hospitals must request an administrative day designation on a case-by-case basis.

(i) Inpatient services recorded on a claim that is grouped by MAA to a DRG for which MAA has not published an all patient DRG relative weight, except that claims grouped to DRGs 469 and 470 will be denied payment. This policy also applies to covered services paid through the general assistance programs, medically indigent program, and any other state-only administered program.

(j) Organ transplants that involve the heart, kidney, liver, lung, allogeneic bone marrow, autologous bone marrow, or simultaneous kidney/pancreas. These services are also exempt from the DRG payment method when funded by MAA through the general assistance programs, medically indigent program, and any other state-only administered program.

(3) Inpatient services provided through a managed care plan contract are reimbursed by the managed care plan.

[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, 388-550-4400, filed 12/18/97, effective 1/18/98.]

(a) ((MAA)) The medical assistance administration (MAA) calculates a hospital's ((ratio of costs-to-charges ())RCC(())) by dividing allowable operating costs by patient revenues associated with these allowable costs.

(b) MAA bases these figures on the annual Medicare cost report data provided by the hospital.

(c) MAA ((updates hospitals' RCC rates)) updates a hospital's inpatient RCC rate annually with the submittal of new HCFA 2552 Medicare cost report data. Prior to computing the ratio, MAA excludes increases in operating costs or total rate-setting revenue attributable to a change in ownership.

(2) ((MAA)) The department limits a hospital's RCC payment to one hundred percent of its allowable charges. ((MAA recoups payments made to a hospital in excess of its customary charges to the general public.))

(3) ((MAA)) The department establishes the basic inpatient hospital RCC payment by multiplying the hospital's assigned RCC rate by the allowed charges for medically necessary services. MAA deducts client responsibility (spend-down) ((or)) and third-party liability (TPL) ((as identified on the billing invoice or by MAA)) from the basic payment to determine the actual payment due ((from MAA for that hospital admission)).

(4) ((MAA)) The department uses the RCC payment method to reimburse:

(a) ((Peer group A hospitals;

(b) Other)) DRG-exempt hospitals ((identified)) as provided in WAC 388-550-4300; and

(((c))) (b) Any hospital for DRG-exempt services described in WAC 388-550-4400.

(5) ((MAA deems the RCC for)) In-state and border area hospitals ((lacking)) that lack sufficient HCFA 2552 Medicare cost report data to establish a hospital specific RCC are reimbursed using the weighted average ((of the RCC rates for in-state hospitals)) in-state:

(a) RCC rate for inpatient services as provided in WAC 388-550-4300 and 388-550-4400; and

(b) Outpatient rate as provided in WAC 388-550-6000.

(6) ((MAA calculates an outpatient ratio of costs-to-charges by dividing the projected costs by the projected charge multiplied by the average RCC.

(a) In no case may the outpatient adjustment factor exceed 1.0.

(b) The outpatient adjustment factor is updated annually effective November 1)) Out-of-state hospitals are also reimbursed for the respective services using the weighted average in-state:

(a) RCC rate for inpatient services as provided in WAC 388-550-4300 and 388-550-4400; and

(b) Outpatient rate for outpatient hospital services as provided in WAC 388-550-6000.

(7) MAA identifies all in-state hospitals that have hospital specific RCC rates, and calculates the weighted average in-state RCC rate annually on August 1, by dividing the total allowable operating costs of these hospitals by the total respective patient revenues.

(8) The department pays hospitals an all-inclusive administrative day rate for those days of hospital stay in which a client no longer needs an acute inpatient level of care, but is not discharged because an appropriate placement outside the hospital is not available.

(a) MAA sets payment for administrative days at the statewide average Medicaid nursing facility per diem rate. The administrative day rate is adjusted annually effective November 1.

(b) Ancillary services provided during administrative days are not reimbursed.

(c) The department identifies administrative days for a DRG exempt case during the length of stay review process after the client's discharge from the hospital.

(d) The department pays the hospital at the administrative day rate starting the date of hospital admission if the admission is solely for a stay until an appropriate sub-acute placement can be made.

(9) MAA calculates the weighted average in-state outpatient rate annually on August 1, by multiplying the weighted average in-state RCC rate by the outpatient adjustment factor.

(10) For hospitals that have their own hospital specific inpatient RCC rate, MAA calculates the hospital's specific outpatient rate by multiplying the hospital's inpatient RCC rate by the outpatient adjustment factor.

(11) The outpatient adjustment factor:

(a) Must not exceed 1.0; and

(b) Is updated annually on November 1. This update causes an additional update of the outpatient rate for each hospital on November 1 annually.

(12) MAA establishes the basic hospital outpatient payment as provided in WAC 388-550-6000. MAA deducts client responsibility (spend-down) and third-party liability (TPL) from the basic payment to determine the actual payment due.

[Statutory Authority: RCW 74.08.090, 42 USC 1395 x(v), 42 CFR 447.271, 447.11303, and 447.2652. 99-06-046, 388-550-4500, 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, 388-550-4500, filed 12/18/97, effective 1/18/98.]

(a) Calculates payments to hospitals for ((state-only MI/medical care services to clients according to the)) covered services provided to eligible clients under the state-only MI and medical care services programs using one of the following payment methods:

(i) Diagnosis-related group (DRG); or

(ii) Ratio of costs-to-charges (RCC) methodologies; and

(b) ((Reduces hospitals' Title XIX rates by their ratable and/or equivalency factors (EQ), as applicable.)) Calculates the respective state-only program RCC rate and cost based conversion factor (CBCF) by reducing:

(i) The hospital's Title XIX inpatient RCC rate by the hospital's ratable; and

(ii) The hospital's Title XIX DRG CBCF.

(2) ((MAA calculates)) To calculate ratables ((by)), MAA:

(a) ((Adding together)) Adds a hospital's Medicare and Medicaid revenues, ((along with)) to the value of the hospital's charity care and bad debts. ((MAA)) MAA deducts the hospital's low-income disproportionate share hospital (LIDSH) revenue from this total to arrive at the hospital's community care dollars; then

(b) ((Subtracting)) Subtracts revenue generated by hospital-based physicians from total hospital revenue. Both revenues are as reported in the hospital's HCFA 2552 cost report; then

(c) Divides the amount derived in step (2)(a) by the amount derived in step (2)(b) to obtain the ratio of community care dollars to total revenue; then

(d) Subtracts the result of step (2)(c) from 1.000 to obtain the hospital's ratable. The hospital's Title XIX ((cost-based conversion factor (CBCF) or RCC rate is multiplied by (1-ratable) for a MI or medical care services client)) CBCF is multiplied by (1 minus the ratable), and that result is multiplied by the equivalency factor (EF) to calculate the state-only CBCF. The hospital's Title XIX RCC rate is multiplied by (1 minus the ratable) to calculate the state-only program RCC.

(e) The payments for ((MI/medical care services clients)) services under the state-only MI and medical care services programs are mathematically represented as follows:

((MI/medical care services)) State-only program RCC = Title XIX RCC x (1((-)) minus the ratable) x EF

((MI/medical care services)) State-only program CBCF = Title XIX Conversion Factor x (1((-)) minus the ratable) x ((EQ)) EF

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

(4) MAA:

(a) Uses the ((EQ)) EF to hold the DRG reimbursement rates for the ((MI/medical care services)) state-only programs at their current level prior to any rebasing. MAA applies the ((EQ)) EF only to the Title XIX DRG CBCFs((. MAA does not apply the EQ)), not to the Title XIX RCCS. The EF does not apply when the DRG rate change is due to the application of an inflation factor.

(b) Calculates a hospital's equivalency factor as follows:

((EQ)) EF = (Current ((MI/medical care services conversion factor)/(Title XIX DRG rate x (1-ratable))) state-only program CBCF divided by (Title XIX CBCF) multiplied by (1 minus the ratable))

(5) ((Effective for hospital admissions on or after December 1, 1991, MAA reduces its payment for MI (but not medical care services) clients further by multiplying the payment by ninety-seven percent. MAA applies this payment reduction adjustment to the MIDSH methodology in accordance with section 3(b) of the "Medicaid Voluntary Contributions and Provider-Specific Tax Amendment of 1991."

(6))) When ((the MI/medical care services)) a client eligible for the MI program or medical care services program has a trauma that qualifies under the trauma program, ((MAA pays)) the hospital is reimbursed the full Medicaid ((Title XIX)) reimbursement amount when care has been provided in a nongovernmental hospital designated by the department of health (DOH) as a trauma services center. MAA gives an annual grant for trauma services to governmental hospitals certified by DOH.

[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.]

     The following section of the Washington Administrative Code is repealed:

WAC 388-550-2700

Substance abuse detoxification services.

Washington State Code Reviser's Office