WSR 08-01-090



(Health and Recovery Services Administration)

[ Filed December 17, 2007, 11:32 a.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 05-16-083.

Title of Rule and Other Identifying Information: The department is creating chapter 388-549 WAC, Rural health clinics.

Hearing Location(s): Office Building 2 - Auditorium (DSHS Headquarters), 1115 Washington, Olympia, WA 98504 (public parking at 11th and Jefferson. A map is available at or by calling (360) 664-6094), on January 22, 2008, at 10:00 a.m.

Date of Intended Adoption: Not earlier than January 23, 2008.

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, fax (360) 664-6185, by 5 p.m. on January 22, 2008.

Assistance for Persons with Disabilities: Contact Jennisha Johnson, DSHS Rules Consultant, by January 15, 2008, TTY (360) 664-6178 or (360) 664-6097 or by e-mail at

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The department is creating the new chapter to implement a new payment methodology for rural health clinics (RHC) - replacing cost-based reimbursement methodology with Medicaid RHC prospective payment system (PPS).

Reasons Supporting Proposal: To be in compliance with the federal payment methodology for rural health clinics under Section 702 of the Benefit Improvement and Protection Act (BIPA) of 2000 which replaced cost-based reimbursement methodology with Medicaid RHC prospective payment system (PPS).

Statutory Authority for Adoption: RCW 74.08.090, 74.09.510, 74.09.522, 42 C.F.R. 405.2472, 42 C.F.R. 491.

Statute Being Implemented: RCW 74.08.090.

Rule is necessary because of federal law, 42 C.F.R. 405.2472, 42 C.F.R. 491, 42 U.S.C. 1396a(bb).

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

Name of Agency Personnel Responsible for Drafting: Wendy Boedigheimer, P.O. Box 45504, Olympia, WA 98504-5504, (360) 725-1306; Implementation and Enforcement: Kevin Collins, P.O. Box 45510, Olympia, WA 98504-5510, (360) 725-2104.

No small business economic impact statement has been prepared under chapter 19.85 RCW. The department has analyzed the proposed rule amendments and concludes that they do not impose a disproportionate cost impact on small businesses. As a result, the preparation of a 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 Kevin Collins, P.O. Box 45510, Health and Recovery Service Administration, Olympia, WA 98504-5510, phone (360) 725-2104, fax (360) 586-9727, e-mail

December 13, 2007

Stephanie E. Schiller

Rules Coordinator

Chapter 388-549 WAC


WAC 388-549-1000   Rural health clinics -- Purpose.   This chapter establishes the department's reimbursement methodology for rural health clinic (RHC) services. RHC conditions for certification are found in 42 CFR part 491.


WAC 388-549-1100   Rural health clinics -- Definitions.   This section contains definitions of words and phrases that apply to this chapter. Unless defined in this chapter or WAC 388-500-0005, the definitions found in the Webster's New World Dictionary apply.

"Base year" - The year that is used as the benchmark in measuring a clinic's total reasonable costs for establishing base encounter rates.

"Change in scope of service" - A change in the type, intensity, duration, or amount of service.

"Encounter" - A face-to-face visit between a client and a qualified rural health clinic (RHC) provider (e.g., a physician, physician's assistant, or advanced registered nurse practitioner) who exercises independent judgment when providing services that qualify for an encounter rate.

"Encounter rate" - A cost-based, facility-specific rate for covered RHC services, paid to a rural health clinic for each valid encounter it bills.

"Enhancements" (also called healthy options (HO) enhancement) - A monthly amount paid to RHCs for each client enrolled with a managed care organization (MCO). Plans may contract with RHCs to provide services under healthy options. RHCs receive enhancements from the department in addition to the negotiated payments they receive from the MCOs for services provided to enrollees.

"Fee-for-service" - A payment method the department uses to pay providers for covered medical services provided to medical assistance clients, except those services provided under the department's prepaid managed care organizations or those services that qualify for an encounter rate.

"Interim rate" - The rate established by the department to pay a rural health clinic for covered RHC services prior to the establishment of a prospective payment system (PPS) rate for that facility.

"Medicare cost report" - The cost report is a statement of costs and provider utilization that occurred during the time period covered by the cost report. RHCs must complete and submit a report annually to Medicare.

"Mobile unit" - The objects, equipment, and supplies necessary for provision of the services furnished directly by the RHC are housed in a mobile structure.

"Permanent unit" - The objects, equipment and supplies necessary for the provision of the services furnished directly by the clinic are housed in a permanent structure.

"Rural area" - An area that is not delineated as an urbanized area by the Bureau of the Consensus.

"Rural health clinic (RHC)" - A clinic, as defined in 42 CFR 405.2401(b), that is primarily engaged in providing RHC services and is:

Located in a rural area designated as a shortage area as defined under 42 CFR 491.2;

Certified by Medicare as a RHC in accordance with applicable federal requirements; and

Not a rehabilitation agency or a facility primarily for the care and treatment of mental diseases.

"Rural health clinic (RHC) services" - Outpatient or ambulatory care of the nature typically provided in a physician's office or outpatient clinic and the like, including specified types of diagnostic examination, laboratory services, and emergency treatments. The specific list of services which must be made available by the clinic can be found under 42 CFR part 491.9.


WAC 388-549-1200   Rural health clinics -- Enrollment.   (1) To participate in the Title XIX (Medicaid) program and receive payment for services, a rural health clinic (RHC) must:

(a) Receive RHC certification for participation in the Title XVIII (Medicare) program according to 42 CFR 491;

(b) Sign a core provider agreement;

(c) Comply with the clinical laboratory improvement amendments (CLIA) of 1988 testing for all laboratory sites per 42 CFR part 493; and

(d) Operate in accordance with applicable federal, state, and local laws.

(2) An RHC may be a permanent or mobile unit. If an entity owns clinics in multiple locations, each individual site must be certified by the department in order to receive reimbursement from the department as an RHC.

(3) The department uses one of two timeliness standards for determining the effective date of a Medicaid-certified RHC.

(a) The department uses Medicare's effective date if the RHC returns a properly completed core provider agreement and RHC enrollment packet within sixty days from the date of Medicare's letter notifying the clinic of the Medicare certification.

(b) The department uses the date the signed core provider agreement is received if the RHC returns the properly completed core provider agreement and RHC enrollment packet after sixty days of the date of Medicare's letter notifying the clinic of the Medicare certification.


WAC 388-549-1300   Rural health clinics -- Services.   (1) Rural health clinic (RHC) services are defined under 42 CFR 440.20(b).

(2) The department pays for RHC services when they are:

(a) Within the scope of an eligible client's medical assistance program. Refer to WAC 388-501-0060; and

(b) Medically necessary as defined in WAC 388-500-0005.

(3) RHC services may be provided by any of the following individuals in accordance with 42 CFR 405.2401:

(a) Physicians;

(b) Physician assistants (PA);

(c) Nurse practitioners (NP);

(d) Nurse midwives or other specialized nurse practitioners;

(e) Certified nurse midwives;

(f) Registered nurses or licensed practical nurses; and

(g) Psychologists or clinical social workers.


WAC 388-549-1400   Rural health clinics -- Reimbursement and limitations.   (1) For rural health clinics (RHC) certified by Medicare on and after January 1, 2001, the department pays RHCs an encounter rate per client, per day using a prospective payment system (PPS) as required by 42 USC 1396a(bb) for RHC services.

(a) The department calculates the RHC's encounter rate for RHC core services as follows:

(i) Until the RHC's first audited Medicare cost report is available, the department pays an average encounter rate of other similar RHCs (such as hospital-based or free-standing) within the state, otherwise known as an interim rate.

(ii) Upon availability of the RHC's audited Medicare cost report, the department sets the clinic's encounter rate at one hundred percent of its costs as defined in the cost report. The RHC will receive this rate for the remainder of the calendar year during which the audited cost report became available. The encounter rate is then inflated each January 1 by the Medicare economic index (MEI) for primary services.

(2) For RHCs in existence during calendar years 1999 and 2000, the department sets the payment prospectively using a weighted average of one hundred percent of the clinic's total reasonable costs for calendar years 1999 and 2000 and adjusted for any increase or decrease in the scope of services furnished during the calendar year 2001 to establish a base encounter rate.

(a) The department adjusts a PPS base encounter rate to account for an increase or decrease in the scope of services provided during calendar year 2001 in accordance with WAC 388-549-1500.

(b) The PPS base encounter rates are determined using Medicare's audited cost reports and each year's rate is weighted by the total reported encounters. The department does not apply a capped amount to these base encounter rates. The formula used to calculate the base encounter rate is as follows:

Base Encounter Rate = (1999 Rate X 1999 Encounters) + (2000 Rate X 2000 Encounters)
(1999 Encounters + 2000 Encounters)
(c) Beginning in calendar year 2002 and any year thereafter, the encounter rate is increased by the MEI and adjusted for any increase or decrease in the clinic's scope of services.

(3) The department pays for one encounter, per client, per day except in the following circumstances:

(a) The visits occur with different doctors with different specialties; or

(b) There are separate visits with unrelated diagnoses.

(4) RHC services and supplies incidental to the provider's services are included in the encounter rate payment.

(5) Services other than RHC services that are provided in an RHC are not included in the RHC encounter rate. Payments for nonRHC services provided in an RHC are made on a fee-for-service basis using the department's published fee schedules. NonRHC services are subject to the coverage guidelines and limitations listed in chapters 388-500 through 557 WAC.

(6) For clients enrolled with a managed care organization, covered RHC services are paid for by that plan.

(7) The department does not pay the encounter rate or the enhancements for clients in state-only programs. Services provided to clients in state-only programs are considered fee-for-service, regardless of the type of service performed.


WAC 388-549-1500   Rural health clinics -- Change in scope of service.   (1) The department considers a rural health clinic's (RHC) change in scope of service to be a change in the type, intensity, duration, and/or amount of services provided by the RHC. Changes in scope of service apply only to covered Medicaid services.

(2) When the department determines that a change in scope of service has occurred after the base year, the department will adjust the RHC's perspective payment system (PPS) rate to reflect the change.

(3) RHCs must:

(a) Notify the department's RHC program manager in writing, at the address published in the department's rural health clinic billing instructions, of any changes in scope of service no later than sixty days after the effective date of the change; and

(b) Provide the department with all relevant and requested documentation pertaining to the change in scope of service.

(4) The department adjusts the PPS rate to reflect the change in scope of service using one or more of the following:

(a) A Medicaid comprehensive desk review of the RHC's cost report;

(b) Review of a Medicare audit of the RHC's cost report; or (c) Other documentation relevant to the change in scope of service.

(5) The adjusted encounter rate will be effective on the date the change of scope of service is effective.


Washington State Code Reviser's Office