WSR 98-01-124

PERMANENT RULES

DEPARTMENT OF

SOCIAL AND HEALTH SERVICES

(Medical Assistance Administration)

[Filed December 18, 1997, 1:10 p.m.]

Date of Adoption: December 18, 1997.

Purpose: To adopt rules describing the coverage, payment and payment methodology for hospital services.

Statutory Authority for Adoption: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010.

Other Authority: RCW 74.09.200, [74.09.]500, [74.09.]530, [74.09.]730, 43.20B.020.

Adopted under notice filed as WSR 97-11-008 on May 8, 1997.

Changes Other than Editing from Proposed to Adopted Version: The department made numerous editorial revisions and clarifications since these rules were proposed. In addition, the department made the following changes:

1. WAC 388-550-5300 (1)(b) initially read: "Is a state-owned university or public corporation hospital (border area hospitals are included);" The Medical Assistance Administration revised WAC 388-550-5300 (1)(b) to read: "Is a state-owned university or public corporation hospital (border area hospitals are excluded);"

WAC 388-550-5400 (1)(b) initially read: "Is a public district hospital in Washington state including border area hospitals; and" The Medical Assistance Administration revised WAC 388-550-5400 (1)(b) to read: "Is a public district hospital in Washington state or a border area hospital owned by a public corporation; and"

Reason: These changes bring the WACs into agreement with the Medical Assistance Administration's Medicaid state plan. The department initially placed Oregon Health Sciences University Hospital (OHSU) in the state teaching hospital financing disproportionate share program (STFPDSH). However, in cooperation with the Washington State Hospital Association staff and attorney for OHSU, the department determined that the public hospital district disproportionate share program (PHDDSH) was a "better fit" for OHSU.

2. WAC 388-550-4800(6), changed the trauma severity factory from "sixteen" to "nine."

Reason: This change was made in response to information provided by the Department of Health and the Trauma Technical Advisory Group.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, amended 0, repealed 0; Federal Rules or Standards: New 0, amended 0, repealed 0; or Recently Enacted State Statutes: New 0, amended 0, repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, amended 0, repealed 0.

Number of Sections Adopted on the Agency's own Initiative: New 72, amended 0, repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 72, amended 0, repealed 0.

Number of Sections Adopted using Negotiated Rule Making: New 0, amended 0, repealed 0; Pilot Rule Making: New 0, amended 0, repealed 0; or Other Alternative Rule Making: New 0, amended 0, repealed 0.

Effective Date of Rule: Thirty-one days after filing.

December 18, 1997

Merry A. Kogut, Manager

Rules and Policies Assistance Unit

NEW SECTION

WAC 388-550-1050 Definitions. Unless otherwise specified, the terms used in this chapter have the following meaning:

"Accommodation costs" mean 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, medical social services, psychiatric social services, and the use of certain hospital equipment and facilities.

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

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

"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 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" means a secondary procedure that is 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 an appropriate noninpatient hospital placement is not available.

"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.

"Advance directive" means a document, such as a living will, executed by a client, that tells the client's health care providers and others the client's decisions regarding his or her medical care, particularly whether the client wishes to accept or refuse extraordinary measures to prolong his or her 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 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" mean the maximum amount for any procedure that the department will recognize.

"Ancillary hospital costs" mean the expenses incurred by a hospital to provide additional or supporting services to its patients during their hospital stay. Such services include, but are not limited to, laboratory, radiology, drugs, delivery room (including maternity labor room), and operating room (including anesthesia and postoperative recovery rooms).

"Ancillary services" mean additional or supporting services, such as, but 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 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, usually before 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.

"Average hospital rate" means the weighted average of hospital rates in the state of Washington.

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

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

"Base period costs" mean costs incurred in or associated with a specified base period.

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

"Benefit period" means a "spell of illness" for Medicare payments. For part A coverage, the benefit period begins on the first day a Medicare beneficiary is furnished inpatient hospital or extended care services by a qualified provider, and ends when the beneficiary has been out of the hospital or other covered facility for sixty-consecutive days.

"Billed charge" - See "usual and customary charge."

"Blended rate" means a mathematically weighted average rate.

"Border area hospital" means a hospital located in an area defined by state law as: Oregon - Astoria, Hermiston, Hood River, Milton-Freewater, Portland, Rainier, or The Dalles; Idaho - Coeur d'Alene, Lewiston, Moscow, Priest River or Sandpoint.

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

"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 is not included in MAA's published fee schedules by requiring the provider to submit a "report" describing the nature, extent, time, effort and/or equipment necessary to deliver the service.

"Callback" means keeping physician staff on duty beyond their regularly scheduled hours, or having them return to the facility after hours to provide unscheduled services; 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.

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

"Case mix index" 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.

"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.

"Coinsurance" - See WAC 388-500-005.

"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 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 charges for the services has 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 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 "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 published annually by the American Medical Association (AMA).

"Customary charge or fee" - See "Allowed charges" and "usual and customary charge."

"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 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.

"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), 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, 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 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 a more formal hearing, held by the office of contracts and asset management which issues a decision articulating the department's final position on the contested issue(s).

(3) See WAC 388-81-042.

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

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

"DRG-exempt services" mean services which are paid for through other methodologies than those using cost-based or negotiated conversion factors.

"DRG payment" means the payment made by MAA for a client's inpatient hospital stay; it is 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 of a certain DRG divided by the average cost for all cases in the entire data base for all DRGs, expressed in comparison to a designated standard cost.

"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.

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

"Emergency medical condition" - See WAC 388-500-0005, Medical definitions.

"Emergency medical expense requirement (EMER)" - See WAC 388-500-0005, Medical definitions.

"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 capable of providing emergency services including trauma.

"Emergency services" mean 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. Inpatient maternity services are treated as emergency services.

"Equivalency factor" 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" 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.

"Experimental treatment" means a course of treatment or procedure that:

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

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

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

(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 will pay a hospital for a medical evaluation or medical screening examination, performed in the hospital's emergency department, of 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 1 or level 2 service.

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

"Formula price" means the hospital's payment rate, which is the product of the hospital-specific conversion factor multiplied by the DRG weight for the given hospitalization.

"Global surgery days" mean 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" mean 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 involved in the care of a client.

"High-cost outlier" means a case with extraordinarily high costs when compared to other cases in the same DRG, in which the allowed charges exceed three times the applicable DRG payment or twenty-eight thousand dollars, whichever is greater.

"Hospice" means a medically-directed, interdisciplinary program of palliative services which 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 cost report" - See "cost report."

"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;

(2) Group B - urban hospitals without medical education programs;

(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.

"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 factor determined by Data Resources, Inc., (DRI) and published in the DRI/McGraw-Hill Report. See also "hospital market basket index." 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.

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

"Inpatient services" mean 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.

"Institution" - See WAC 388-500-0005, Medical definitions.

"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.

"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 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)."

"Length of stay extension request" means a request from a hospital provider for MAA 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 is less than or equal to ten percent of the applicable DRG payment or four hundred 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 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 care services" - See WAC 388-500-0005, Medical definitions.

"Medical education costs" mean 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 is adequately supported to prevent further deterioration.

"Medically indigent (MI)" - See WAC 388-500-0005, Medical definitions.

"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 Medical Assistance.

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

"Mentally incompetent" means a client who has been declared mentally incompetent by a federal, state, or local court of competent jurisdiction for any purpose, unless the client 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 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 "conversion factor" and "cost-based conversion factor."

"Nonallowed service or charge" means a service or charge that 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 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.

"Nonemergent hospital admission" means any inpatient hospitalization of a client 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.

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

"Orthotic device" means a fitted surgical apparatus designed to activate or supplement a weakened or atrophied limb or bodily function.

"Out-of-state hospital" means any hospital located outside the state of Washington or 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" mean cases with extraordinarily high or low costs when compared to other cases in the same DRG.

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

"Outpatient care" means medical care provided in other than an inpatient hospital setting, such as in a hospital outpatient or emergency department, a physician's office, the patient's own home, or a nursing facility.

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

"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.

"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 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 and/or the client's guardian to the procedure(s) to be performed upon or the treatment provided to the client, evidenced by the client's or guardian's signature on a consent form.

"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 charge per client that a facility may bill or is allowed to receive as payment for its services.

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

"Physical medicine and rehabilitation (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.

"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)" mean eligible female clients who are pregnant or within the first one hundred sixty days following delivery.

"Principal diagnosis" means the medical condition determined after study of the patient's medical records to be the principal cause of the patient's hospital stay.

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

"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.

"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" - See WAC 388-500-0005, Medical definitions.

"Psychiatric hospitals" mean designated psychiatric facilities, state psychiatric hospitals, designated distinct part pediatric psychiatric units, and Medicare-certified distinct part psychiatric units in acute care hospitals.

"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 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.

"Rebasing" means the process of recalculating the hospital cost-based conversion factors using more current data.

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

"Rehabilitation units" mean 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" mean hospitals located outside selective contracting areas (SCAs), or which:

(1) Are more than ten miles from the nearest contract hospital in the SCA; and

(2) Have fewer than seventy five beds; and

(3) Have fewer than five hundred Medicaid admissions in a two-year period.

"Reserve days" mean 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 three-digit coding system for billing inpatient and outpatient hospital services, home health services, and hospice services.

"Room and board" means 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.

"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.

"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 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."

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

"Special care unit" means a Medicare-certified hospital unit where intensive care, coronary care, psychiatric intensive care, burn treatment or other specialized care is provided.

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

"Spenddown" means the amount of 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.

"Stat laboratory charges" mean 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 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 to a patient which is less intrusive than that given at an acute care hospital. Skilled nursing, nursing care facilities and other facilities provide subacute care services.

"Surgery" - 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 days" means a bed day on which an inpatient is receiving skilled nursing services in a swing bed at the hospital's census hour. The hospital bed must be certified by the health care financing administration 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 hospital.

"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 to another.

"Transferring hospital" means the hospital transferring a client to another acute care facility.

"Trauma care facility" means a facility certified by the department of health as a level I, II or III facility.

"UB-92" means the uniform billing document intended for use nationally by hospitals, hospital-based skilled nursing facilities, home health, and hospice agencies in billing third party payers for services provided to clients.

"Unbundled services" mean 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 insufficient health insurance or other resources to cover the cost.

"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.

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Chapter 388-550 WAC


HOSPITAL SERVICES

NEW SECTION

WAC 388-550-1000 Applicability. The department shall pay for hospital services provided to eligible clients when:

(1) The eligible client is a patient in a general hospital and the hospital meets the definition in RCW 70.41.020;

(2) The services are medically necessary as defined under WAC 388-500-0005; and

(3) The conditions, exceptions and limitations in this chapter are met.

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NEW SECTION

WAC 388-550-1100 Hospital coverage. (1) Admission of a medical care client to a hospital shall be covered only when the admission is requested by the client's attending physician. For nonemergent hospital admissions, "attending physician" shall mean the client's primary care provider, or the primary provider of care to the patient at the time of hospitalization. For emergent admissions, "attending physician" shall mean the staff member who has hospital privileges who evaluates the client's medical condition upon the client's arrival at the hospital.

(2) In areas where the choice of hospitals is limited by managed care or selective contracting, the department shall 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 managed care plan, unless the services are excluded from the health carrier's capitation contract with the department and are covered under the medical assistance program; or

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

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

(a) An alcohol, drug addiction and treatment support act 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) The department shall cover 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 or directly supervises such services.

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

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

(7) For inpatient psychiatric admissions, whether voluntary or involuntary, see chapter 246-318 WAC.

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NEW SECTION

WAC 388-550-1200 Limitations on hospital coverage. Hospital coverage under the medical assistance program is limited for certain eligible clients, including, but not limited to, the following:

(1) Medical care clients enrolled with the department's managed care carriers as follows:

(a) Comprehensive risk contracts are subject to their respective carriers' policies and procedures regarding hospital services;

(b) Primary care case management contracts are subject to the clients' primary care physicians' approval;

(c) For emergency care exemptions, see WAC 388-538-100.

(2) The department shall limit coverage for clients eligible for the medically indigent (MI) program to emergent hospital services, subject to the conditions and limitations of WAC 388-521-2140, WAC 388-529-2950, and this chapter. The department shall not cover out-of-state hospital or other medical care for clients under the MI program.

(3) The department shall not cover out-of-state medical care for clients under the medical care services program.

(4) See WAC 388-550-1100(3) for chemical-dependent pregnant clients.

(5) The department shall limit care in a state mental institution or an approved psychiatric facility to categorically needy and medically needy clients under twenty-one years of age, or sixty-five years of age or older.

(6)(a) The department shall pay clients eligible for both Medicare and Medicaid only for their deductibles and coinsurance for hospitalization, unless the client has exhausted his or her Medicare part A benefits.

(b) If such benefits are exhausted, the department shall pay for hospitalization for such client subject to MAA rules.

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NEW SECTION

WAC 388-550-1300 Revenue code categories and subcategories. (1) For reimbursement and audit purposes, hospitals shall report and bill all services provided to a medical care client under the appropriate cost centers or revenue codes, except the following services which are subject to current procedural terminology codes and rates when provided in an outpatient setting:

(a) Laboratory/pathology;

(b) Radiology, diagnostic and therapeutic;

(c) Nuclear medicine;

(d) Computerized tomography scans, magnetic resonance imaging, and other imaging services;

(e) Physical therapy;

(f) Occupational therapy;

(g) Speech/language therapy; and

(h) Other hospital services as identified and published by the department.

(2) Revenue code categories in this chapter shall be as listed in the state of Washington's UB-92 procedure manual, implemented October 1, 1993, which was patterned after the national uniform billing data element specifications adopted by the national uniform billing committee.

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NEW SECTION

WAC 388-550-1400 Covered revenue codes for hospital services. (1) The department shall cover the following revenue code categories for both inpatient and outpatient hospitalizations:

(a) "Pharmacy," except that:

(i) Subcategories "take-home drugs," "experimental drugs," and "other pharmacy" are not covered; and

(ii) Subcategory "nonprescription" is covered for inpatients only;

(b) "Intravenous (IV) therapy," except subcategory "other IV therapy";

(c) "Medical/surgical supplies and devices," except for the following subcategories:

(i) "Take home supplies";

(ii) "Prosthetic devices";

(iii) "Oxygen - take home"; and

(iv) "Other supplies/devices."

(d) "Oncology," except subcategory "other oncology";

(e) "Respiratory services," except subcategory "other respiratory services";

(f) Subcategories "general classification" and "minor surgery" under the "operating room services" category;

(g) "Anesthesia," except subcategories "acupuncture" and "other anesthesia";

(h) "Blood storage and processing," except subcategory "other blood storage and processing";

(i) "Other imaging services," except subcategory "other image services";

(j) "Emergency room," except subcategory "other emergency room";

(k) "Pulmonary function," except subcategory "other pulmonary function";

(l) "Cardiology," except subcategory "other cardiology";

(m) "Magnetic resonance imaging (MRI)," except subcategory "other MRI";

(n) "Cast room," except subcategory "other cast room";

(o) "Recovery room," except subcategory "other recovery room";

(p) "Labor room/delivery," except for subcategories "circumcision" and "other labor room/delivery";

(q) "EKG/ECG (electrocardiogram)," except subcategory "other EKG/ECG";

(r) "EEG (electroencephalogram)," except subcategory "other EEG";

(s) "Gastrointestinal services," except subcategory "other gastroenteritises";

(t) "Treatment or observation room," except subcategory "other treatment room";

(u) "Lithotripsy," except subcategory "other lithotripsy"; and

(v) "Organ acquisition," except for subcategories "unknown donor" and "other organ."

(2) Except for certain services, such as inpatient hospice services covered by MAA pursuant to other rules, the department shall cover the following revenue code categories and/or subcategories for inpatient hospitalizations only:

(a) "Room and board - private, medical, or general," except subcategory "hospice";

(b) "Semi-private room and board" (two to four beds), except subcategory "hospice";

(c) "Nursery for newborns and premature babies";

(d) "Intensive care," except subcategory "post-ICU";

(e) "Coronary care," except subcategory "post-CCU";

(f) "Laboratory," except subcategory "renal patient (home)";

(g) "Laboratory pathological";

(h) "Radiology," both "diagnostic" and "therapeutic";

(i) "Nuclear medicine";

(j) "Physical therapy," "occupational therapy," and "speech-language therapy";

(k) "CT (computed tomographic) scans";

(l) "Operating room services," subcategories "organ transplant other than kidney" and "kidney transplant only";

(m) "Clinic," subcategory "chronic pain center" only;

(n) "Ambulance," subcategory "neonatal ambulance services (support crews)" only;

(o) "Other donor bank" category, except that subcategories "peripheral blood stem cell harvesting" and "reinfusion" are limited only to facilities approved by the medical assistance administration (MAA).

In addition to specifically excluded subcategories, the subcategory "other" in each category shall not be covered.

(3) Except for certain services, such as inpatient hospice services covered by MAA pursuant to other rules, the department shall cover the following revenue code categories for outpatient hospital services only:

(a) "Ambulatory surgical care";

(b) "Outpatient services";

(c) Subcategories "general classification" and "dental clinic," under "clinic";

(d) Subcategory "rural health clinic," under "free-standing clinic";

(e) "Drugs requiring specific identification," except covered only for certified kidney centers;

(f) "Hospice services";

(g) "Respite care";

(h) "Inpatient renal dialysis";

(i) "Hemodialysis - outpatient or home";

(j) "Peritoneal dialysis - outpatient or home";

(k) "Continuous ambulatory peritoneal dialysis - outpatient or home";

(l) "Continuous cycling peritoneal dialysis - outpatient or home";

(m) "Miscellaneous dialysis";

(n) Subcategories "education/training" and "weight loss," under the "other therapeutic services" category, except limited to facilities approved by MAA.

In addition to specifically excluded subcategories, the subcategory "other" in each category shall not be covered.

(4) The department shall cover the following revenue code categories and/or subcategories subject to the following specific limitations:

(a) The "private (deluxe)" and "room and board - ward" categories shall be reimbursed at the semi-private hospital room rates.

(b) All inpatient psychiatric services shall be subject to the policies and procedures of the mental health division, and reimbursed only to department-approved psychiatric facilities. See chapter 246-318 WAC. Inpatient psychiatric revenue codes include, but are not limited to:

(i) The subcategory "psychiatric" under all "room and board" categories;

(ii) The subcategory "psychiatric" under the "intensive care" category;

(iii) The "psychiatric/psychological treatments" category; and

(iv) The "psychiatric/psychological services" category.

(c) The department shall reimburse the subcategory "detoxification" under all room and board categories only to detoxification facilities approved by the division of alcohol and substance abuse.

(d) The subcategory "rehabilitation" under all "room and board" categories shall be reimbursed only to MAA-approved rehabilitation facilities.

(e) Only the subcategories "chemical-using pregnant women" and "administrative days" shall be covered in the "other room and board" category.

(f) Subcategory "nonprescription drugs" under the category "pharmacy" shall be covered for inpatient hospitalizations only. See WAC 388-550-1400 (1)(a)(ii). Certain exemptions apply for pregnant women as described in WAC 388-86-024 (2)(c). For coverage of nonprescription drugs, see WAC 388-530-110 and 388-530-1150.

(g) The subcategories "renal patient (home)" and "nonroutine dialysis" under category "laboratory" shall be reimbursed in the outpatient setting only to Medicare-certified kidney centers.

(h) Subcategory "chronic pain center" under the "clinic" category shall be reimbursed only to MAA-approved chronic pain treatment facilities.

(i) Only the subcategory "neonatal ambulance services (support crews)" under the "ambulance" category shall be covered, and only for inpatient hospitalizations.

(j) The category "drugs requiring specific identification" shall be reimbursed only for outpatients and only to Medicare-approved kidney centers.

(k) Subcategories "education/training" and "weight loss," under the "other therapeutic service" category, shall be reimbursed only to MAA-approved facilities.

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NEW SECTION

WAC 388-550-1500 Noncovered revenue codes. (1) Revenue code subcategories titled "other" shall not be covered by the medical assistance administration (MAA), unless otherwise specified.

(2) The department shall not cover the following revenue code categories in either an inpatient or outpatient setting:

(a) "All-inclusive rate";

(b) "Other room and board," except as indicated in WAC 388-550-1400 (4)(e);

(c) "Leave of absence";

(d) "Not assigned" (all such categories);

(e) "Special charges";

(f) "Incremental nursing charge rate";

(g) "All-inclusive ancillary";

(h) "Pharmacy" subcategories for "take home" and "experimental drugs";

(i) "Durable medical equipment (other than renal)";

(j) "Blood" (and blood products);

(k) "Audiology";

(l) "Clinic," except as specified in WAC 388-550-1400 (3)(c);

(m) "Free-standing clinic," except as specified in WAC 388-550-1400 (3)(d);

(n) "Osteopathic services";

(o) "Ambulance," except as specified in WAC 388-550-1400 (4)(i);

(p) "Skilled nursing";

(q) "Medical social services";

(r) "Home health aide (home health)" and "other visits (home health)";

(s) "Units of service (home health)";

(t) "Oxygen (home health)";

(u) "Medicare/surgical supplies";

(v) "Home IV therapy services";

(w) "Preventive care services";

(x) "Other diagnostic services";

(y) "Professional fees" (all such categories); and

(z) "Patient convenience items."

(3) The department shall not cover the following subcategories in the "other therapeutic service" category:

(a) "General classification";

(b) "Recreational therapy";

(c) "Cardiac rehabilitation";

(d) "Drug rehabilitation," except under the chemically-using pregnant (CUP) women program;

(e) "Alcohol rehabilitation," except under the CUP program; and

(f) "Air fluidized support beds."

(4) The department shall not cover the following subcategories under the "free-standing clinic" category:

(a) "General classification";

(b) "Rural health - home";

(c) "Family practice"; and

(d) "Other clinic."

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NEW SECTION

WAC 388-550-1600 Specific items/services not covered. The department shall not cover certain hospital items/services for any hospital stay including, but not limited to, the following:

(1) Personal care items such as, but not limited to, slippers, toothbrush, comb, hair dryer, and make-up;

(2) Telephone/telegraph services or television/radio rentals;

(3) Medical photographic or audio/videotape records;

(4) Crisis counseling;

(5) Psychiatric day care;

(6) Ancillary services, such as respiratory and physical therapy, performed by regular nursing staff assigned to the floor or unit;

(7) Standby personnel and travel time;

(8) Routine hospital medical supplies and equipment such as bed scales;

(9) Handling fees and portable X-ray charges;

(10) Room and equipment charges ("rental charges") for use periods concurrent with another room or similar equipment for the same client;

(11) Cafeteria charges;

(12) Services and supplies provided to nonpatients, such as meals and "father packs"; and

(13) Standing orders. The department shall cover routine tests and procedures only if the department determines such services are medically necessary, according to the following criteria. The procedure or test:

(a) Is specifically ordered by the admitting physician or, in the absence of the admitting physician, the hospital staff having responsibility for the client (e.g., physician, advanced registered nurse practitioner, or physician assistant);

(b) Is for the diagnosis or treatment of the individual's condition; and

(c) Does not unnecessarily duplicate a test available or made known to the hospital which is performed on an outpatient basis prior to admission; or

(d) Is performed in connection with a recent admission.

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NEW SECTION

WAC 388-550-1700 Hospital services--Prior approval. (1) Providers of hospital-related services to clients not enrolled with the department's managed care carriers shall obtain prior approval from the medical assistance administration (MAA) for hospital services requiring prior approval. For inpatient psychiatric admissions and inpatient treatment for alcohol and other substance abuse, see chapter 246-318 and 246-326 WAC respectively.

(2) The department shall require that for medical care clients not enrolled with the department's managed care carriers, providers receive prior approval from the department for the following hospital-related services:

(a) All nonemergent admissions to or planned inpatient hospital surgeries in nonparticipating hospitals in selective contracting areas;

(b) Inpatient detoxification, medical stabilization, and drug treatment for a pregnant Medicaid client as described under WAC 388-550-1100(3);

(c) Cataract surgery that does not meet requirements in WAC 388-86-030;

(d) The following surgical procedures, regardless of the diagnosis or place of service:

(i) Hysterectomies for clients forty-four years and younger;

(ii) Reduction mammoplasty; and

(iii) Surgical bladder repair.

(e) All physical medicine and rehabilitation (PM&R) inpatient hospital stays, even when provided by MAA-approved PM&R contract facilities (see WAC 388-550-2300);

(f) All outpatient magnetic resonance imaging and magnetic resonance angiography procedures;

(g) All nonemergent inpatient hospital transfers (see WAC 388-550-3600);

(h) All out-of-state non-emergent hospital stays;

(i) Hospital-related services as described in WAC 388-550-1800 when not provided in an MAA-approved facility; and

(j) Services in excess of the department's established limits.

(3) The department shall inform providers which diagnosis codes from the International Classification of Diseases, 9th Revision, Clinical Modification and procedure codes from physicians' current procedural terminology require prior authorization for nonemergent hospital admissions.

(4) When a client's hospitalization exceeds the number of days allowed by WAC 388-550-4300(2):

(a) The hospital shall, within sixty days after discharge, submit to MAA a request for authorization of the extra days with adequate medical justification, to include at a minimum the following:

(i) History and physical examination;

(ii) Social history;

(iii) Progress notes and doctor's orders for the entire length of stay;

(iv) Treatment plan/critical pathway; and

(v) Discharge summary.

(b) The department shall approve or deny a length of stay extension request within fifteen working days of receiving the request.

(5) The department shall require prior approval for out-of-state hospital admissions of clients not enrolled with department's managed care carriers, except for emergent hospitalizations. The department shall inform providers which codes from the current revision of ICD-9CM are designated as emergent diagnosis codes. The nature of the client's emergent medical condition must be fully documented in the client's hospital's records.

(6) The department shall not reimburse ambulance providers for ambulance transports in cases involving hospital transfers without prior authorization by the department.

(7) The department shall require that providers receive prior approval from the department for medical transportation to out-of-state treatment programs or services authorized by the department for clients not enrolled with the department's managed care carriers.

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NEW SECTION

WAC 388-550-1750 Services requiring approval. (1) The department shall require that for medical services clients not enrolled with the department's managed care carriers, providers receive approval from the department for the following:

(a) Hospital length-of-stay extensions, in order for the provider to receive payment for the additional hospital days;

(b) All hospital readmissions within seven days of discharge; and

(c) All hospitalizations billed under "miscellaneous diagnosis-related group (DRG)," four hundred sixty-eight.

(2) Providers shall obtain approval for:

(a) Length-of-stay extensions, during or immediately after the extension;

(b) Readmissions, immediately after the readmission; and

(c) Hospitalizations under "miscellaneous DRG," four hundred sixty-eight, immediately after the hospitalization.

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NEW SECTION

WAC 388-550-1800 Services--Contract facilities. The department shall reimburse certain services without requiring prior authorization when such services are provided in medical assistance administration (MAA)-approved contract facilities. These services include, but are not limited to, the following:

(1) All transplant procedures specified in WAC 388-550-1900(2);

(2) Chronic pain management services, including outpatient evaluation and inpatient treatment, as described under WAC 388-550-2400;

(3) Polysomnograms and multiple sleep latency tests for clients one year of age and older (allowed only in outpatient hospital settings), as described under WAC 388-550-6350;

(4) Diabetes education (allowed only in outpatient hospital setting), as described under WAC 388-550-6400; and

(5) Weight loss program (allowed only in outpatient hospital setting), as described under WAC 388-550-6450.

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NEW SECTION

WAC 388-550-1900 Transplant coverage. (1) The department shall pay for transplant procedures only for eligible clients who:

(a) Meet the criteria in WAC 388-550-2000; and

(b) Are not otherwise subject to a managed care plan.

(2) The department shall cover the following transplant procedures:

(a) Solid organs involving the heart, kidney, liver, lung, heart-lung, pancreas, kidney-pancreas;

(b) Bone marrow and peripheral stem cell (PSC);

(c) Skin grafts; and

(d) Corneal transplants.

(3) For procedures covered under subsections (2)(a) and (b) of this section, the department shall pay facility charges only to those medical centers that meet the standards and conditions:

(a) Established by the department; and

(b) Specified in WAC 388-550-2100 and 388-550-2200.

(4) The department shall pay facility charges for skin grafts and corneal transplants to any qualified medical facility, subject to the limitations in this chapter.

(5) The department shall deem organ procurement fees included in the reimbursement to the transplant facility. The department may make an exception to this policy and reimburse these fees separately to a transplant facility when an eligible medical care client is covered by a third-party payer which will pay for the organ transplant procedure itself but not for the organ procurement.

(6) The department shall, without requiring prior authorization, pay for up to fifteen matched donor searches per client approved for a bone marrow transplant. The department shall require prior authorization for matched donor searches in excess of fifteen per bone marrow transplant client.

(7) The department shall not pay for experimental transplant procedures. In addition, the department shall consider experimental those services including, but not limited to, the following:

(a) Transplants of three or more different organs during the same hospital stay;

(b) Solid organ and bone marrow transplants from animals to humans; and

(c) Transplant procedures used in treating certain medical conditions for which use of the procedure has not been generally accepted by the medical community or for which its efficacy has not been documented in peer-reviewed medical publications.

(8) The department shall pay for a solid organ transplant procedure only once per client's lifetime, except in cases of organ rejection by the client's immune system during the original hospital stay. The department shall cover bone marrow, PSC, skin grafts and corneal transplants whenever medically necessary.

(9) In reviewing coverage for transplant services, the department shall consider cost benefit analyses on a case-by-case basis.

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NEW SECTION

WAC 388-550-2000 Medical criteria--Transplant services. (1) The department shall pay for transplant surgery in accordance with the provisions of this chapter for an eligible client who has:

(a) End-stage organ disease, except end-stage renal disease and diseases treatable with bone marrow or peripheral stem cell (PSC) transplants;

(b) A critical medical need for a transplant and a poor prognosis for survival without one, except for kidney, skin graft, or corneal transplants;

(c) Tried all other appropriate medical and surgical therapies that customarily yield both short and long term survival comparable to that of a transplant;

(d) Been identified by the transplant facility as a candidate for whom the transplant, as a therapy, has a high probability of a successful clinical outcome, defined as a better than sixty percent survival rate after one year; and

(e) Agreed to long-term adherence to a disciplined medical regimen.

(2) Medical care clients enrolled with the department's managed care carriers shall be subject to their respective carriers' criteria and policies.

(3) The department shall not cover transplant procedures for clients with the following medical conditions:

(a) An irreversible terminal state in which the client has had multi-organ system failure, is moribund, or on life support, defined as mechanical systems such as ventilators or heart-lung respirators which are used to supplement or supplant the normal autonomic functions of a person;

(b) Current active and incurable or metastatic malignancy within other organ systems;

(c) An active infection that will interfere with the client's recovery;

(d) Irreversible renal or hepatic disease that substantially affects longevity. MAA shall exempt from this criterion clients requesting a kidney, liver, bone marrow, PSC, skin graft or corneal transplant;

(e) Significant atherosclerotic vascular disease or atherosclerotic coronary disease that substantially affects longevity. MAA shall not apply this criterion to clients requesting a heart, bone marrow, PSC, skin graft or corneal transplant;

(f) Any other major irreversible disease likely to substantially limit life expectancy to three years or less;

(g) Inability to follow a drug regimen or maintain necessary therapies and/or other prescribed health care regimens;

(h) Ventilator dependence, except when used in short-term, acute situations. The department shall not consider ventilator dependence for transplants involving bone marrow, PSC, skin or cornea;

(i) Current use or history within the past year of alcohol or substance abuse and/or smoking, or failure to have abstained for long enough to indicate low likelihood of recidivism; and

(j) A history of behavior pattern or psychiatric illness that has not been assessed, treated or considered stable, that would likely lead to nonconformance or interference with a disciplined medical regimen.

(4) The department may deny coverage for corneal transplants for clients with an associated disease severe enough to prevent visual improvement, such as macular degeneration or diabetic retinopathy.

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NEW SECTION

WAC 388-550-2100 Requirements--Transplant facilities. (1) The department shall require a transplant facility to meet the following requirements in order to be reimbursed for transplant services provided to medical care clients. The facility shall have:

(a) An approved certificate of need (CON) from the state department of health (DOH) for the type(s) of transplant procedure(s) to be performed, except that MAA shall not require CON approval for peripheral stem cell (PSC), skin graft and corneal transplant facilities;

(b) Approval from the United Network of Organ Sharing (UNOS) to perform transplants, except that MAA shall not require UNOS approval for PSC, skin graft and corneal transplant facilities; and

(c) Been approved by the department as a center of excellence transplant center for the specific organ(s) or procedure(s) the facility proposes to perform. An out-of-state transplant center shall be a Medicare-certified facility participating in that state's Medicaid program.

(2) The department shall consider a facility for approval as a transplant center of excellence when the facility submits to the department a copy of its DOH-approved CON for transplant services, or documentation that it has, at a minimum:

(a) Organ-specific transplant physicians for each organ or transplant team. The transplant surgeon and other responsible team members shall be experienced and board-certified or board-eligible practitioners in their respective disciplines, including, but not limited to, the fields of cardiology, cardiovascular surgery, anesthesiology, hemodynamics and pulmonary function, hepatology, hematology, immunology, oncology, and infectious diseases. The department shall consider this requirement met when the facility submits to the department a copy of its DOH-approved CON for transplant services;

(b) Component teams which are integrated into a comprehensive transplant team with clearly defined leadership and responsibility. Transplant teams shall include, but not be limited to:

(i) A team-specific transplant coordinator for each type of organ;

(ii) An anesthesia team available at all times;

(iii) A nursing service team trained in the hemodynamic support of the patient and in managing immunosuppressed patients;

(iv) Pathology resources for studying and reporting the pathological responses of transplantation;

(v) Infectious disease services with both the professional skills and the laboratory resources needed to discover, identify, and manage a whole range of organisms; and

(vi) Social services resources.

(c) An organ procurement coordinator;

(d) A method ensuring that transplant team members are familiar with transplantation laws and regulations;

(e) An interdisciplinary body and procedures in place to evaluate and select candidates for transplantation;

(f) An interdisciplinary body and procedures in place to ensure distribution of donated organs in a fair and equitable manner conducive to an optimal or successful patient outcome;

(g) Extensive blood bank support;

(h) Patient management plans and protocols;

(i) Written policies safeguarding the rights and privacy of patients; and

(j) Satisfied the annual volume and survival rates criteria for the particular transplant procedures performed at the facility, as specified in WAC 388-550-2200(2).

(3) In addition to the requirements of subsection (2) of this section, a facility being considered for approval as a transplant center of excellence shall submit a copy of its approval from the United Network for Organ Sharing (UNOS), or documentation showing that the facility:

(a) Participates in the national donor procurement program and network; and

(b) Systematically collects and shares data on its transplant program(s) with the network.

(4) The department shall apply the following specific requirements to PSC transplant facilities:

(a) A PSC transplant facility may receive approval from the department to do PSC:

(i) Harvesting, if it has its own apheresis equipment which meets federal or American Association of Blood Banks (AABB) requirements;

(ii) Processing, if it meets AABB quality of care requirements for human tissue/tissue banking; and/or

(iii) Reinfusion, if it meets the criteria established by the Foundation for the Accreditation of Hematopoietic Cell Therapy.

(b) A hospital may purchase PSC processing and harvesting services from other department-approved processing providers.

(c) The department shall not reimburse a PSC transplant facility for AABB inspection and certification fees related to PSC transplant services.

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NEW SECTION

WAC 388-550-2200 Transplant requirements--COE. (1) The department shall measure the effectiveness of transplant centers of excellence (COE) using the performance criteria in this section. Unless otherwise waived by the department, the department shall apply these criteria to a facility during both initial and periodic evaluations for designation as a transplant COE. The COE performance criteria shall include, but not be limited to:

(a) Meeting annual volume requirements for the specific transplant procedures for which approved;

(b) Patient survival rates; and

(c) Relative cost per case.

(2) A transplant COE shall meet or exceed annually the following applicable volume criteria for the particular transplant procedures performed at the facility, except for cornea transplants which do not have established minimum volume requirements. Annual volume requirements for transplant centers of excellence include:

(a) Twelve or more heart transplants;

(b) Ten or more lung transplants;

(c) Ten or more heart-lung transplants;

(d) Twelve or more liver transplants;

(e) Twenty-five or more kidney transplants;

(f) Eighteen or more pancreas transplants;

(g) Eighteen or more kidney-pancreas transplants;

(h) Ten or more bone marrow transplants; and

(i) Ten or more peripheral stem cell (PSC) transplants.

Dual-organ procedures may be counted once under each organ and the combined procedure.

(3) A transplant facility within the state that fails to meet the volume requirements in subsection (1) of this section may submit a written request to the department for conditional approval as a transplant center of excellence. The department shall consider the minimum volume requirement met when the requestor submits an approved certificate of need for transplant services from the state department of health.

(4) An in-state facility granted conditional approval by the department as a transplant center of excellence shall meet the department's criteria, as established in this chapter, within one year of the conditional approval. The department shall automatically revoke such conditional approval for any facility which fails to meet the department's published criteria within the allotted one year period, unless:

(a) The facility submits a written request for extension of the conditional approval thirty calendar days prior to the expiration date; and

(b) Such request is granted by the department.

(5) A transplant center of excellence shall meet Medicare's survival rate requirements for the transplant procedure(s) performed at the facility.

(6) A transplant center of excellence shall submit to the department annually, at the same time the hospital submits a copy of its Medicare Cost Report (HCFA 2552 report) documentation showing:

(a) The numbers of transplants performed at the facility during its preceding fiscal year, by type of procedure; and

(b) Survival rates data for procedures performed over the preceding three years as reported on the United Network of Organ Sharing report form.

(7)(a) Transplant facilities shall submit to the department, within sixty days of the date of the facility's approval as a center of excellence, a complete set of the comprehensive patient selection criteria and treatment protocols used by the facility for each transplant procedure it has been approved to perform.

(b) The facility shall submit to the department updates to said documents annually thereafter, or whenever the facility makes a change to the criteria and/or protocols.

(c) If no changes occurred during a reporting period the facility shall so notify the department to this effect.

(8) The department shall evaluate compliance with the provisions of WAC 388-550-2100 (2)(d) and (e) based on the protocols and criteria submitted to the department by transplant centers of excellence in accordance with subsection (7) of this section. The department shall terminate a facility's designation as a transplant center of excellence if a review or audit finds that facility in noncompliance with:

(a) Its protocols and criteria in evaluating and selecting candidates for transplantation; and

(b) Distributing donated organs in a fair and equitable manner that promotes an optimal or successful patient outcome.

(9)(a) The department shall provide transplant centers of excellence it finds in noncompliance with subsection (8) of this section sixty days within which such centers may submit a plan to correct a breach of compliance;

(b) The department shall not allow the sixty-day option as stated in (a) of this subsection for a breach that constitutes a danger to the health and safety of clients as stated in WAC 388-87-005 (3)(d);

(c) Within six months of submitting a plan to correct a breach of compliance, a center shall report to the department showing:

(i) The breach of compliance has been corrected; or

(ii) Measurable and significant improvement toward correcting such breach of compliance.

(10) The department shall periodically review the list of approved transplant centers of excellence. The department may limit the number of facilities it designates as transplant centers of excellence or contracts with to provide services to medical care clients if, in the department's opinion, doing so would promote better client outcomes and cost efficiencies.

(11) The department shall reimburse department-approved centers of excellence for covered transplant procedures using any of the methods identified in chapter 388-550 WAC.

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NEW SECTION

WAC 388-550-2400 Chronic pain management program. (1)(a) The department shall cover inpatient chronic pain management training to assist eligible clients to manage chronic pain.

(b) The department shall pay for only one inpatient hospital stay, up to a maximum of twenty-one days, for chronic pain management training per eligible client's lifetime.

(c) Refer to WAC 388-550-1700 (2)(i) and 388-550-1800 for prior authorization.

(2) The department shall reimburse approved chronic pain management facilities an all-inclusive per diem facility fee under the revenue code published in the department's chronic pain management fee schedule. MAA shall reimburse professional fees for chronic pain management services to performing providers in accordance with the department's fee schedule.

(3) The department shall not reimburse a contract facility for unrelated services provided during the client's inpatient stay for chronic pain management, unless the facility requested and received prior approval from the department for those services.

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NEW SECTION

WAC 388-550-2500 Inpatient hospice services. (1) The department shall reimburse hospice agencies participating in the medical assistance program for general inpatient and inpatient respite services provided to clients in hospice care, when:

(a) The hospice agency coordinates the provision of such inpatient services; and

(b) Such services are related to the medical condition for which the client sought hospice care.

(2) Hospice agencies shall bill the department for their services using revenue codes. The department shall reimburse hospice providers a set per diem fee according to the type of care provided to the client on a daily basis.

(3) The department shall reimburse hospital providers directly pursuant to this chapter for inpatient care provided to clients in the hospice program for medical conditions not related to their terminal illness.

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NEW SECTION

WAC 388-550-2600 Inpatient psychiatric services. For psychiatric hospitalizations, including involuntary admissions, see chapter 246-318 WAC.

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NEW SECTION

WAC 388-550-2700 Substance abuse detoxification services. For hospital-based alcohol and/or drug detoxification services, see chapter 246-326 WAC.

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NEW SECTION

WAC 388-550-2750 Hospital discharge planning services. For discharge planning service requirements, see chapter 246-318 WAC.

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NEW SECTION

WAC 388-550-2800 Establishing inpatient payment rates. (1) Inpatient hospital services shall be reimbursed using the methodologies identified by the department in its approved state plan. In determining a hospital's basic payment rate, the department shall use either:

(a) A negotiated conversion factor, for hospitals participating in the federally waivered Medicaid hospital selective contracting program;

(b) A cost-based conversion factor, for hospitals not located in selective contracting areas and for hospitals and/or services exempt from selective contracting; or

(c) The ratio of cost to charge, for hospitals and services exempt from conversion factor-based payment methods, as described in WAC 388-550-4200 and WAC 388-550-4300.

(2) As required by 42 CFR 447.271, the department's total annual aggregate Medicaid payments to each hospital for inpatient hospital services provided to Medicaid clients shall not exceed the hospital's customary charges to the general public for the services. The department will recoup amounts of total annual aggregate Medicaid payments in excess of such charges.

(3) The department's annual aggregate payments for inpatient hospital services, including annual aggregate payments to state-operated hospitals, shall not exceed amounts that can reasonably be estimated would have been paid under the Medicare payment principles.

(4) Reimbursement to a hospital shall not increase by more than the amount allowed under 42 U.S.C. Section 1385x (v)(1)(O) as a result of a change of ownership.

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

(a) A copy of their HCFA 2552 uniform cost report; and

(b) A disproportionate share hospital application with the department. Participating providers shall permit the department to conduct periodic audits of their financial and statistical records.

(6) The reports referred to in subsection (5) of this section shall be completed in accordance with Medicare cost reporting requirements, the provisions of this chapter, and such instructions as may be issued by the department from time to time. Unless federally or state-regulated or instructed by the department, providers shall follow generally accepted accounting principles.

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NEW SECTION

WAC 388-550-2900 Payment limits--Inpatient hospital services. (1) The department shall pay covered inpatient hospital services only to:

(a) General hospitals that meet the definition in RCW 70.41.020;

(b) Inpatient psychiatric facilities and alcohol or drug treatment centers approved by the department; and

(c) Out-of-state hospital providers subject to conditions specified in WAC 388-550-6700.

(2) The department shall not pay for hospital care and/or services provided to a client enrolled with a department-contracted managed care carrier, unless the medical assistance administration (MAA) specifically authorized the provision of and payment for a service not covered by the health carrier's capitation contract with the department but covered under the client's medical assistance program.

(3) The department shall not pay a hospital for care or services provided to a client enrolled in the hospice program, except as provided under WAC 388-550-2500(3).

(4) The department shall not pay hospitals for inpatient ancillary services in addition to the diagnosis-related group (DRG) payment. The DRG payment includes ancillary services which 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 the department nor the client shall be 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 department approval for the LOS extension, as specified in WAC 388-550-1700 (3)(a).

(6) The LOS limit for a hospitalization shall be 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.

(7) Neither the department nor the client shall be responsible for payment of elective or nonemergent inpatient services included in the department's selective contracting program and received in a nonparticipating hospital in a selective contracting area (SCA) unless the provider received prior approval from the department as required by WAC 388-550-1700 (2)(a). The client, however, may be held responsible for payment of such services if he or she contracts in writing with the hospital at least seventy-two hours in advance of the hospital admission to be responsible for payment. See WAC 388-550-4600, Selective contracting program.

(8) The department shall consider hospital stays of twenty-four hours or less short stays, and shall not pay such stays under the DRG methodology, except that stays of twenty-four hours or less involving the following situations shall be paid under the DRG system:

(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-charge (RCC) method, the department shall not pay for inpatient hospital services provided more than one day prior to the date of a scheduled or elective surgery, nor shall these services be charged to the client.

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

(c) The department shall not count toward the threshold for hospital outlier status:

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

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

(10) The department shall apply the following rules to RCC cases and high-cost DRG outlier cases for costs over the high-cost outlier threshold:

(a) The department shall pay hospitals for accommodation costs at the multiple occupancy rate even when a private room is provided to the client. The department shall pay accommodation costs at the semi-private or ward room rate, consistent with the type of accommodations provided.

(b) The department shall cover hospital stat charges only for specific laboratory procedures determined and published by the department as qualified stat procedures. The department shall not automatically treat tests generated in the emergency room as justifying a stat order.

(c) The department shall reimburse hospitals for special care charges only when:

(i) The hospital has a department of health (DOH) or Medicare-qualified 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-qualified; and

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

(11) The department shall determine its actual payment for a hospital admission by deducting from the basic hospital payment those charges which are the client's responsibility, referred to as spend-down, or a third party's liability.

(12) The department shall reduce reimbursement rates to hospitals for services provided to MI/medical care services clients according to the individual hospital's ratable and/or equivalency factors, as provided in WAC 388-550-4800.

(13) The department shall pay for the hospitalization of a client who is eligible for Medicare and Medicaid only when the client has exhausted his or her Medicare part A benefits, including the nonrenewable lifetime hospitalization reserve of sixty days.

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NEW SECTION

WAC 388-550-3000 DRG payment system. (1) Except where otherwise specified, the department shall use the diagnosis-related group (DRG) system, which categorizes patients into clinically coherent and homogenous groups with respect to resource use, as the reimbursement method for inpatient hospital services.

(2) The department shall periodically evaluate which all-patient grouper (AP-DRG) version to use.

(3)(a) The department shall calculate the DRG payment for a particular hospital by multiplying the assigned DRG's relative weight, as determined in WAC 388-550-3100, for that admission by the hospital's cost-based conversion factor, as determined in WAC 388-550-3450.

(b) If the hospital is participating in the selective contracting program, the department shall multiply the DRG relative weight for the admission by the hospital's negotiated conversion factor, as specified in WAC 388-550-4600(4).

(4)(a) The department shall pay for a hospital readmission within seven days of discharge for the same client when department review concludes the readmission did not occur as a result of premature hospital discharge.

(b) When a client is readmitted to the same hospital within seven days of discharge, and department review concludes the readmission resulted from premature hospital discharge, the department shall treat the previous and subsequent admissions as one hospital stay and pay a single DRG for the combined stay.

(5) If two different DRG assignments are involved in a readmission as described in subsection (4) of this section, the department shall review the hospital's records to determine the appropriate reimbursement.

(6) The department shall recognize Medicare's DRG payment for a Medicare-Medicaid dually eligible client to be payment in full.

(a) The department shall pay the Medicare deductible and co-insurance related to the inpatient hospital services provided to clients eligible for Medicare and Medicaid.

(b) The department shall ensure total Medicare and Medicaid payments to a provider for such client does not exceed Medicare's maximum allowable charges.

(c) The department shall pay for those allowed charges beyond the threshold using the outlier policy described in WAC 388-550-3700 in cases where:

(i) Such client's Medicare part A benefits including lifetime reserve days are exhausted; and

(ii) The Medicaid outlier threshold status is reached.

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NEW SECTION

WAC 388-550-3100 Calculating DRG relative weights. (1) The department shall set Washington Medicaid-specific diagnosis-related group (DRG) relative weights, as follows:

(a) The department shall classify Washington Medicaid hospital admissions data and the hospital admissions data in the Washington state department of health's comprehensive hospital abstract reporting system (CHARS), using the all-patient grouper (AP-DRG).

(b) The department shall test each DRG statistically for adequacy of sample size to ensure that relative weights meet acceptable reliability and validity standards.

(c) The department shall establish relative weights from Washington Medicaid hospital admissions data. These relative weights may be stable or unstable.

(d) The department shall establish relative weights from CHARS-derived data which include Medicaid data. These relative weights may be stable or unstable.

(e) The department shall test the stability of Washington Medicaid relative weights established in subsection (1)(c) of this section using the null hypothesis test at seventy-five percent confidence interval. The department shall accept as stable and adopt those Washington Medicaid relative weights that pass the null hypothesis test.

(f) The department shall test the stability of CHARS-derived relative weights established in subsection (1)(d) of this section using the same procedure as in subsection (e) of this section. The department shall replace unstable Washington Medicaid relative weights with stable CHARS-derived relative weights.

(g) The department shall replace remaining unstable Washington Medicaid relative weights with New York proxy relative weights. For the purposes of this chapter, remaining unstable Washington Medicaid relative weights are those that fail the null hypothesis test and for which there are no stable CHARS-derived relative weight replacements.

(2) Using ratios with a Washington Medicaid relative weight as base, the department shall:

(a) Standardize the relative weights by adjusting the CHARS and New York proxy relative weights; and

(b) Assure all Medicaid stable and proxy weights equal a statement case mix of 1.0.

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NEW SECTION

WAC 388-550-3150 Base period costs and claims data. (1) The department shall set a hospital's cost-based conversion factor using base period cost data from its Medicare cost report (Form HCFA 2552) for its fiscal year corresponding with the base period.

(2) The department shall use in rate-setting only base period cost data that have been desk reviewed and/or field audited by the Medicare intermediary.

(3) The department shall, to the extent feasible, factor out of a hospital's base period cost data nonallowable hospital charges associated with the items/services listed in WAC 388-550-1600(1) before calculating the hospital's conversion factor.

(4) The department shall use the figures for total costs, capital costs, and direct medical education costs from a hospital's HCFA 2552 report in calculating that hospital's allowable costs for each of the thirty-eight categories of cost/revenue centers, listed in subsections (5) and (6) below, used to categorize Medicaid claims.

(5) The department shall use nine categories to assign a hospital's accommodation costs and days of care. These accommodation categories are:

(a) Routine;

(b) Intensive care;

(c) Intensive care-psychiatric;

(d) Coronary care;

(e) Nursery;

(f) Neonatal intensive care unit;

(g) Alcohol/substance abuse;

(h) Psychiatric; and

(i) Oncology.

(6) The department shall use twenty-nine categories to assign ancillary costs and charges. These ancillary categories are:

(a) Operating room;

(b) Recovery room;

(c) Delivery/labor room;

(d) Anesthesiology;

(e) Radiology-diagnostic;

(f) Radiology-therapeutic;

(g) Radioisotope;

(h) Laboratory;

(i) Blood storage;

(j) Intravenous therapy;

(k) Respiratory therapy;

(l) Physical therapy;

(m) Occupational therapy;

(n) Speech pathology;

(o) Electrocardiography;

(p) Electroencephalography;

(q) Medical supplies;

(r) Drugs;

(s) Renal dialysis;

(t) Ancillary oncology;

(u) Cardiology;

(v) Ambulatory surgery;

(w) Computerized tomography scan/magnetic resonance imaging;

(x) Clinic;

(y) Emergency;

(z) Ultrasound;

(aa) Neonatal intensive care unit transportation;

(bb) Gastrointestinal laboratory; and

(cc) Miscellaneous.

(7) The department shall:

(a) Extract from the Medicaid Management Information System all Medicaid paid claims data for each hospital's base year;

(b) Assign line item charges from the paid hospital claims to the appropriate accommodation and ancillary cost center categories; and

(c) Use the cost center categories to apportion Medicaid costs.

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NEW SECTION

WAC 388-550-3200 Medicaid cost proxies. (1) For cases in which a hospital has Medicaid charges (claims) for certain accommodation or ancillary cost centers which are not separately reported on its Medicare cost report, the department shall establish cost proxies to estimate such costs in order to ensure recognition of Medicaid related costs.

(2) The department shall develop per diem proxies for accommodation cost centers using the median value of the hospital's per diem cost data within the affected hospital peer group.

(3) The department shall develop ratio of cost-to-charge (RCC) proxies for ancillary cost centers using the median value of the hospital's RCC data within the affected hospital peer group.

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NEW SECTION

WAC 388-550-3250 Indirect medical education costs. (1) For a hospital with a graduate medical education program, the department shall remove indirect medical education-related costs from the aggregate operating and capital costs of each hospital in the peer group before calculating a peer group's cost cap.

(2) To arrive at indirect medical education costs for each component, the department shall:

(a) Multiply Medicare's indirect cost factor of 0.579 by the ratio of the number of interns and residents in the hospital's approved teaching programs to the number of hospital beds; and

(b) Multiply the product obtained in subsection (2)(a) of this section by the hospital's operating and capital components.

(3) After the peer group's cost cap has been calculated, the department shall add back to the hospital's aggregate costs its indirect medical education costs. See WAC 388-550-3450(6).

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NEW SECTION

WAC 388-550-3300 Hospital peer groups and cost caps. (1) For rate-setting purposes the department shall group hospitals into peer groups and establish cost caps for each peer group. The department shall set hospital reimbursement rates at levels that recognize the cost of reasonable, efficient, and effective providers.

(2) The department shall use the Washington state department of health's (DOH) four hospital peer groupings for rate-setting purposes. The four 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 a cost cap at the seventieth percentile for a peer group.

(a) The department shall cap 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 peer group A hospitals from the cost cap because they are paid under the ratio of cost-to-charge methodology.

(c) The department shall exempt 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 a peer group's cost cap based on the hospitals' base period cost after subtracting:

(a) Indirect medical education costs, as determined in 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 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 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 changes in peer group status as a result of DOH approval or recommendation. However, in cases where corrections or changes in individual hospitals' base-year cost or peer group assignment occur after peer group cost caps are calculated, the department shall update the peer group cost caps involved only if the change in the individual hospital's base-year cost or peer group assignment would result in a five percent or greater change in the seventieth percentile of costs calculated for its peer group.

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NEW SECTION

WAC 388-550-3350 Outlier costs. (1)(a) The department shall remove the cost of low- and high-cost outlier cases from individual hospitals' aggregate costs before calculating the peer group cost cap.

(b) After this initial step, all subsequent calculations involving outliers in subsections (2) through (5) of this section pertain only to high-cost outliers.

(c) For a definition of outliers see WAC 388-550-1050, Definitions.

(2) After an individual hospital's base period costs and its peer group cost cap are determined, the department shall add the individual hospital's indirect medical education costs and an outlier cost adjustment back to:

(a) The lesser of the hospital's calculated aggregate cost; or

(b) The peer group's seventieth percentile cost cap.

(3) The outlier cost adjustment is determined as follows to reduce the original high-cost outlier amount in proportion to the reduction in the hospital's base period costs as a result of the capping process:

(a) If the individual hospital's aggregate operating, capital, and direct medical education costs for the base period are less than the seventieth percentile costs for the peer group, the entire high-cost outlier amount is added back.

(b) A reduced high-cost outlier amount is added back if:

(i) The individual hospital's aggregate base period costs are higher than the seventieth percentile for the peer group; and

(ii) The hospital is capped at the seventieth percentile.

(iii) The amount of the outlier added back is determined by multiplying the original high-cost outlier amount by the percentage obtained when the hospital's final cost cap, which is the peer group's seventieth percentile cost, is divided by its uncapped base period costs, as determined in WAC 388-550-3300(4).

(4) The department shall pay high-cost outlier claims from the outlier set-aside pool. The department shall calculate an individual hospital's high-cost outlier set-aside as follows:

(a) For each hospital, the department extracts utilization and paid claims data from the Medicaid Management Information System (MMIS) for the most recent twelve-month period for which the department estimates the MMIS has complete payment information.

(b) Using the data in (a) of this subsection, the department determines the projected annual amount above the high-cost DRG outlier threshold that the department paid to each hospital.

(c) The department's projected high-cost outlier payment to the hospital determined in (b) of this subsection is divided by the department's total projected annual DRG payments to the hospital to arrive at a hospital-specific high-cost outlier percentage. This percentage becomes the hospital's outlier set-aside factor.

(5) The department shall use the individual hospital's outlier set-aside factor to reduce the hospital's CBCF by an amount that goes into a set-aside pool to pay for all high-cost outlier cases during the year. The department shall fund the outlier set-aside pool on hospitals' prior high-cost outlier experience. No cost settlements shall be made to hospitals for outlier cases.

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NEW SECTION

WAC 388-550-3400 Case-mix index. (1)(a) The department shall adjust hospital costs for case mix under the diagnosis-related group (DRG) payment systems.

(b) The department shall calculate a case-mix index (CMI) for each individual hospital to measure the relative cost for treating Medicaid cases in a given hospital.

(2) The department shall calculate the CMI for each hospital using Medicaid admissions data from the individual hospital's base period cost report, as described in WAC 388-550-3150. The hospital-specific CMI is calculated as follows:

(a) The department shall multiply the number of Medicaid admissions to the hospital for a specific DRG by the relative weight for that DRG. The department shall repeat this process for each DRG billed by the hospital.

(b) The department shall add together the products in (a) of this subsection for all of the Medicaid admissions to the hospital in the base year.

(c) The department shall divide the sum obtained in (b) of this subsection by the corresponding number of Medicaid hospital admissions.

(d) Example: If the average case mix index for a group of hospitals is 1.0, a CMI of 1.0 or greater for a hospital in that group means that the hospital has treated a mix of patients in the more costly DRGs. A CMI of less than 1.0 indicates a mix of patients in the less costly DRGs.

(3) The department shall recalculate each hospital's case mix index periodically, but no less frequently than each time rebasing is done.

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NEW SECTION

WAC 388-550-3450 Payment method--CBCF rate calculation. (1)(a) The department shall use each hospital's base period cost data to calculate the hospital's total operating, capital, and direct medical education costs for each of the nine accommodation categories described in WAC 388-550-3150(5).

(b) The department shall divide operating, capital, and direct medical education costs by total hospital days per category to arrive at a per day accommodation cost.

(c) The department shall multiply the per day accommodation cost by the total Medicaid days to arrive at total Medicaid accommodation costs per category for the three components.

(2)(a) The department shall also use the base period cost data to calculate total operating, capital and direct medical education costs for each of the hospital's twenty-nine ancillary categories.

(b) The department shall divide these costs by total charges per category to arrive at a cost-to-charge ratio per ancillary category.

(c) The department shall multiply these cost-to-charge ratios by Medicaid charges per category, as tracked by the Medicaid Management Information System (MMIS), to arrive at total Medicaid ancillary costs per category for the three components.

(3) The department shall combine Medicaid accommodation and ancillary costs to derive the hospital's operating, capital and direct medical education components for the base year. The department shall divide these components' combined total will be divided by the number of Medicaid cases during the base year to arrive at an average cost per DRG admission for the hospital.

(4) The department shall adjust the average cost per admission for each component to a common fiscal year end using the appropriate McGraw-Hill Data Resources, Inc., (DRI) Prospective Payment System (PPS)-Type Hospital Market Basket update. The department shall standardize these three admission cost components by dividing the average cost by the hospital's case-mix index.

(5)(a) For hospitals with medical education programs, the department shall remove the indirect medical education costs from operating and capital costs before the peer group cost cap is set.

(b) The department shall also remove the cost of outlier cases in accordance with WAC 388-550-3350(1).

(c) For hospitals in peer group B and C, the department shall set aggregate costs for the operating, capital, and direct medical education components at the lesser of hospital-specific aggregate cost or the peer group cost cap.

(6) The department shall add to the lesser of the hospital-specific aggregate cost or the peer group cost cap determined in subsection (5) of this section:

(a) The individual hospital's indirect medical education costs, as determined in WAC 388-550-3250(2); and

(b) An outlier cost adjustment in accordance with WAC 388-550-3350(2).

(7)(a) The department shall multiply the sum obtained in subsection (6) of this section by the DRI PPS-type hospital market basket update for the period January 1 of the year after the base year through September 30 of the rebase year.

(b) The department shall then reduce the product obtained in (a) of this subsection by the outlier set-aside percentage determined in accordance with WAC 388-550-3350(3) to arrive at the hospital's adjusted cost-based conversion factor for July 1 of the rebase year.

(8) The department shall multiply the hospital's adjusted cost-based conversion factor determined in subsection (7) of this section by the applicable DRG relative weight to calculate the DRG payment for each admission.

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NEW SECTION

WAC 388-550-3500 Inflation adjustments. (1) Effective on October 1 of each year, the department shall adjust all cost-based conversion factors for inflation for the federal fiscal year October 1 through September 30.

(2) The department shall use as annual inflation factor the prospective payment system (PPS)-type hospital market-basket index factor from the most recent McGraw-Hill Data Resources, Inc., (DRI) forecast.

(3) The department shall consider adjustments to negotiated conversion factors according to the terms of the individual hospital's contract.

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NEW SECTION

WAC 388-550-3600 Payment--Hospital transfers. The department shall apply the following payment rules when a client is transferred from one hospital to another:

(1) The department shall deny payment to a hospital that transfers a nonemergent case to another hospital without the department's prior approval.

(2) The department shall pay a hospital transferring a client to another acute care hospital the lesser of:

(a) A per diem rate multiplied by the number of medically necessary days at the transferring hospital. The department shall determine 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 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 length of stay data to determine the number of medically necessary days for a hospital stay.

(4) The department shall pay 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 the outlier payment methodology if a transfer case qualifies as a high- or low-cost outlier.

(5) The department shall not pay a discharging hospital any additional amounts as a transferring hospital if it transfers a client to another 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 payment to the discharging hospital shall be the full DRG payment.

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

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NEW SECTION

WAC 388-550-3700 DRG outliers and administrative day rates. (1) The department shall calculate high-cost diagnosis-related group (DRG) outlier payments for qualifying cases as follows:

(a) To qualify as a DRG high-cost outlier, the allowed charges for the case must exceed a threshold of three times the applicable DRG payment or twenty-eight thousand dollars, whichever is greater.

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

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

(d) Reimbursement for high-cost outlier cases at in-state children's hospitals shall be the applicable DRG payment amount, plus eighty-five percent of the hospital's RCC applied to the allowed charges exceeding the outlier threshold.

(2) The department shall calculate low-cost DRG outlier payments for qualifying cases as follows:

(a) To qualify as a DRG low-cost outlier, the allowed charges for the case shall be less than or equal to ten percent of the applicable DRG payment or four hundred dollars, whichever is greater.

(b) The department's reimbursement for low-cost DRG outlier claims shall be the allowed charges multiplied by the hospital's RCC.

(3) The department shall pay 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) The department shall set reimbursement for administrative days at the statewide average Medicaid nursing facility per diem rate. The administrative day rate shall be adjusted annually effective October 1.

(b) Ancillary services shall not be reimbursed during administrative days.

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

(d) For DRG-exempt cases, the department shall identify 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, the department shall reimburse the hospital at the administrative day per diem rate from the date of admission.

(4) The department shall make 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 shall be 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 (three times the DRG rate or twenty-eight thousand dollars, whichever is greater); 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) The department shall base the day outlier payment on the number of days exceeding the day outlier threshold, multiplied by the administrative day rate.

(6) The department's total reimbursement for day outlier claims shall be the applicable DRG payment plus the day outlier or administrative days payment.

(7) Day outliers shall only be paid for cases that do not reach high-cost outlier status. A client's claim shall be either a day outlier or a high-cost outlier, but not both.

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NEW SECTION

WAC 388-550-3800 Rebasing and recalibration. (1) The department shall rebase the Medicaid payment system periodically using each hospital's cost report for its fiscal year that ends during the calendar year designated by the department to be used for each update.

(2) The department shall recalibrate diagnosis-related group weights periodically, as described in WAC 388-550-3100, but no less frequently than each time rebasing is done. The department shall make recalibrated weights effective July 1 of that year.

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NEW SECTION

WAC 388-550-3900 Border area hospitals payment method. (1) Under the diagnosis-related group (DRG) payment method, the department shall calculate the cost-based conversion factor (CBCF) of a border area hospital as defined in WAC 388-550-1050, in accordance with WAC 388-550-3450.

(a) For a border area hospital with insufficient Medicare cost report (HCFA Form 2552) data, the department shall assign a CBCF based on the peer group average final conversion factor for its Washington hospital peer group.

(b) The department shall include in this average final conversion factor all adjustments to the CBCF, including the outlier set-aside factor described in WAC 388-550-3350(3).

(2) Under the ratio of cost-to-charge (RCC) payment method, the department shall calculate a border area hospital's RCC in accordance with WAC 388-550-4500. For a border area hospital with insufficient Medicare cost report (HCFA Form 2552) data, the department shall assign an RCC based on the weighted average of the RCC ratios for in-state Washington hospitals.

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NEW SECTION

WAC 388-550-4000 Out-of-state hospitals payment method. The department shall pay out-of-state hospitals the lesser of billed charges or the amount calculated using the weighted average of ratio of cost-to-charge ratios for in-state Washington hospitals multiplied by the allowed charges for medically necessary services.

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NEW SECTION

WAC 388-550-4100 New hospitals payment method. (1) For rate-setting purposes, the department shall consider as a new hospital an entity which began services after the most recent base period used for calculating cost-based conversion factors (CBCFs).

(2) The department shall base a new hospital's cost-based rates on the peer group average final conversion factor for its Washington hospital peer group. The department shall include in this average final conversion factor all adjustments to the CBCF, including the outlier set aside factor described in WAC 388-550-3350(3).

(3) The department shall base a new hospital's ratio of cost-to-charge (RCC) rates on the statewide weighted average RCC rate.

(4) The department shall not consider a change in ownership as constituting creation of a new hospital.

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NEW SECTION

WAC 388-550-4200 Change in hospital ownership. (1) For purposes of this section, a change in hospital ownership may involve one or more, but is not limited to, the following events:

(a) A change in the composition of the partnership;

(b) A sale of an unincorporated sole proprietorship;

(c) The statutory merger or consolidation of two or more corporations;

(d) The leasing of all or part of a provider's facility if the leasing affects utilization, licensure, or certification of the provider entity;

(e) The transfer of a government-owned institution to a governmental entity or to a governmental corporation;

(f) Donation of all or part of a provider's facility to another entity if the donation affects licensure or certification of the provider entity;

(g) Disposition of all or some portion of a provider's facility or assets through sale, scrapping, involuntary conversion, demolition or abandonment if the disposition affects licensure or certification of the provider entity; or

(h) A change in the provider's federal identification tax number.

(2) A hospital shall notify the department in writing ninety days prior to the date of an expected change in the hospital's ownership, but in no case later than thirty days after the change in ownership takes place.

(3) When a change in a hospital's ownership occurs, the department shall set the new provider's cost-based conversion factor (CBCF) at the same level as the prior owner's, except as provided in subsection (4) below.

(4) The department shall set for a hospital formed as a result of a merger:

(a) A blended CBCF based on the old hospitals' rates, proportionately weighted by admissions for the old hospitals; and

(b) An RCC rate determined by combining the old hospitals' cost reports and following the process described in WAC 388-550-4500.

(5) The department shall recapture depreciation and acquisition costs as required by section 1861 (V)(1)(0) of the Social Security Act.

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NEW SECTION

WAC 388-550-4300 Payment--Exempt hospitals. (1) The department shall exempt the following hospitals from the diagnosis-related group (DRG) payment method:

(a) Peer group A hospitals, as defined in WAC 388-550-3300(2);

(b) Rehabilitation units: Rehabilitation services provided in specifically identified rehabilitation hospitals and designated rehabilitation units of general hospitals. The department shall use the same criteria employed by the Medicare program to identify exempt hospitals and designated distinct part rehabilitation units;

(c) Out-of-state hospitals: Those facilities located outside of Washington and outside designated border areas as described in WAC 388-501-0175. The department shall pay these hospitals according to WAC 388-550-4000; and

(d) Military hospitals: Military hospitals may individually elect to get reimbursed a negotiated per diem rate, or the DRG or RCC reimbursement method. The department shall exempt military hospitals from the DRG payment method if no other specific arrangements have been made.

(2) The department shall limit inpatient hospital stays in hospitals identified in subsection (1) above 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:

(a) The department has a prior arrangement for a specified length of stay; or

(b) The stay is for chemical dependency treatment which is subject to WAC 388-550-1100(3).

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NEW SECTION

WAC 388-550-4400 Services--Exempt from DRG payment. (1) The department shall exclude the following services from the diagnosis-related group (DRG)-based payment system:

(a) Neonatal services: The department shall exempt DRGs 602-619, 621-628, 630, 635, 637-641 neonatal services from the DRG payment methods. The department shall reimburse DRGs 620 and 629 (normal newborns) by the DRG payment method.

(b) Acquired immunodeficiency syndrome (AIDS)-related inpatient services: AIDS-related inpatient services for those cases with a reported diagnosis of, AIDS-related complex and other human immunodeficiency virus infections.

(c) Alcohol detoxification and treatment services: Alcoholism detoxification and treatment services provided in department-approved alcohol treatment centers.

(d) Detoxification, medical stabilization, and drug treatment for chemically-dependent pregnant women: Hospital-based intensive inpatient care for detoxification, medical stabilization, and drug treatment provided to chemically-dependent pregnant women by a certified hospital.

(e) Physical medicine and rehabilitation: Rehabilitation services provided in department-approved rehabilitation hospitals and general hospital distinct units, and services for physical medicine and rehabilitation patients.

(f) Chronic pain management: Pain management treatment provided in department-approved pain treatment facilities.

(g) Inpatient services for managed care plan enrollees: The department shall reimburse hospitals for these enrollees according to the contract between the hospital and the managed care plan.

(h) Long-term care administrative day services: The department shall reimburse long-term care services based on the statewide average Medicaid nursing facility per diem rate, which is adjusted annually each October 1. The department shall apply this rate to patient days identified as administrative days on the hospital's notice of rates. Hospitals must request a long-term care administrative day designation on a case-by-case basis.

(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.

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NEW SECTION

WAC 388-550-4500 Payment method--RCC. (1)(a) The department shall calculate a hospital's ratio of cost to charge (RCC) by dividing allowable operating costs by patient revenues associated with these allowable costs.

(b) The department shall base these figures on the annual Medicare cost report data provided by the hospital.

(c) The department shall update hospitals' RCC ratios annually with the submittal of new HCFA 2552 Medicare cost report data. Prior to computing the ratio, the department shall exclude increases in operating costs or total rate-setting revenue attributable to a change in ownership.

(2) The department shall limit a hospital's RCC to one hundred percent of its allowable charges. The department shall recoup payments made to a hospital in excess of its customary charges to the general public.

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

(4) The department shall use the RCC payment method to reimburse:

(a) Peer group A hospitals;

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

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

(5) The department shall deem the RCC for in-state and border area hospitals lacking sufficient HCFA 2552 Medicare cost report data the weighted average of the RCC ratios for in-state hospitals.

(6) The department shall calculate an outpatient ratio of cost-to-charge by dividing the projected costs by the projected charge multiplied by the average RCC.

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

(b) The factor shall be updated each October 1.

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NEW SECTION

WAC 388-550-4600 Hospital selective contracting program. (1) The department shall designate selective contracting areas (SCA) in which hospitals participate in competitive bidding to provide hospital services to medical care clients. Selective contracting areas are based on historical patterns of hospital use by Medicaid clients.

(2) The department shall require medical care clients in a selective contracting area obtain their elective (nonemergent) inpatient hospital services from participating or exempt hospitals in the SCA. Elective (nonemergent) inpatient hospital services provided by nonparticipating hospitals in an SCA shall not be reimbursed by the department, except as provided in WAC 388-550-4700.

(3) The department shall exempt from the selective contracting program those hospitals that are:

(a) In an SCA but designated by the department as remote. The department shall designate as remote hospitals meeting the following criteria:

(i) Located more than ten miles from the nearest hospital in the SCA;

(ii) Having fewer than seventy-five beds; and

(iii) Having fewer than five hundred Medicaid admissions in a two-year period.

(b) Owned by health maintenance organizations (HMOs) and providing inpatient services to HMO enrollees only;

(c) Children's hospitals;

(d) State psychiatric hospitals or separate (freestanding) psychiatric facilities; and

(e) Out-of-state hospitals in nonborder areas, and out-of-state hospitals in border areas not designated as selective contracting areas.

(4)(a) The department shall negotiate with selectively contracted hospitals a negotiated conversion factor (NCF) for inpatient hospital services.

(b) The department shall calculate its maximum financial obligation for a client under the hospital selective contract in the same manner as DRG payments using cost-based conversion factors (CBCFs).

(c) The department shall apply NCFs to Medicaid clients only. The department shall use CBCFs in calculating payments for MI/medical care services clients.

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NEW SECTION

WAC 388-550-4700 Payment--Non-SCA participating hospitals. (1) In a selective contracting area (SCA), the department shall pay any qualified hospital for inpatient hospital services provided to an eligible medical care client for treatment of an emergency medical condition.

(2) The department shall pay any qualified hospital for medically necessary but nonemergent inpatient hospital services provided to an eligible medical care client deemed by the department to reside an excessive travel distance from a contracting hospital.

(a) The client is deemed to have an excessive travel burden if the travel distance from a client's residence to the nearest contracting hospital exceeds the client's county travel distance standard, as follows:

County Community Travel Distance Norm

Adams 25 miles

Asotin 15 miles

Benton 15 miles

Chelan 15 miles

Clallam 20 miles

Clark 15 miles

Columbia 19 miles

Cowlitz 15 miles

Douglas 20 miles

Ferry 27 miles

Franklin 15 miles

Garfield 30 miles

Grant 24 miles

Grays Harbor 23 miles

Island 15 miles

Jefferson 15 miles

King 15 miles

Kitsap 15 miles

Kittitas 18 miles

Klickitat 15 miles

Lewis 15 miles

Lincoln 31 miles

Mason 15 miles

Okanogan 29 miles

Pacific 21 miles

Pend Oreille 25 miles

Pierce 15 miles

San Juan 34 miles

Skagit 15 miles

Skamania 40 miles

Snohomish 15 miles

Spokane 15 miles

Stevens 22 miles

Thurston 15 miles

Wahkiakum 32 miles

Walla Walla 15 miles

Whatcom 15 miles

Whitman 20 miles

Yakima 15 miles

(b) If a client must travel outside his/her SCA to obtain inpatient services not available within the community, such as treatment from a tertiary hospital, the client shall obtain such services from a contracting hospital appropriate to the client's condition.

(3) The department shall require prior authorization for all nonemergent admissions to nonparticipating hospitals in an SCA. See WAC 388-550-1700 (2)(a).

(4) The department shall pay a licensed hospital all applicable Medicare deductible and coinsurance amounts for inpatient services provided to Medicaid clients who are also beneficiaries of Medicare part A.

(5) The department shall pay any licensed hospital DRG-exempt services as listed in WAC 388-550-4400.

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NEW SECTION

WAC 388-550-4800 Hospital payment method--State-only programs. (1) (a) The department shall calculate payments to hospitals for state-only MI/medical care services clients according to the:

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

(ii) Ratio of cost-to-charge (RCC) methodologies; and

(b) The department shall reduce hospitals' Title XIX rates by their ratable and/or equivalency (EQ) factors, as applicable.

(2) The department shall calculate ratables as follows:

(a) A hospital's Medicare and Medicaid revenues are added together, along with the value of the hospital's charity care and bad debts. The hospital's low-income disproportionate share (LIDSH) revenue is deducted from this total to arrive at the hospital's community care dollars.

(b) Revenue generated by hospital-based physicians, as reported in the hospital's HCFA 2552 report, is subtracted from total hospital revenue, also as reported in the hospital's cost report.

(c) The amount derived in step (2)(a) is divided by the amount derived in step (2)(b) to obtain the ratio of community care dollars to total revenue.

(d) The result of step (2)(c) is subtracted from 1.000 to derive the hospital's ratable. The hospital's Title XIX cost-based conversion factor (CBCF) or RCC rate is multiplied by (1-ratable) for an MI or medical care services client.

(e) The reimbursements for MI/medical care services clients are mathematically represented as follows:

MI/medical care services RCC = Title XIX RCC x (1-Ratable)

MI/medical care services CBCF = Title XIX Conversion Factor x (1-Ratable) x EQ

(3) The department shall update each hospital's ratable annually on July 1.

(4)(a) The department shall use the equivalency factor (EQ) to hold the DRG reimbursement rates for the MI/medical care services programs at their current level prior to any rebasing. The department shall apply the EQ only to the Title XIX DRG CBCFs. The department shall not apply the EQ when the DRG rate change is due to the application of the annual DRI inflation adjustment.

(b) The department shall calculate a hospital's equivalency factor as follows:

EQ = (Current MI/medical care services conversion factor)/(Title XIX DRG rate x (1-ratable))

(5) Effective for hospital admissions on or after December 1, 1991, the department shall reduce its payment for MI (but not medical care services) clients further by multiplying it by ninety-seven percent. The department shall apply 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 client has a trauma severity factor of nine or more, the department shall pay the full Medicaid Title XIX amount when care has been provided in a nongovernmental hospital designated by DOH as a trauma center. The department shall apply the reduction in MI cases where the trauma severity factor is less than nine. The department shall give an annual grant to governmental hospitals certified by DOH.

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NEW SECTION

WAC 388-550-4900 Disproportionate share payments. (1) As required by section 1902 (a)(13)(A) of the Social Security Act, the department shall give consideration to hospitals which serve a disproportionate number of low-income patients with special needs by making a payment adjustment to eligible hospitals. The department shall deem this adjustment a disproportionate share payment.

(2) The department shall deem a hospital a disproportionate share hospital if:

(a) The hospital's Medicaid inpatient utilization rate (MIPUR), as defined in WAC 388-550-1050, is at least one standard deviation above the mean Medicaid inpatient utilization rate for hospitals receiving Medicaid payments in the state, or its low-income utilization rate (LIUR), as defined in WAC 388-550-1050, exceeds twenty-five percent; and

(b) The hospital has at least two obstetricians who have staff privileges at the hospital and who have agreed to provide obstetric services to eligible individuals, except that this requirement shall not apply to a hospital:

(i) The inpatients of which are predominantly individuals under eighteen years of age; or

(ii) Which did not offer nonemergency obstetric services to the general public as of December 22, 1987, when section 1923 of the Social Security Act was enacted.

(3) For hospitals located in rural areas, "obstetrician" shall mean any physician with staff privileges at the hospital to perform nonemergency obstetric procedures.

(4) The department may define or deem a hospital a disproportionate share hospital if:

(a) The hospital has a Medicaid inpatient utilization rate (MIPUR) of not less than one percent; and

(b) The hospital meets the requirement of subsection (2)(c) of this section.

(5) The department shall administer the following disproportionate share programs:

(a) Low-income disproportionate share hospital;

(b) Medically-indigent disproportionate share hospital;

(c) General assistance-unemployable disproportionate share hospital;

(d) Small rural hospital assistance program disproportionate share hospital;

(e) Teaching hospital assistance program disproportionate share hospital;

(f) State teaching hospital financing program disproportionate share hospital;

(g) County teaching hospital financing program disproportionate share hospital; and

(h) Public hospital district disproportionate share hospital.

(6) The department shall allow a hospital to receive any one or all of the disproportionate share hospital (DSH) payment adjustments discussed in subsection (5) of this section if:

(a) The hospital applies to the department; and

(b) Meets the eligibility requirements for the particular DSH payment program, as discussed in WAC 388-550-5000 through 388-550-5400.

(7) The department shall ensure each hospital's total DSH payments do not exceed the individual hospital's DSH limit, defined as the cost to the hospital of providing services to Medicaid patients, including patients served under Medicaid managed care programs, less the amount paid by the state under the non-DSH payment provision of the state plan, plus the cost to the hospital of providing services to uninsured patients, less any cash payments made by uninsured patients.

(8)(a) The department's total annual DSH payments shall not exceed the state's DSH allotment for the federal fiscal year.

(b) If the DSH statewide allotment is exceeded, the department shall recoup overpayments from hospitals in the following program order:

(i) Public hospital district disproportionate share hospital;

(ii) Teaching hospital assistance program disproportionate share hospital;

(iii) County teaching hospital financing program disproportionate share hospital;

(iv) State teaching hospital financing program disproportionate share hospital;

(v) Small rural hospital assistance program disproportionate share hospital;

(vi) Medically-indigent disproportionate share hospital;

(vii) General assistance-unemployable disproportionate share hospital; and

(viii) Low-income disproportionate share hospital.

(9) The department shall make periodic DSH payments to eligible hospitals. The department shall have sole discretion regarding the timing of DSH payments.

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NEW SECTION

WAC 388-550-5000 Payment method--LIDSH. (1) The department shall deem a hospital serving the department's clients eligible for a low-income disproportionate share hospital (LIDSH) payment adjustment if the hospital meets the requirements of WAC 388-550-4900(2).

(2) The department shall pay hospitals deemed eligible under the criteria in subsection (1) of this section DSH payment amounts which in total equal the funding set by the state's appropriations act for LIDSH. The amount appropriated for LIDSH may vary from year to year.

(3) The department shall apportion LIDSH payments to individual hospitals as follows:

(a) For each LIDSH-eligible hospital, the department shall determine the standardized Medicaid inpatient utilization rate (MIPUR). The MIPUR is standardized by dividing the hospital's MIPUR by the average MIPUR of all LIDSH-eligible hospitals.

(b) The hospital's standardized MIPUR is multiplied by the hospital's most recent fiscal year case mix index, and then by the hospital's most recent fiscal year Title XIX admissions. The product is then multiplied by an initial random base amount.

(c) The annual LIDSH payment so calculated for individual hospitals shall be added and compared to the appropriated amount. If the amounts differ, a new base amount shall be selected progressively by trial and error until the sum of the LIDSH payments to hospitals equals the appropriated amount.

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NEW SECTION

WAC 388-550-5100 Payment method--MIDSH. (1) The department shall deem a hospital eligible for the medically indigent disproportionate share hospital (MIDSH) payment if the hospital:

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

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

(c) Provides services to clients under the medically indigent program; and

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

(2) The department shall determine the MIDSH payment for each eligible hospital in accordance with WAC 388-550-4800.

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NEW SECTION

WAC 388-550-5150 Payment method--GAUDSH. (1) The department shall deem a hospital eligible for the general assistance-unemployable disproportionate share hospital (GAUDSH) payment if the hospital:

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

(b) Is an in-state or border area 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) The department shall determine the GAUDSH payment for each eligible hospital in accordance with WAC 388-550-4800, except that the payment shall not be reduced by the additional three percent specified in WAC 388-550-4800(4).

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NEW SECTION

WAC 388-550-5200 Payment method--SRHAPDSH. (1) The department shall deem a hospital eligible for the small rural hospital assistance program disproportionate share hospital (SRHAPDSH) payment if the hospital:

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

(b) Is an in-state hospital;

(c) Is a small, rural hospital, defined as a hospital with fewer than seventy-five licensed beds and located in a city or town with a nonstudent population of thirteen thousand or less; and

(d) Provides at least one percent of its services to low-income patients in rural areas of the state.

(2)(a) The department shall pay hospitals qualifying for SRHAPDSH payments from a legislatively appropriated pool.

(b) The department shall determine each individual hospital's SRHAPDSH payment as follows: The total dollars in the pool will be multiplied by the percentage derived from dividing the Medicaid payments to the individual hospital during the fiscal year that is two years previous to the state fiscal year immediately preceded by the total Medicaid payments to all SRHAPDSH hospitals during the same hospital fiscal year.

(3) The department's SRHAPDSH payments to a hospital may not exceed one hundred percent of the projected cost of care for Medicaid and uninsured indigent patients. The department shall reallocate dollars not allocated because a hospital would otherwise exceed this ceiling to the remaining hospitals in the SRHAPDSH pool.

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NEW SECTION

WAC 388-550-5250 Payment method--THAPDSH. (1) The department shall deem a hospital eligible for the teaching hospital assistance program disproportionate share hospital (THAPDSH) program if the hospital:

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

(b) Is a Washington State University hospital; and

(c) Has a Medicaid inpatient utilization rate (MIPUR) of twenty percent or more.

(2) The department shall fund THAPDSH payments with legislatively appropriated monies. The department shall divide the legislatively appropriated THAPDSH amount equally between qualifying hospitals.

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NEW SECTION

WAC 388-550-5300 Payment method--STHFPDSH. (1) The department shall deem a hospital eligible for the state teaching hospital financing program disproportionate share hospital (STHFPDSH) if the hospital:

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

(b) Is a state-owned university or public corporation hospital (border area hospitals are excluded);

(c) Provides a major medical teaching program, defined as a hospital with more than one hundred residents and/or interns; and

(d) Has a Medicaid inpatient utilization rate (MIPUR) of at least twenty percent.

(2)(a) The department shall pay hospitals deemed eligible under the criteria in subsection (1) of this section a STHFPDSH payment from the legislatively appropriated pool specifically designated for DSH payments to state and county teaching hospitals.

(b) The department shall limit STHFPDSH payments to eligible hospitals to seventy percent of the legislatively appropriated pool for DSH payments to state and county teaching hospitals.

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NEW SECTION

WAC 388-550-5350 Payment method--CTHFPDSH. (1) The department shall deem a hospital eligible for the county teaching hospital financing program disproportionate share hospital (CTHFPDSH) payment if the hospital:

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

(b) Is a county hospital in Washington state (border area hospitals are excluded), so designated by the county in which located;

(c) Provides a major medical teaching program, defined as a hospital with more than one hundred residents and/or interns; and

(d) Has a low-income utilization rate (LIUR) of at least twenty-five percent.

(2)(a) The department shall pay hospitals deemed eligible under the criteria in subsection (1) of this section a CTHFPDSH payment from the legislatively appropriated pool specifically designated for DSH payments to state and county teaching hospitals.

(b) The department shall limit CTHFPDSH payments to eligible hospitals to thirty percent of the legislatively appropriated pool for DSH payments to state and county teaching hospitals.

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NEW SECTION

WAC 388-550-5400 Payment method--PHDDSH. (1) The department shall deem a hospital eligible for the public hospital district disproportionate share hospital (PHDDSH) payment if the hospital:

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

(b) Is a public district hospital in Washington state or a border area hospital owned by a public corporation; and

(c) Provides at least one percent of its services to low-income patients.

(2) The department shall pay hospitals deemed eligible under the criteria in subsection (1) of this section a PHDDSH payment amount from the legislatively appropriated PHDDSH pool.

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NEW SECTION

WAC 388-550-5500 Payment--Hospital-based RHCs. (1) The department shall reimburse hospital-based rural health clinics under the prospective payment methods effective July 1, 1994. Under the prospective payment method, the department shall not make reconciliation payments to a hospital-based rural health clinic to cover its costs for a preceding period.

(2) The department shall pay an amount equal to the hospital-based rural health clinic's charge multiplied by the hospital's specific ratio of costs to charges (RCC), not to exceed one hundred percent of the charges.

(3) The department shall determine the hospital-based rural health clinic's RCC from the hospital's annual Medicare cost report, pursuant to WAC 388-550-4500(1).

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NEW SECTION

WAC 388-550-5600 Hospital rate appeals and disputes. (1) A hospital may appeal any aspect of its Medicaid payment rates by submitting a written notice of appeal and supporting documentation to the medical assistance administration's (MAA) hospital reimbursement section, except that no administrative appeals may be filed challenging the method described herein.

(a) The grounds for rate adjustments include, but are not limited to:

(i) Errors or omissions in the data used to establish rates; and

(ii) Peer group change recommended by the Washington state department of health.

(b) The department may require additional documentation from the provider in order to complete the appeal review. The department may conduct an audit and/or desk review if necessary to complete the appeal review.

(c) Unless the written rate notification specifies otherwise, a hospital shall file an appeal within sixty days after being notified of an action or determination the hospital wishes to challenge. The department shall deem the notification date of an action or determination the date of the written rate notification letter.

(i) A hospital which files an appeal within the sixty-day period described in subsection (1)(c) of this section shall be eligible for retroactive rate adjustments if it prevails.

(ii) The department shall not consider a hospital rate appeal filed after the sixty-day period described in this subsection for retroactive rate adjustments.

(d) When a hospital appeals a rate the department may review all aspects of its rate.

(e) Unless the written rate notification specifies otherwise, the department shall deem rate changes resulting from an appeal effective as follows:

(i) Increases in rates resulting from an appeal filed within sixty days after the written rate notification letter that the hospital is challenging shall be effective retroactive to the date of the rate change specified in the original notification letter.

(ii) Increases in rates resulting from a rate appeal filed after the sixty day period or exception period shall be effective on the date the appeal was filed with the department.

(iii) A rate decrease resulting from an appeal shall be effective on the date specified in the appeal decision notification.

(2)(a) A hospital may request a dispute conference to appeal an administrative review decision. The conference shall be conducted by the assistant secretary for the MAA or his/her designee.

(b) The hospital shall submit a request for a conference within thirty days of receipt of the administrative review decision.

(c) The department shall deem the dispute conference decision its final decision regarding rate appeals.

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NEW SECTION

WAC 388-550-5700 Hospital reports and audits. (1) In-state and border area hospitals shall complete and submit a copy of their annual Medicare cost reports (HCFA 2552) to the department. These hospital providers shall:

(a) Maintain adequate records for audit and review purposes, and assure the accuracy of their cost reports;

(b) Complete their annual Medicare HCFA 2552 cost report according to the applicable Medicare statutes, regulations, and instructions; and

(c) Submit a copy to the department:

(i) Within one hundred fifty days from the end of the hospital's fiscal year; or

(ii) If the hospital provider's contract is terminated, within one hundred fifty days of effective termination date; or

(d) Request up to a thirty day extension of the time for submitting the cost report in writing at least ten days prior to the due date of the report. Hospital providers shall include in the extension request the completion date of the report, and the circumstances prohibiting compliance with the report due date;

(2) If a hospital provider improperly completes a cost report or the cost report is received after the due date or approved extension date, the department may withhold all or part of the payments due the hospital until the department receives the properly completed or late report.

(3) Hospitals shall submit other financial information required by the department to establish rates.

(4) The department shall periodically audit:

(a) Cost report data used for rate setting;

(b) Hospital billings; and

(c) Other financial and statistical records.

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NEW SECTION

WAC 388-550-5800 Outpatient and emergency hospital services. The department shall cover outpatient services, emergent outpatient surgical care, and other emergency care performed on an outpatient basis in a hospital for categorically needy or limited casualty program-medically needy clients. The department shall limit clients eligible for the medically indigent program to emergent hospital services, subject to the conditions and limitations of WAC 388-521-2140, 388-529-2950, and this chapter.

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NEW SECTION

WAC 388-550-5900 Prior authorization--Outpatient services. The department shall require providers to obtain prior authorization for the following selected outpatient hospital services:

(1) Magnetic resonance imaging;

(2) Magnetic resonance angiography;

(3) Sleep studies/polysomnograms for clients over one year old, unless provided in a medical assistance administration (MAA)-approved facility;

(4) Peripheral stem cell transplants, unless provided in an MAA-approved facility;

(5) Positron emission tomography scans, except that the department shall not require prior authorization for brain PET scans;

(6) Evaluation, management and treatment of chronic pain, unless provided in an MAA-approved facility; and

(7) Weight loss program costs, unless provided in a department-approved outpatient weight-loss facility.

(8) See WAC 388-550-1700 for hospital services requiring prior approval and WAC 388-550-1800 for certain prior approval exemptions.

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NEW SECTION

WAC 388-550-6000 Payment--Outpatient hospital services. (1)(a) The department shall determine allowable costs for hospital outpatient services, excluding nonallowable revenue codes, by the application of the hospital-specific outpatient ratio of costs to charges (RCC), except as specified in subsection (2) below.

(b) The department shall not pay separately for ancillary hospital services which are included in the hospital's RCC reimbursement rate.

(2) The department shall pay the lesser of billed charges or the department's published maximum allowable fees for the following outpatient services:

(a) Laboratory/pathology;

(b) Radiology, diagnostic and therapeutic;

(c) Nuclear medicine;

(d) Computerized tomography scans, magnetic resonance imaging, and other imaging services;

(e) Physical therapy;

(f) Occupational therapy;

(g) Speech/language therapy; and

(h) Other hospital services as identified and published by the department.

(3) The department shall not be responsible for payment of hospital care and/or services provided to a client enrolled in a department-contracted, prepaid medical plan when the client fails to use:

(a) For a nonemergent condition, a hospital provider under contract with the plan;

(b) In a bona fide emergent situation, a hospital provider under contract with the plan; or

(c) The provider whom the department has authorized to provide and receive payment for a service not covered by the prepaid plan but covered under the client's medical assistance program.

(4) The department shall consider a hospital stay of twenty-four hours or less as an outpatient short stay. The department shall not reimburse an outpatient short stay under the diagnosis-related group system except when it involves one of the following situations:

(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.

(5) The department shall not pay for patient room and ancillary services charges beyond the twenty-four period for outpatient stays.

(6) The department shall not cover short stay unit, emergency room facility charges, and labor room charges in combination when the billed periods overlap.

(7) The department shall require that the hospital's bill to the department shows the admitting, principal, and secondary diagnoses, and include the attending physician's name.



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NEW SECTION

WAC 388-550-6100 Outpatient hospital physical therapy. (1) The department shall pay for physical therapy as an outpatient hospital service when:

(a) The attending physician prescribes physical therapy;

(b) A licensed physical therapist or physiatrist or a physical therapist assistant supervised by a licensed physical therapist provides the treatment; and

(c) The therapy assists the client:

(i) In avoiding hospitalization or nursing facility care; or

(ii) In becoming employable; or

(iii) Who suffers from severe motor disabilities to obtain a greater degree of self-care or independence; or

(iv) As part of a treatment program intended to restore normal function of a body part following injury, surgery, or prolonged immobilization.

(2) The hospital shall bill outpatient hospital physical therapy services to the department using the appropriate current procedural terminology or department-assigned codes. The department shall not pay outpatient hospitals a facility fee for such services.

(3) The department shall pay for outpatient hospital physical therapy for clients eligible under the:

(a) Categorically needy, general assistance unemployable and ADATSA programs;

(b) Medically needy program only when the client is:

(i) Twenty years of age and under and referred by a screening provider under the early and periodic screening, diagnosis, and treatment program; or

(ii) Receiving home health care services.

(4) The department shall not pay for physical therapy programs for clients under the limited casualty program-medically indigent program.

(5)(a) For clients who are twenty years of age or under, the department shall not require prior authorization or limit the number of physical therapy sessions payable per client per calendar year, subject to the provision of subsection (8) below, provided the services are medically necessary.

(b) Providers shall fully document in the client's medical record the medical justification for continued therapy.

(6)(a) Except as provided in subsection (7) below, the department shall pay for categorically needy, medically needy and medical care services clients who are twenty-one years of age or older a total of eighteen hours of physical therapy in a calendar year, in any combination of modalities and procedures, for:

(i) Acute conditions; or

(ii) Following joint surgery.

(b) The department shall set time unit equivalents for each physical therapy procedure or modality, and publish such schedules periodically.

(7) For a client twenty-one years of age or older who has a medical diagnosis specified in the outpatient hospital billing instructions as normally requiring more intensive physical therapy treatment, the department shall cover up to twenty-four hours of physical therapy in a calendar year, in any combination of modalities and procedures.

(8)(a) Notwithstanding the hours per calendar year limit, the department shall reimburse a maximum of one hour of physical therapy session per day, except that a maximum of two hours shall be allowed when a client assessment/evaluation is performed on the same date.

(b) The physical therapy provider shall document in each client's record the amount of time spent on services to the client.

(9)(a) The department shall require that physical therapy begin within thirty days of the date the therapy was prescribed.

(b) The department may deny payment for therapy started more than thirty days after the date of the prescription, unless medical justification for the delay is presented to the department.

(c) The hospital shall include the prescription for physical therapy services in the client's medical record.

(10) The department shall not pay for physical therapy services under fee-for-service when physical therapy is already included in other reimbursement methodologies applied to the case, including but not limited to DRG payment for inpatient hospital services and nursing facility per diem.

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NEW SECTION

WAC 388-550-6150 Outpatient hospital occupational therapy. (1) The department shall pay for occupational therapy as an outpatient hospital service when:

(a) The service is provided by a licensed occupational therapist or a licensed occupational therapy assistant supervised by a licensed occupational therapist;

(b) The provider obtains approval from the department before services are performed, for services requiring prior approval as designated in the department's billing instructions; and

(c) The occupational therapy is provided:

(i) As part of an outpatient program when identified in the early and periodic screening, diagnosis, and treatment program of a recipient twenty years of age and younger; or

(ii) As part of the physical medicine and rehabilitation program.

(2)(a) The hospital shall bill outpatient hospital occupational therapy services to the department using the appropriate current procedural terminology or department-assigned codes.

(b) The department shall not pay outpatient hospitals a facility fee for these services.

(3) The department shall pay for occupational therapy provided to clients eligible under the:

(a) Categorically needy, general assistance unemployable and ADATSA programs;

(b) Medically needy program only when the client is:

(i) Twenty years of age and younger and referred by a screening provider under the early and periodic screening, diagnosis and treatment program; or

(ii) Receiving home health care services.

(4) The department shall reimburse for occupational therapy as part of an outpatient program when identified in the early and periodic screening, diagnosis, and treatment program of an eligible client.

(5) The department shall cover one assessment, two durable medical equipment needs assessments, and twelve sessions of outpatient hospital occupational therapy per year.

(6) The department shall pay for up to twenty-four additional therapy visits for clients under the children with special health care needs program when the therapy visits are related to the approved list of diagnoses as published by the department.

(7) The department shall not pay for occupational therapy when payment for occupational therapy is included in the reimbursement of other treatment programs including, but not limited to the hospital inpatient diagnosis related group and inpatient physical medicine and rehabilitation services.

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NEW SECTION

WAC 388-550-6200 Outpatient hospital speech therapy services. (1) The department shall cover speech therapy services for eligible medical care clients who have a medically recognized disease or defect which requires speech therapy services, except as limited below:

(a) Under the medically needy program the department shall limit therapy to clients twenty years of age and under.

(b) The department shall not pay for specialized speech therapy under the medically indigent program.

(2) The department shall cover speech therapy when provided under a written plan of treatment:

(a) Established by a speech pathologist who has been granted a certificate of clinical competence by the American Speech, Language and Hearing Association; or

(b) An individual who has completed the equivalent educational and work experience necessary for such a certificate; and

(c) That is periodically reviewed by the client's primary care physician.

(3) The department shall cover one medical diagnostic evaluation and twelve speech therapy sessions in a calendar year per client. The department may cover up to twenty-four additional speech therapy sessions only when associated with the specific diagnoses listed in the department's outpatient hospital billing instructions. The department shall make such instructions available to the public.

(4) The department shall require a provider to submit an authorization request to the office of children with special health care needs on the appropriate form for a child with special health care needs who needs more than twelve speech therapy sessions or the additional twenty-four sessions, but does not have any of the specific diagnoses identified in subsection (3) of this section.

(5) The department shall require swallowing (dysphagia) evaluations to be performed by a speech/language pathologist who holds a master's degree in speech pathology and who has received extensive training in the anatomy and physiology of the swallowing mechanism, with additional training in the evaluation and treatment of dysphagia.

(6) The department shall require a swallowing evaluation to include:

(a) An oral-peripheral exam to evaluate the anatomy and function of the structures used in swallowing;

(b) Dietary recommendations for oral food and liquid intake therapeutic or management techniques;

(c) Therapeutic or management techniques; and

(d) Videofluoroscopy, when necessary, for further evaluation of swallowing status and aspiration risks.

(7) The provider shall bill outpatient hospital speech therapy services to the department using the appropriate current procedural terminology or department-assigned codes. The department shall not pay the outpatient hospital a facility fee for these services.

(8) The department shall not pay for speech therapy when payment for speech therapy is included in the reimbursement as part of other treatment programs including, but not limited to the hospital inpatient diagnosis-related group and nursing facility services.

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NEW SECTION

WAC 388-550-6250 Pregnancy--Enhanced outpatient benefits. The department shall provide outpatient chemical dependency treatment in programs qualified under chapter 440-25 WAC and certified under chapter 440-22 WAC or its successor.

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NEW SECTION

WAC 388-550-6300 Outpatient nutritional counseling. (1) The department shall cover nutritional counseling services only for eligible Medicaid clients twenty years of age and under referred during an early and periodic screening, diagnosis and treatment screening to a certified dietitian.

(2) Except for children under the children's medical program, the department shall not cover nutritional counseling for clients under the medically indigent and other state-only funded programs.

(3) The department shall pay for nutritional counseling for the following conditions:

(a) Inadequate or excessive growth such as failure to thrive, undesired weight loss, underweight, major change in weight-to-height percentile, and obesity;

(b) Inadequate dietary intake, such as formula intolerance, food allergy, limited variety of foods, limited food resources, and poor appetite;

(c) Infant feeding problems, such as poor suck/swallow reflex, breast-feeding difficulties, lack of developmental feeding progress, inappropriate kinds or amounts of feeding offered, and limited caregiver knowledge and/or skills;

(d) Chronic disease requiring nutritional intervention, such as congenital heart disease, pulmonary disease, renal disease, cystic fibrosis, metabolic disorder, and gastrointestinal disease;

(e) Medical conditions requiring nutritional intervention, such as iron-deficiency anemia, familial hyperlipidemia, and pregnancy;

(f) Developmental disability, such as increasing the risk of altered energy and nutrient needs, oral-motor or behavioral feeding difficulties, medication-nutrient interaction, and tube feedings; or

(g) Psycho-social factors, such as behavior suggesting eating disorders.

(4) The department shall pay for maximum of twenty sessions, in any combination, of assessment/evaluation and/or nutritional counseling in a calendar year.

(5) The department shall require each assessment/evaluation or nutritional counseling session be for a period of twenty-five to thirty minutes of direct interaction with a client and/or the client's caregiver.

(6) The department shall pay the provider for a maximum of two sessions per day per client.

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NEW SECTION

WAC 388-550-6350 Outpatient sleep apnea/sleep study programs. (1) The department shall pay for polysomnograms or multiple sleep latency tests only for clients one year of age or older with obstructive sleep apnea or narcolepsy.

(2) The department shall pay for polysomnograms or multiple sleep latency tests only when performed in outpatient hospitals approved by the medical assistance administration (MAA) as centers of excellence for sleep apnea/sleep study programs.

(3) The department shall not require prior authorization for sleep studies as outlined in WAC 388-550-1800.

(4) Hospitals shall bill the department for sleep studies using current procedural terminology codes. The department shall not reimburse hospitals for these services when billed under revenue codes.

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NEW SECTION

WAC 388-550-6400 Outpatient hospital diabetes education. (1) The department shall pay for outpatient hospital-based diabetes education for an eligible client when:

(a) The facility is approved by the department of health (DOH) as a diabetes education center, and

(b) The client is referred by a licensed health care provider.

(2) The department shall require the diabetes education teaching curriculum to have measurable, behaviorally-stated educational objectives. The diabetes education teaching curriculum shall include all the following core modules:

(a) An overview of diabetes;

(b) Nutrition, including individualized meal plan instruction that is not part of the Women, Infants, and Children program;

(c) Exercise, including an individualized physical activity plan;

(d) Prevention of acute complications, such as hypoglycemia, hyperglycemia, and sick day management;

(e) Prevention of other chronic complications, such as retinopathy, nephropathy, neuropathy, cardiovascular disease, foot and skin problems;

(f) Monitoring, including immediate and long term diabetes control through monitoring of glucose, ketones, and glycosylated hemoglobin; and

(g) Medication management, including administration of oral agents and insulin, and insulin start-up.

(3) The department shall pay for a maximum of six hours of individual core survival skills outpatient diabetes education per lifetime per client.

(4) The department shall require DOH-approved centers to bill the department for diabetes education services on the UB92 billing form using the specific revenue codes assigned and published by the department.

(5) The department shall reimburse for outpatient hospital-based diabetes education based on the individual hospital's current specific ratio of costs-to-charges, or the hospital's customary charge for diabetes education, whichever is less.

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NEW SECTION

WAC 388-550-6450 Outpatient hospital weight loss program. The department may pay for an outpatient weight loss program only when provided through an outpatient weight loss facility approved by the medical assistance administration. The department shall deny payment for services provided by nonapproved providers.

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NEW SECTION

WAC 388-550-6500 Blood and blood products. (1) The department shall limit Medicaid reimbursement to a hospital for blood derivatives to blood bank service charges for processing the blood and blood products.

(2) Other than payment of blood bank service charges, the department shall not pay for blood and blood derivatives.

(3) The department shall not separately reimburse blood bank service charges for handling and processing blood and blood derivatives provided to an individual who is hospitalized when the hospital is reimbursed under the diagnosis-related group (DRG) system. The department shall bundle these service charges into the total DRG payment.

(4) The department shall reimburse a hospital, which is paid under the cost to charge method, separately for processing blood and blood products.

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NEW SECTION

WAC 388-550-6600 Hospital-based physician services. See chapter 388-531 WAC regarding rules for inpatient and outpatient physician services.

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NEW SECTION

WAC 388-550-6700 Hospital services provided out-of-state. (1) The department shall reimburse only emergency care for an eligible Medicaid client who goes to another state, except specified border cities, specifically for the purpose of obtaining medical care that is available in the state of Washington. See WAC 388-501-0175 for a list of border cities.

(2) The department shall authorize and provide comparable medical care services to a Medicaid client who is temporarily outside the state to the same extent that such medical care services are furnished to an eligible Medicaid client in the state, subject to the exceptions and limitations in this section.

(3) The department shall not authorize payment for out-of-state medical care furnished to state-funded clients (medically indigent/medical care services), but may authorize medical services in designated bordering cities.

(4) The department shall cover hospital care provided to Medicaid clients in areas of Canada as described in WAC 388-501-0180 (1)(b).

(5) The department shall review all cases involving out-of-state medical care to determine whether the services are within the scope of the medical assistance program.

(6)(a) If the client can claim deductible or coinsurance portions of Medicare, the provider shall submit the claim to the intermediary or carrier in the provider's own state on the appropriate Medicare billing form.

(b) If the state of Washington is checked on the form as the party responsible for medical bills, the intermediary or carrier may bill on behalf of the provider or may return the claim to the provider for submission to the state of Washington.

(7) For reimbursement for out-of-state inpatient hospital services, see WAC 388-550-4000.

(8) The department shall reimburse out-of-state outpatient hospital services billed under the physician's current procedural terminology codes at an amount that is the lower of:

(a) The billed amount; or

(b) The rate paid by the Washington state Title XIX Medicaid program.

(9) Out-of-state providers shall present final charges to MAA within three hundred sixty-five days of the date of service. In no case shall the state of Washington be liable for payment of charges received beyond one year from the date services were rendered.

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NEW SECTION

WAC 388-550-2300 Payment--PM&R. (1) The department may pay for acute inpatient physical medicine and rehabilitation (PM&R) evaluation and individualized treatment for a client for a period of up to four weeks when all of the following conditions are met:

(a) The client suffers from severe disabilities including, but not limited to, motor and/or cognitive deficits;

(b) The client's condition is of hospital-level acuity and:

(i) The condition is medically stable;

(ii) The client is able to actively participate in rehabilitation at least three hours per day, five days per week;

(iii) The client is alert, cooperative, and follows commands;

(iv) The client can mobilize out of bed;

(v) The client is ready to participate in rehabilitation; and

(vi) The client must have new deficits or recent loss of his/her previous level of function.

(c) The client must show an impairment in two or more of the following areas:

(i) Mobility and strength;

(ii) Self care/activities of daily living (ADLs);

(iii) Communication;

(iv) Continence, evacuation of bowel and/or bladder;

(v) Kitchen/food preparation, safety and skill;

(vi) Cognitive perceptual functioning; or

(vii) Pathfinding skills and safety.

(d) PM&R treatment would potentially enable the client to obtain a greater degree of self-care and/or independence;

(e) The client's medical condition requires that intensive PM&R services be provided in an inpatient setting;

(f) The department authorizes services; and

(g) The services are provided in a contract facility approved by the department to provide inpatient PM&R services.

(2) The department shall pay a hospital admitting a PM&R client who does not meet the above criteria the administrative day rate set at the statewide average daily nursing home rate as determined by the department.

(3) The department may authorize an extension to the inpatient treatment period specified in subsection (1) of this section if the PM&R facility submits adequate written medical justification to the department prior to the expiration of the initial approved stay.

(4) The department shall consider only written applications from facilities requesting designation as approved contract facilities for inpatient PM&R services. To be an inpatient PM&R contract facility, a hospital shall be a commission on accreditation of rehabilitation facilities (CARF)-approved level I or level II rehabilitation facility, as approved by the department.

(5) The department may approve a skilled nursing facility or a hospital as a level II PM&R contract inpatient rehabilitation facility if it meets the following criteria. The skilled nursing facility is:

(a) Medicare and Medicaid-certified;

(b) Accredited by the CARF. The facility shall submit to the department documentation showing its CARF accreditation; and

(c) In good standing with the department.

(6) The department may conditionally approve an inpatient rehabilitation facility as a level II PM&R contract rehabilitation facility if it meets the criteria in subsections (5)(a) and (c) above, and provides documentation showing it:

(a) Is actively operating under CARF standards; and

(b) Has begun the process of obtaining full CARF accreditation.

(7) An inpatient rehabilitation facility conditionally approved as a level II contract rehabilitation facility shall obtain full CARF accreditation within twelve months of being granted conditional approval by the department. The department shall automatically revoke conditional approval for any facility which fails to obtain full CARF accreditation within the allotted one year period.

(8) The department shall determine the most appropriate acute inpatient PM&R facility (inpatient hospital or skilled nursing facility) placement which provides clients the least restrictive environment at the least cost to the department.

(9) A level I PM&R contract rehabilitation facility shall be reimbursed by the department according to the individual hospital's current ratio of cost-to-charge, as described in WAC 388-550-4500.

(10)(a) The department shall reimburse an approved level II PM&R contract rehabilitation facility, whether a hospital or skilled nursing facility, according to the all-inclusive contracted reimbursement allowance, except that such allowance shall not be deemed to include customized adaptive appliances or specialized therapeutic bed, wheelchair, ventilator, or orthotics for home use.

(b) Reimbursement for other medical services provided by the facility which are unrelated to the client's PM&R stay shall be determined by the department on a case-by-case basis.

(11) A hospital not approved by the department as a contract PM&R facility may be reimbursed under the diagnosis-related group methodology, using the initial admitting diagnosis, for rehabilitation services it provides to medical assistance clients.

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