Original Notice.

     Preproposal statement of inquiry was filed as WSR 08-11-090.

     Title of Rule and Other Identifying Information: The department is amending WAC 388-550-4670 Certified public expenditure (CPE) payment program -- "Hold harmless" provision, 388-550-4690 Authorization requirements and utilization review for hospitals eligible for CPE payments, and 388-550-5410 Medicaid cost report schedules.

     Hearing Location(s): Blake Office Park East, Rose Room, 4500 10th Avenue S.E., Lacey, WA 98503 (one block north of the intersection of Pacific Avenue S.E. and Alhadeff Lane. A map or directions are available at http://www1.dshs.wa.gov/msa/rpau/docket.html or by calling (360) 664-6094), on August 26, 2008, at 10:00 a.m.

     Date of Intended Adoption: Not sooner than August 27, 2008.

     Submit Written Comments to: DSHS Rules Coordinator, P.O. Box 45850, Olympia, WA 98504-5850, delivery 4500 10th Avenue S.E., Lacey, WA 98503, e-mail DSHSRPAURulesCoordinator@dshs.wa.gov, fax (360) 664-6185, by 5 p.m. on August 26, 2008.

     Assistance for Persons with Disabilities: Contact Jennisha Johnson, DSHS Rules Consultant, by August 19, 2008, TTY (360) 664-6178 or (360) 664-6094 or by e-mail at johnsjl4@dshs.wa.gov.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: This rule proposal ensures consistent policies for calculating the interim and final hold harmless grant payment amounts to hospitals qualifying for certified public expenditure (CPE) payments; clarifies that WAC 388-550-4690 does not apply to psychiatric CPE inpatient hospital admissions; clarifies how the department performs utilization reviews for CPE inpatient hospital admissions prior to August 1, 2007, and on and after August 1, 2007; updates and clarifies requirements for completing the medicaid cost report schedules; lists the required documentation the hospitals must provide with the medicaid cost report schedules; and incorporates into rule that CPE hospitals are at risk for recoupment of the federal payments exceeding costs unless covered by the hold harmless provision.

     Reasons Supporting Proposal: See Purpose above.

     Statutory Authority for Adoption: RCW 74.08.090 and 74.09.500.

     Statute Being Implemented: RCW 74.08.090 and 74.09.500.

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

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

     Name of Agency Personnel Responsible for Drafting: Kathy Sayre, P.O. Box 45504, Olympia, WA 98504-5504, (360) 725-1342; Implementation and Enforcement: Lillian Erola, P.O. Box 45500, Olympia, WA 98504-5500, (360) 725-1877.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. HRSA has analyzed the proposed rule and concluded that no new costs will be imposed on small businesses affected by them. The preparation of a comprehensive small business economic impact statement is not required under RCW 19.85.030.

     A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Lillian Erola, 626 8th Avenue S.E., Olympia, WA 98504-5500, phone (360) 725-1877, fax (360) 753-9152, e-mail erolal@dshs.wa.gov.

July 16, 2008

Stephanie E. Schiller

Rules Coordinator

     (1) The department:

     (a) Uses historical cost and payment data trended forward to calculate prospective hold harmless grant payment amounts for the current state fiscal year (SFY); and

     (b) Reconciles these hold harmless grant payment amounts when the actual claims data is available for the current fiscal year.

     (2) For each state fiscal year, the department calculates what the hospital would have been paid under the methodologies otherwise in effect for the state fiscal year (SFY) as the sum of:

     (a) The total payments for inpatient claims for patients admitted during the fiscal year, calculated by repricing the claims using:

     (i) For SFYs 2006 and 2007, the inpatient payment method in effect during SFY 2005; or

     (ii) For SFYs 2008 and beyond, the payment method that would otherwise be in effect during the CPE payment program year if the CPE payment program had not been enacted((; and)).

     (b) The total net disproportionate share hospital and state grant payments paid for SFY 2005.

     (((2))) (3) For each SFY, the department determines total state and federal payments made under the program ((during the fiscal year)), including ((the allowable federal portion of inpatient claims and disproportionate share hospital (DSH) payments, and the state and federal shares of any supplemental upper payment limit payments)):

     (a) Inpatient claim payments;

     (b) Disproportionate share hospital (DSH) payments; and

     (c) Supplemental upper payment limit payments made for SFY 2006 and 2007, as applicable.

     (((3))) (4) The amount determined in subsection (((2))) (3) of this section is subtracted from the amount calculated in subsection (((1))) (2) of this section to determine the gross state grant amount necessary to hold the hospital harmless. ((Prepaid hold harmless grants prepaid for the same SFY referred to in subsection (2) of this section are deducted from the gross hold harmless amount to determine the net amount due to or from the hospital)) If the resulting number is positive, the hospital is entitled to a grant in that amount, subject to legislative directives and appropriations.

     (a) The department calculates an interim hold harmless grant amount approximately ten months after the SFY to include the paid claims for the same SFY admissions. Claims are subject to utilization review prior to the interim hold harmless calculation. Prospective grant payments made under subsection (1) of this section are deducted from the calculated interim hold harmless grant amount to determine the net grant payment amount due to or due from the hospital.

     (b) The department calculates the final hold harmless grant amount at such time as the final allowable federal portions of program payments are determined. The procedure is the same as the interim grant calculation but it includes all additional claims that have been paid or adjusted since the interim hold harmless calculation. Claims are subject to utilization review and audit prior to the final calculation of the hold harmless amount. Interim grant payments determined under (a) of this subsection are deducted from this final calculation to determine the net final hold harmless amount due to or due from the hospital.

[Statutory Authority: RCW 74.08.090, 74.09.500. 07-14-090, § 388-550-4670, filed 6/29/07, effective 8/1/07. Statutory Authority: RCW 74.08.090, 74.09.500, and 2005 c 518 § 209(9). 06-11-100, § 388-550-4670, filed 5/17/06, effective 6/17/06.]

     (1) ((Certified public expenditure (CPE))) CPE inpatient hospital claims submitted to the department must meet all authorization and program requirements in WAC and current department-published issuances.

     (2) The department performs utilization reviews of inpatient hospital:

     (a) Admissions in accordance with the requirements of 42 CFR 456, subparts A through C; and

     (b) Claims for compliance with medical necessity, appropriate level of care and the department's (or a department designee's) established length of stay (LOS) standards.

     (3) ((CPE inpatient hospital claims that would have been paid by the diagnosis related group (DRG) payment method prior to July 1, 2005:

     (a) Are not targeted for retrospective utilization review based on the department's professional activity study (PAS) length of stay (LOS) criteria;

     (b) Are subject to the department's medical necessity retrospective utilization review process (see WAC 388-550-1700); and

     (c) That involve a client's seven-day readmission (see WAC 388-550-1050) are subject to a department retrospective utilization review described in WAC 388-550-3000(5)(e).

     (4) CPE inpatient hospital claims that would have been paid by the ratio of costs-to-charges (RCC) payment method prior to July 1, 2005 and exceed the professional activity study (PAS) average LOS, will continue to be targeted for retrospective utilization review based on the department's PAS LOS criteria. See WAC 388-550-4300(3).

     (5))) For CPE inpatient admissions prior to August 1, 2007, the department performs utilization reviews:

     (a) Using the professional activity study (PAS) length of stay (LOS) standard in WAC 388-550-4300 on claims that qualified for ratio of costs-to-charges (RCC) payment prior to July 1, 2005.

     (b) On seven-day readmissions according to the diagnosis related group (DRG) payment method described in WAC 388-550-3000 (5)(f) for claims that qualified for DRG payment prior to July 1, 2005.

     (4) For claims identified in this subsection (((4) of this section)), the department may request a copy of the client's hospital medical records and itemized billing statements. The department sends written notification to the hospital detailing the department's findings. Any day of a client's hospital stay that exceeds the ((PAS)) LOS standard:

     (a) Is paid under ((the RCC)) a nonDRG payment method if the department determines it to be medically necessary for the client at the acute level of care;

     (b) Is paid as an administrative day (see WAC 388-550-1050 and 388-550-4500(8)) if the department determines it to be medically necessary for the client at the subacute level of care; and

     (c) Is not eligible for payment if the department determines it was not medically necessary.

     (((6) Inpatient hospital claims that would not have been paid under a prior payment methodology are not eligible for payment under the CPE payment program)) (5) For CPE inpatient admissions on and after August 1, 2007, CPE hospital claims are subject to the same utilization review rules as nonCPE hospital claims.

     (a) LOS reviews may be performed under WAC 388-550-4300.

     (b) All claims are subject to the department's medical necessity review under WAC 388-550-1700(2).

     (c) For inpatient hospital claims that involve a client's seven-day readmission, see WAC 388-550-3000 (5)(f).

[Statutory Authority: RCW 74.08.090, 74.09.500, and 2005 c 518 § 209(9). 06-11-100, § 388-550-4690, filed 5/17/06, effective 6/17/06.]

     (a) Title XIX fee-for-service claims;

     (b) Medicaid managed care organization (MCO) plan claims;

     (c) Uninsured patients (((individuals who are not covered under any health care insurance plan for the hospital service provided))). The cost report schedules for uninsured patients must not include services that Medicaid would not have covered had the patients been Medicaid eligible (see WAC 388-550-1400 and 388-550-1500); and

     (d) State-administered program patients. State-administered program patients are reported separately and are not to be included on the uninsured patient cost report schedule. The department will provide provider statistics and reimbursements (PS&R) reports for the state-administered program claims.

     (2) ((The department requires each CPE hospital to submit Medicaid cost report schedules to the department for services provided to patients discharged on or after July 1, 2005.

     (3))) A CPE hospital must:

     (a) Use the information on individualized PS&R reports provided by the department when completing the Medicaid cost report schedules. The department provides the hospital with the PS&R reports at least thirty calendar days prior to the appropriate deadline.

     (i) For state fiscal year (SFY) 2006, the deadline for all CPE hospitals to submit the federally required Medicaid cost report schedules is June 30, 2007.

     (ii) For hospitals with a December 31 year end, partial year Medicaid cost report schedules for the period July 1, 2005 through December 31, 2005 must be submitted to the department by August 31, 2007.

     (iii) For SFY 2007 and thereafter, each CPE hospital is required to submit the Medicaid cost report schedules to the department within thirty calendar days after the Medicare cost report is due to its Medicare fiscal intermediary or Medicare administrative contractor, whichever is applicable.

     (b) Complete the cost report schedules for uninsured patients and Medicaid clients enrolled in an MCO plan ((and the uninsured patients)) using the hospital provider's records.

     (c) Comply with the department's instructions regarding how to complete the required Medicaid cost report schedules.

     (3) The Medicaid cost report schedules must be completed using the Medicare cost report for the same reporting year.

     (a) The ratios of costs-to-charges and per diem costs from the "as filed" Medicare cost report are used to allocate the Medicaid and uninsured costs on the "as filed" Medicaid cost report schedules, unless expressly allowed for Medicaid.

     (b) After the Medicare cost report is finalized by the Medicare fiscal intermediary or Medicare administrative contractor (whichever is applicable), final Medicaid cost report schedules must be submitted to the department incorporating the adjustments to the Medicare cost report, unless expressly allowed for Medicaid. CPE hospitals must submit finalized Medicare cost reports with the notice of amount of program reimbursement (NPR) within thirty calendar days of receipt. The department will then provide the hospitals with updated PS&R reports for Medicaid and state program claims processed by the department for the Medicaid cost report period. The hospitals will update the data for uninsured patients and Medicaid clients enrolled in an MCO plan.

     (4) The Medicaid cost report schedules and supporting documentation are subject to audit by the department or its designee to verify that claimed costs qualify under federal and state rules governing the CPE payment program. The documentation required includes, but is not limited to:

     (a) The revenue codes assigned to specific cost centers on the Medicaid cost report schedules.

     (b) The inpatient charges by revenue codes for uninsured patients and Medicaid clients enrolled in an MCO plan.

     (c) The outpatient charges by revenue codes for uninsured patients and Medicaid clients enrolled in an MCO plan.

     (d) All payments received for the inpatient and outpatient charges in (b) and (c) of this subsection including, but not limited to, payments for third party liability, uninsured patients, and Medicaid clients enrolled in an MCO plan.

     (5) The department:

     (a) Performs cost settlements for both the "as filed" and "final" Medicaid cost report schedules for all CPE hospitals;

     (b) Reports to CMS as an adjustment any difference between the payments of federal funds made to the CPE hospitals and the federal share of the certified public expenditures; and

     (c) Recoups from the CPE hospitals the federal payments that exceed the hospitals' costs, unless the hold harmless provision in WAC 388-550-4670 is applicable.

[Statutory Authority: RCW 74.08.090, 74.09.500. 07-14-090, § 388-550-5410, filed 6/29/07, effective 8/1/07.]

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