WSR 99-17-110

PROPOSED RULES

DEPARTMENT OF

SOCIAL AND HEALTH SERVICES
(Medical Assistance Administration)

[ Filed August 18, 1999, 10:56 a.m. ]

Supplemental Notice to WSR 99-13-050.

Preproposal statement of inquiry was filed as WSR 99-06-084.

Title of Rule: WAC 388-550-4500 Payment method--RCC.

Purpose: This proposed rule differs from the rule proposed under WSR 99-13-050. Because of the changes that have been made in the rule since the public hearing was held on July 27, 1999, the department is filing a supplemental notice. The department wishes to give stakeholders and the general public another opportunity to comment on the proposed rule.

Statutory Authority for Adoption: RCW 74.04.050, 74.08.090, 74.09.500.

Statute Being Implemented: RCW 74.08.090, 42 U.S.C. 1395x(v).

Summary: These amendments update the method by which the department calculates hospital ratio of costs-to-charges (RCC). This proposed rule differs from the previously proposed version by: Explaining more clearly how MAA calculates a hospital's ratio of costs-to-charges (RCC); specifying the percentage limit by which weighted average payments may be increased for certain hospitals; and explaining how MAA calculates a hospital's capped RCC.

Reasons Supporting Proposal: To update rule content to reflect current department policy.

Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Alan McMullen, DOS/MAA, 623 8th Avenue S.E., Olympia, WA 98501, (360) 586-6698.

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

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

Explanation of Rule, its Purpose, and Anticipated Effects: Reflects updated methods that the department uses to calculate hospital ratio of costs-to-charges (RCC). The purpose of the proposed amendments are to improve staff efficiency and customer compliance by reflecting current policy in rule, as well as clarify, consolidate, and reorganize the rule.

The anticipated effect is that the purpose stated above will be achieved.

Proposal Changes the Following Existing Rules: Amends rule listed in Title of Rule above to reflect current department policy in calculating hospital ratio of costs-to-charges (RCC).

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

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

Hearing Location: Lacey Government Center (behind Tokyo Bento Restaurant), 1009 College Street S.E., Room 104-B, Lacey, WA 98503, on September 21, 1999, at 10:00 a.m.

Assistance for Persons with Disabilities: Contact Paige Wall by September 10, 1999, phone (360) 664-6094, TTY (360) 664-6178, e-mail wallpg@dshs.wa.gov.

Submit Written Comments to: Identify WAC Numbers, Paige Wall, Rules Coordinator, Rules and Policies Assistance Unit, P.O. Box 45850, Olympia, WA 98504-5850, fax (360) 664-6185, by September 21, 1999.

Date of Intended Adoption: September 30, 1999.

August 11, 1999

Marie Myerchin-Redifer, Manager

Rules and Policies Assistance Unit

2597.3
AMENDATORY SECTION(Amending WSR 99-06-046, filed 2/26/99, effective 3/29/99)

WAC 388-550-4500
Payment method--RCC.

(1) The ratio of costs-to-changes (RCC) payment is the hospital’s allowable charges on a claim multiplied by the lesser of the hospital’s RCC or capped RCC.

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

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

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

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

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

(4)))

(2)(a) Except in the case of rural hospitals and Harborview Medical Center, weighted average payments under the ratio of costs-to-charges hospital payment system shall increase by no more than one hundred seventy-five percent of the DRI HCFA hospital reimbursement market basket index over the previous year’s projected payment. Any necessary capping will be made by an adjustment to the hospital’s RCC.

The hospital’s capped RCC is equal to its allowable projected payments divided by the projected charges for the hospital.

The projected charges are based on the hospital’s billed charges on paid claims and the average annual estimated charge increase. The average annual estimated charge increase is based on comparison of included hospitals’ aggregate average charges from four prior years.

The next year's allowable projected payments equal the current projected charges multiplied by the product of the hospital’s current RCC multiplied by one hundred seventy-five percent of the DRI HCFA hospital reimbursement market basket index factor.

Mathematically:

Average annual estimated charge increase= for all included hospitals:

Aggregate average charge for the fourth year minus aggregate average charge for the first year;

Divided by aggregate average charge for the first year, then;

The result divided by three.

Projected charges= billed charges x one hundred percent plus the average annual estimated charge increase.

Allowable projected payments= projected charges x product of current RCC or capped RCC x one hundred seventy-five percent DRI index factor.

(b) MAA also recoups payments made to a hospital in excess of its customary charges to the general public.

(3) MAA uses the RCC payment method to ((reimburse)) pay:

(a) MAA 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))) (4) MAA ((deems the RCC for in-state and border area hospitals lacking sufficient HCFA 2552 Medicare cost report data the weighted average of the RCC rates for in-state hospitals)) uses the Washington in-state average RCC to pay for Washington in-state and border area hospitals that are exempted from the DRG payment method and do not have a HCFA 2552 Medicare cost report.

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

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

(b) The outpatient adjustment factor is updated annually effective November 1)) the hospital’s specific outpatient RCC by multiplying the hospital specific inpatient RCC by the outpatient adjustment factor. The outpatient adjustment factor:

(a) Is the projected costs divided by the product of the projected charges multiplied by the in-state average RCC.

(b) Is limited at 1.00.

(c) Is updated annually on November 1.

[Statutory Authority: RCW 74.08.090, 42 USC 1395 x(v), 42 CFR RCW 447.271, RCW 447.11303, and RCW 447.2652.   WSR 99-06-046, § 388-550-4500, filed 2/26/99, effective 3/29/99.  Statutory Authority: RCW 74.08.090, RCW 74.09.730, RCW 74.04.050, RCW 70.01.010, RCW 74.09.200, [ RCW 74.09.]500, [ RCW 74.09.]530 and RCW 43.20B.020.   WSR 98-01-124, § 388-550-4500, filed 12/18/97, effective 1/18/98.]