Original Notice.

     Preproposal statement of inquiry was filed as WSR 05-17-136.

     Title of Rule and Other Identifying Information: Part 2 of 2; new sections WAC 388-550-5125 Payment method -- PIIDSH and 388-550-5425 Upper payment limit (UPL) for inpatient hospital services; and amending WAC 388-550-5150 Payment method -- GAUDSH, 388-550-5200 Payment method -- SRHAPDSH method, 388-550-5210 Payment method -- SRHIAAPDSH, 388-550-5220 Payment method -- NRHIAAPDSH, 388-550-5400 Payment method -- PHDSH, and 388-550-5450 Supplemental distributions to approved trauma service centers.

     Hearing Location(s): Blake Office Park East, Rose Room, 4500 10th Avenue S.E., Lacey, WA 98503 (one block north of the intersection of Pacific Avenue S.E. and Alhadeff Lane behind Goodyear Tire. A map or directions are available at http://www1.dshs.wa.gov/msa/rpau/docket.html or by calling (360) 664-6097), on March 21, 2006, at 10:00 a.m.

     Date of Intended Adoption: Not earlier than March 22, 2006.

     Submit Written Comments to: DSHS Rules Coordinator, P.O. Box 45850, Olympia, WA 98504, delivery 4500 10th Avenue S.E., Lacey, WA 98503, e-mail fernaax@dshs.wa.gov, fax (360) 664-6185, by 5:00 p.m., March 21, 2006.

     Assistance for Persons with Disabilities: Contact Stephanie Schiller, DSHS Rules Consultant, by March 17, 2006, TTY (360) 664-6178 or (360) 664-6097 or by e-mail at schilse@dshs.wa.gov.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The rules add language to clarify, update, and ensure clear and consistent policies for the certified public expenditure (CPE) program, the disproportionate share hospital (DSH) program, and the trauma program; add an additional requirement that peer group E hospitals are not eligible for certain DSH programs; add a new section that identifies the criteria for considering a hospital's eligibility for the psychiatric indigent inpatient disproportionate share hospital (PIIDSH) payment and that PIIDSH payments are determined using a prospective payment method; replace "medical assistance administration" and "MAA" with "the department"; add language that requires hospitals to annually submit a copy of their charity and bad debt policy; repeal WAC 388-550-6800 and provide updated language in new section, WAC 388-550-5425 regarding the upper payment limit (UPL) for inpatient hospital services; and delete language that allows payment through the ratio of costs-to-charges (RCC) payment method when the department determines that the psychiatric services provided to a client eligible under a state-only administered program qualify for a special exemption.

     Reasons Supporting Proposal: See Purpose above.

     Statutory Authority for Adoption: RCW 74.08.090, 74.09.500.

     Statute Being Implemented: RCW 74.08.090, 74.09.500.

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

     Name of Proponent: Department of social and health services, governmental.

     Name of Agency Personnel Responsible for Drafting: Kathy Sayre, P.O. Box 45533, Olympia, WA 98504-5533, (360) 725-1342; Implementation and Enforcement: Ayuni Wimpee, P.O. Box 45510, Olympia, WA 98504-5510, (360) 725-1835.

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

     A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Ayuni Wimpee, P.O. Box 45510, Health and Recovery Services Administration, Olympia, WA 98504-5510, phone (360) 725-1835, fax (360) 753-9152, e-mail wimpeah@dshs.wa.gov.

February 9, 2006

Andy Fernando, Manager

Rules and Policies Assistance Unit

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

     (b) Is an in-state or bordering city hospital;

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

     (d) Qualifies under Section 1923(d) of the Social Security Act.

     (2) The department determines the PIIDSH payment for each eligible hospital using a prospective payment method, in accordance with WAC 388-550-4800.

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

     (b) Is an in-state or ((border area)) bordering city hospital;

     (c) Provides services to clients under the medical care services program; and

     (d) Has a low-income utilization rate (LIUR) of one percent or more.

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

[Statutory Authority: RCW 74.08.090, 74.09.500, 74.09.035(1), and 43.88.290. 03-13-055, § 388-550-5150, filed 6/12/03, effective 7/13/03. Statutory Authority: RCW 74.08.090, 74.09.730, chapter 74.46 RCW and 42 U.S.C. 1396r-4. 99-14-025, § 388-550-5150, filed 6/28/99, effective 7/1/99. Statutory Authority: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010, 74.09.200, [74.09.]500, [74.09.]530 and 43.20B.020. 98-01-124, § 388-550-5150, filed 12/18/97, effective 1/18/98.]

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

     (a) Not be a peer group E hospital;

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

     (((b))) (c) Be an in-state hospital;

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

     (((d))) (e) For the SRHAPDSH program year to be implemented for state fiscal year (SFY) beginning July 1, 2002, the city or town must have a nonstudent population of fifteen thousand five hundred or less.

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

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

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

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

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

     (d) ((MAA)) The department:

     (i) Identifies the individual hospital's most recent, completed SFY Medicaid reimbursement amounts. These amounts are based on historical data considered to be complete; then

     (ii) Multiplies the Medicaid reimbursement amount by the individual hospital's assigned profit factor (1.1 or 1.0) to identify a revised Medicaid reimbursement amount; then

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

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

[Statutory Authority: RCW 74.08.090, 74.04.050, and 2003 1st sp.s. c 25. 04-12-044, § 388-550-5200, filed 5/28/04, effective 7/1/04. Statutory Authority: RCW 74.08.090, 74.09.500, 74.09.035(1), and 43.88.290. 03-13-055, § 388-550-5200, filed 6/12/03, effective 7/13/03. Statutory Authority: RCW 74.08.090, 74.09.730, chapter 74.46 RCW and 42 U.S.C. 1396r-4. 99-14-025, § 388-550-5200, filed 6/28/99, effective 7/1/99. Statutory Authority: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010, 74.09.200, [74.09.]500, [74.09.]530 and 43.20B.020. 98-01-124, § 388-550-5200, filed 12/18/97, effective 1/18/98.]

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

     (a) Not be a peer group E hospital;

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

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

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

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

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

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

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

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

     (d) ((MAA)) The department:

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

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

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

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

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

[Statutory Authority: RCW 74.04.050, 74.08.090. 05-12-132, § 388-550-5210, filed 6/1/05, effective 7/1/05. Statutory Authority: RCW 74.08.090, 74.04.050, and 2003 1st sp.s. c 25. 04-12-044, § 388-550-5210, filed 5/28/04, effective 7/1/04.]

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

     (a) Not be a peer group E hospital;

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

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

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

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

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

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

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

     (d) ((MAA)) The department:

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

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

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

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

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

[Statutory Authority: RCW 74.04.050, 74.08.090. 05-12-132, § 388-550-5220, filed 6/1/05, effective 7/1/05. Statutory Authority: RCW 74.08.090, 74.04.050, and 2003 1st sp.s. c 25. 04-12-044, § 388-550-5220, filed 5/28/04, effective 7/1/04.]

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

     (i) Owned by public hospital districts; and

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

     (b) Harborview Medical Center; and

     (c) University of Washington Medical Center.

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

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

[Statutory Authority: RCW 74.04.050, 74.08.090. 05-12-132, § 388-550-5400, filed 6/1/05, effective 7/1/05. Statutory Authority: RCW 74.08.090, 74.09.500, 74.09.035(1), and 43.88.290. 03-13-055, § 388-550-5400, filed 6/12/03, effective 7/13/03. Statutory Authority: RCW 74.08.090, 74.09.730, chapter 74.46 RCW and 42 U.S.C. 1396r-4. 99-14-025, § 388-550-5400, filed 6/28/99, effective 7/1/99. Statutory Authority: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010, 74.09.200, [74.09.]500, [74.09.]530 and 43.20B.020. 98-01-124, § 388-550-5400, filed 12/18/97, effective 1/18/98.]

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

     (b) Nonstate government-owned hospital.

     (2) UPL payments for inpatient hospital services are subject to:

     (a) Federal approval for federal matching funds; and

     (b) A department analysis of the Medicare UPL for hospital payment.

     (3) The department determines each payment year's UPL payment for inpatient hospital services by:

     (a) Using the charge and payment data from the department's payment system for inpatient hospital services for the base year; and

     (b) Calculating the cumulative difference between Medicare payments and Title XIX payments, including third party liability payment for all eligible hospitals during the most recent state fiscal year.

     (4) UPL payments for inpatient hospital services:

     (a) Are determined for participating eligible hospitals during each federal fiscal year;

     (b) Are paid by the department on a periodic basis to one or more of the participating eligible hospitals; and

     (c) Must be used by the receiving hospital(s) to improve health care services to low income patients.

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     (2) Beginning with trauma services provided after June 30, 2003, ((MAA)) the department makes supplemental distributions from the TCF to qualified hospitals, subject to the provisions in this section.

     (3) To qualify for supplemental distributions from the TCF, a hospital must:

     (a) Be designated or recognized by the department of health (DOH) as an approved Level 1, Level 2, or Level 3 adult or pediatric trauma service center((. No distinction is made between a governmental and nongovernmental hospital));

     (b) Meet the provider requirements in this section and other applicable WAC;

     (c) Meet the billing requirements in this section and other applicable WAC;

     (d) Submit all information ((MAA)) the department requires to ensure services are being provided; and

     (e) Comply with DOH's Trauma Registry reporting requirements.

     (4) Supplemental distributions from the TCF are:

     (a) For qualified hospitals, determined as a percentage of a fixed amount ((for)) per quarter. Each eligible hospital's share per quarter is based on ((all of the following:

     (i) The relative)) the amount paid by ((MAA)) the department to that hospital for inpatient and outpatient trauma care the hospital provides to Medicaid clients ((per)) during that quarter ((in a state fiscal year (SFY). MAA determines the amount of care provided to Medicaid clients by date of service, not date of payment; and

     (ii) The amount paid by MAA to hospitals that receive transferred trauma cases, regardless of the clients' Injury Severity Score (ISS) (a summary rating system for traumatic anatomic injuries))), expressed as a percentage of the following total:

     (i) The department's payments to Level 1, Level 2, and Level 3 trauma service centers for qualified Medicaid trauma cases in that quarter. The department determines the countable payment per quarter for trauma care provided to Medicaid clients based on date of service, not date of payment;

     (ii) The department's payments to Level 1, Level 2, and Level 3 hospitals for trauma cases transferred in during that quarter. A Level 1, Level 2, or Level 3 hospital that receives a transferred trauma case from any lower level hospital is eligible for the enhanced payment, regardless of the client's Injury Severity Score (ISS). An ISS is a summary rating system for traumatic anatomic injuries; and

     (iii) The department's payments to Level 2 and Level 3 hospitals for qualified trauma cases (those that meet or exceed the ISS criteria in subsection (4)(b) of this section) that are transferred to a higher level designated trauma service center during that quarter.

     (b) Paid only for a Medicaid trauma case that meets:

     (i) The ISS of thirteen or greater for an adult trauma patient (a client age fifteen or older);

     (ii) The ISS of nine or greater for a pediatric trauma patient (a client younger than age fifteen); or

     (iii) The conditions of subsection (4)(c) ((of this section are met)).

     (c) Made to hospitals, as follows, for a trauma case that is transferred:

     (i) ((The receiving hospital)) A hospital that receives the transferred trauma case qualifies for payment regardless of the ISS if the hospital is designated or recognized by DOH as an approved Level 1, Level 2, or Level 3 adult or pediatric trauma service center; ((and))

     (ii) ((The transferring hospital)) A hospital that transfers the trauma case qualifies for payment only if:

     (A) It is designated or recognized by DOH as an approved Level 2 or Level 3 adult or pediatric trauma service center; and

     (b) The ISS requirements in (b)(i) or (b)(ii) of this subsection are met.

     (iii) A hospital that DOH designates or recognizes as an approved Level 4 or Level 5 trauma service center does not qualify for supplemental distributions for transferred trauma cases, even when the transferred cases meet the ISS criteria in subsection (4)(b) of this section.

     (d) Not funded by disproportionate share hospital (DSH) funds; and

     (e) Not distributed by ((MAA)) the department to:

     (i) Trauma service centers designated or recognized as Level 4 or Level 5; ((or))

     (ii) Critical access hospitals (CAHs); or

     (iii) Any hospital for follow-up surgical services related to the qualifying trauma incident but provided to the client after the client has been discharged for the initial qualifying injury.

     (5) ((MAA makes supplemental distributions from the TCF to eligible hospitals as follows)) Distributions for an SFY are divided into five "quarters" and paid as follows:

     (a) ((Quarterly payments are made, subject to the following:

     (i))) Each quarterly distribution paid by the department from the TCF totals twenty percent of the amount designated by the department for that SFY;

     (b) The first quarterly supplemental distribution from the TCF is made six months after the SFY begins;

     (((ii) Each quarterly supplemental distribution from the TCF totals twenty percent of the amount designated by MAA for that SFY. If claims data for any quarter indicate an insufficient number of paid claims, MAA may adjust the percentage to allow for an equitable distribution from the TCF for that quarter. See (4)(a) of this subsection.

     (b) A final supplemental distribution from the TCF is:

     (ii))) (c) Subsequent quarterly payments are made approximately every four months after the first quarterly payment is made, except as described in subsection (d);

     (d) The "fifth quarter" final distribution from the TCF for the same SFY is:

     (i) Made one year after the end of the SFY; ((and))

     (ii) Based on the SFY that the TCF designated amount relates to; and

     (iii) Distributed based on each eligible hospital's percentage of the total payments made by the department to all designated trauma service centers for qualified trauma cases during the relevant fiscal year.

     (6) For purposes of the supplemental distributions from the TCF, all of the following apply:

     (a) ((MAA)) The department may consider a request for a claim adjustment submitted by a provider only if the request is received by ((MAA)) the department within one year from the date of the initial trauma service;

     (b) ((MAA)) The department does not allow any carryover of liabilities for a supplemental distribution from the TCF after a date specified by ((MAA)) the department as the last date to make adjustments to a trauma claim for an SFY. WAC 388-502-0150(7) does not apply to TCF claims;

     (c) All claims and claim adjustments are subject to federal and state audit and review requirements; and

     (d) The total amount of supplemental distributions from the TCF disbursed to eligible hospitals by ((MAA)) the department in any ((current)) biennium cannot exceed the amount appropriated by the legislature for that biennium. ((MAA)) The department has the authority to take whatever actions necessary to ensure ((MAA)) the department stays within the ((current)) TCF appropriation.

[Statutory Authority: RCW 74.08.090 and 74.09.500. 04-19-113, § 388-550-5450, filed 9/21/04, effective 10/22/04.]

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