(1) For medicaid and SCHIP accommodation costs, the department:
(a) Uses each hospital's base period cost data to calculate the hospital's total operating, capital, and direct medical education costs for each of the accommodation categories described in WAC
388-550-3150; then
(b) Divides those costs per category by total hospital days per category to arrive at a per day accommodation cost; then
(c) Multiplies the per day accommodation cost for each category by the total medicaid and SCHIP days to arrive at total medicaid accommodation costs per category for the three components.
(2) For ancillary costs the department:
(a) Uses the base period cost data to calculate total operating, capital, and direct medical education costs for each of the hospital's ancillary categories described in WAC
388-550-3150; then
(b) Divides these costs by total charges per category to arrive at a ratio of costs-to-charges (RCC) per ancillary category; then
(c) Multiplies these RCCs by medicaid and SCHIP charges per category, as tracked by the medicaid management information system (MMIS), to arrive at total medicaid and SCHIP ancillary costs per category for the three components (operating, capital, and medical education).
(3) The department:
(a) Combines medicaid and SCHIP accommodation and ancillary costs to derive the hospital's total costs for operating, capital, and direct medical education components for the base year; then
(b) Divides the hospital's combined total cost by the number of medicaid and SCHIP cases during the base year to arrive at an average medicaid and SCHIP cost per discharge; then
(c) For dates of admission before August 1, 2007, adjusts, for hospitals with a fiscal year ending different than the common fiscal year end, the medicaid and SCHIP average cost by a factor determined by the department to standardize hospital costs to the common fiscal year end. The department adjust the hospital's medicaid and SCHIP average cost by the hospital's specific case mix index.
(4) For dates of admission before August 1, 2007, the department caps the medicaid and SCHIP average cost per case for peer groups B and C at seventy percent of the peer group average. In calculation of the peer group cap, the department removes the indirect medical education and outlier costs from the medicaid average cost per admission.
(a) For hospitals in department peer groups B or C, the department determines 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; then
(b) To whichever is less, the hospital-specific aggregate cost or the peer group cost cap determined in subsection (4) of this section, the department adds:
(i) The individual hospital's indirect medical education costs, as determined in WAC
388-550-3250(2); and
(ii) An outlier cost adjustment in accordance with WAC
388-550-3350.
(5) For dates of admission before August 1, 2007, for an inflation adjustment and outlier set-aside adjustment, the department may:
(a) Multiply the sum obtained in subsection (4) of this section by an inflation factor as determined by the legislature for the period January 1 of the year after the base year through October 31 of the rebase year;
(b) 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 CBCF.
(6) For dates of admission on and after August 1, 2007, the department establishes medicaid DRG conversion factors for calculation of the medicaid and SCHIP DRG payments.
(a) The department determines DRG conversion factors based on the estimated hospital operating, capital, and direct medical education costs from medicaid and SCHIP fee-for-services and Health Option claims data for the most current state fiscal year, or "base year claims data." The claims data is designated by the department as the "base year claims data" used for the DRG conversion factor calculation process. The "base year claims data" consists of medicaid and SCHIP fee-for-service and health options claims data for the most current state fiscal year (at the time the rebasing process takes place) from instate acute care hospitals that are not a critical access hospital (CAH) or a long term acute care (LTAC) hospital. The detailed cost calculation is described in WAC
388-550-3150. Only base year claims grouped to a DRG classification that has a stable DRG relative weight are included in the DRG conversion factor calculation. Stable relative weight DRGs are defined in WAC
388-550-3100.
(b) The department calculates and adjusts hospital-specific operating, capital and direct medical education costs as follows:
(i) For hospital-specific operating costs (to determine the labor portion, the department used the factor established by medicare multiplied by the statewide operating standardized amount) by the most currently available hospital-specific medicare wage index established by medicare that exists at the time of the medicaid rebasing; then adds the nonlabor portion to the result; then divides the result by (1.0 plus the most currently available hospital-specific medicare operating indirect medical education factor established by medicare that exists at the time of the medicaid rebasing); then divides that result by the hospital-specific medicaid case-mix index; then
(ii) For hospital-specific capital costs, the department divides hospital-specific capital costs by (1.0 plus the hospital-specific medicare capital indirect medical education factor); then divides that result by the hospital-specific medicaid case-mix; then
(iii) For hospital-specific direct medical education costs, the department divides hospital-specific direct medical education costs by the hospital-specific medicaid case-mix; then
(iv) To make adjustments to hospital-specific costs derived in subsections (i) through (iii) of this subsection, the department uses:
(A) The medicare wage indices and indirect medical education factors in effect for the medicare inpatient prospective payment system (PPS) federal fiscal year that most closely matches the time period covered by the medicare cost report used for these calculations; and
(B) The medicaid case mix indices based on the recalibrated DRG relative weights applied to the base year claims data. Medicaid case mix index is described in WAC
388-550-3400.
(c) Calculates statewide operating and capital standardized amounts to adjust hospital-specific operating and capital costs as follows. The department:
(i) Divides the statewide aggregate adjusted operating costs by the statewide aggregate number of discharges in the base year claims data (cost and discharges are described in subsection (a) and (b) of this subsection); and
(ii) Divides the statewide aggregate adjusted capital costs by the statewide aggregate number of discharges in the base year claims data (costs and discharges described in subsection (a) and (b) of this section.
(d) The department makes hospital-specific adjustments to the statewide operating and capital standardized amounts as follows:
(i) To determine the labor portion, the department used the factor established by medicare multiplied by the statewide operating standardized amount. The labor portion of the hospital-specific operating standardized amount is multiplied by the most currently available hospital-specific medicare wage index established by medicare that exists at the time of the medicaid rebasing; then the nonlabor portion is added to the result; then the result is multiplied by (1.0 plus the most currently available hospital-specific medicare operating indirect medical education factor established by medicare that exists at the time of the medicaid rebasing). These adjustments are made only at the time the rate setting calculation takes place during the rebasing process.
(ii) Capital standardized amount is multiplied by (1.0 plus the most current available hospital-specific medicare capital indirect medical education factor that has been published at the point the rate setting calculation takes place during the rebasing process).
(e) To determine hospital-specific DRG conversion factors, the department sums for each hospital:
(i) The adjusted operating standardized amount;
(ii) The adjusted capital standardized amount; and
(iii) The direct medical education cost per discharge adjusted for hospital-specific case-mix index.
(f) The department adjusts the hospital-specific DRG conversion factors for inflation based on the CMS PPS input price index. The adjustment is to reflect the increases in price index levels between the base year data and the rebased inpatient payment system implementation year.
(g) The department may adust the hospital-specific DRG conversion factors by a factor to achieve budget neutrality for the state's aggregate inpatient payments for all hospital inpatient services for the rebasing implementation year.
(h) The department may make other necessary adjustments as directed by the legislature.
(i) The hospital's specific DRG conversion factor may not be changed unless the inpatient payment system is rebased or the legislature authorized the changes.
[11-14-075, recodified as § 182-550-3450, filed 6/30/11, effective 7/1/11. Statutory Authority: RCW 74.08.090, 74.09.500 and 2005 c 518. 07-14-051, § 388-550-3450, filed 6/28/07, effective 8/1/07. Statutory Authority: RCW 74.09.090, 42 U.S.C. 1395x(v) and 1396r-4, 42 C.F.R. 447.271, 11303 and 2652. 99-14-027, § 388-550-3450, filed 6/28/99, effective 7/1/99. Statutory Authority: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010, 74.09.200, [74.09.]500,[74.09.]530 and 43.20B.020. 98-01-124, § 388-550-3450, filed 12/18/97, effective 1/18/98.]