WAC 388-550-3350   Outlier costs.  (1) The information and processes described in subsections (1) through (5) of this section are applicable for claims with dates of admission before August 1, 2007.

     (a) The department removes 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.

     (2) After an individual hospital's base period costs and its peer group cost cap are determined, the department adds 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 pays high-cost outlier claims from the outlier set-aside pool. The department calculates 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 diagnosis related group (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 uses 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 funds the outlier set-aside pool on hospitals' prior high-cost outlier experience. No cost settlements will be made to hospitals for outlier cases.

     (6) For dates of admission on and after August 1, 2007, the department includes statistical outlier claims for calculation of the conversion factors, per diem rates, and per case rates, and does not establish an outlier set-aside pool. The department does not include statistical outlier claims for calibration of DRG relative weights.



[Statutory Authority: RCW 74.08.090 and 74.09.500. 07-14-055, § 388-550-3350, filed 6/28/07, effective 8/1/07. 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, § 388-550-3350, filed 12/18/97, effective 1/18/98.]