WAC 388-550-4800   Hospital payment methods--State administered programs.  Subsections (1) through (11) of this section apply to hospital payment methods for state administered programs for dates of admission before August 1, 2007. Subsections (12) through (19) of this section apply to hospital payment methods for state administered programs for dates of admission on and after August 1, 2007.

     (1) Except as provided in subsection (2) of this section, the department uses the ratio of costs-to-charges (RCC) and diagnosis-related group (DRG) payment methods described in this section to pay hospitals at reduced rates for covered services provided to a client who is not eligible under a medicaid program, the SCHIP program, or alien emergency medical (AEM) program and:

     (a) Who qualifies for the general assistance unemployable (GAU) program; or

     (b) Is involuntarily detained under the Involuntary Treatment Act (ITA).

     (2) The department exempts the following services from the state-administered programs' payment methods and/or reduced rates:

     (a) Detoxification services when the services are provided under a department-assigned provider number starting with "thirty-six." (The department pays these services using the Title XIX medicaid RCC payment method.)

     (b) Program services provided by department-approved critical access hospitals (CAHs) to clients eligible under state-administered programs. (The department pays these services through cost settlement as described in WAC 388-550-2598.)

     (c) Program services provided by Peer group E hospitals to clients eligible under the GAU program. (The department these services through the "full cost" public hospital certified public expenditure (CPE) payment program (see WAC 388-550-4650).)

     (3) The department determines:

     (a) A state-administered program RCC payment by reducing a hospital's Title XIX medicaid RCC rate using the hospital's ratable.

     (b) A state-administered program DRG payment by reducing a hospital's Title XIX medicaid DRG cost based conversion factor (CBCF) using the hospital's ratable and equivalency factor (EF).

     (4) The department determines:

     (a) The RCC rate for the state-administered programs mathematically as follows:

     State-administered programs' RCC rate = current Title XIX medicaid RCC rate x (one minus the current hospital ratable)

     (b) The DRG conversion factor (CF) for the state-administered programs mathematically as follows:

     State-administered programs' DRG CF = current Title XIX medicaid DRG CBCF x (one minus the current hospital ratable) x EF

     (5) The department determines payments to hospitals for covered services provided to clients eligible under the state-administered programs mathematically as follows:

     (a) Under the RCC payment method:

     State-administered programs' RCC payment = state-administered programs' RCC Rate x allowed charges

     (b) Under the DRG payment method:

     State-administered programs' DRG payment = state-administered programs' DRG CF x all patient DRG relative weight (see subsection (6) of this section for how the department determines payment for state-administered program claims that qualify as DRG high-cost outliers).

     (6) For state-administered program claims that qualify as DRG high-cost outliers, the department determines:

     (a) In-state children's hospital payments for state-administered program claims that qualify as DRG high-cost outliers mathematically as follows:

     Eighty-five percent of the allowed charges above the outlier threshold x the specific hospital's RCC rate x (one minus the current hospital ratable) plus the DRG allowed amount

     (b) Psychiatric DRG high-cost outlier payments for DRGs 424 through 432 mathematically as follows:

     One hundred percent of the allowed charges above the outlier threshold x the specific hospital's RCC rate x (one minus the current hospital ratable) plus the applicable DRG allowed amount

     (c) Payments for all other claims that qualify as DRG high-cost outliers as follows:

     Sixty percent x the specific hospital's RCC rate x (one minus the current hospital ratable) plus the applicable DRG allowed amount

High-cost Outlier Calculations for Qualifying Claims State-administered Programs (for admission dates January 1, 2001 and after)

In-state Children's Hospitals Allowed charges

(-)

> of $33000 or 3 x DRG

(=)

Charges > threshold

(x)

RCC

(x)

1 (-) Ratable

(x)

85%

(=)

Outlier Add-on Amount

(+)

*DRG Allowed Amount

Psychiatric DRGs 424-432 Allowed charges

(-)

> of $33000 or 3 x DRG

(=)

Charges > threshold

(x)

RCC

(x)

1 (-) Ratable

(x)

100%

(=)

Outlier Add-on Amount

(+)

* DRG Allowed Amount

All other qualifying claims Allowed charges

(-)

> of $33000 or 3 x DRG

(=)

Charges > threshold

(x)

RCC

(x)

1 (-) Ratable

(x)

60%

(=)

Outlier Add-on Amount

(+)

* DRG Allowed Amount

*Basic DRG allowed amount calculation: DRG relative weight x conversion factor = DRG allowed amount

     (7) See WAC 388-550-3700(5) for how claims qualify as low-cost outliers.

     (8) The department determines payments for claims that qualify as DRG low-cost outliers mathematically as follows:

     Allowed charges for the claim x the specific hospital's RCC rate x (one minus the current hospital ratable)

     (9) To calculate a hospital's ratable that is applied to both the Title XIX medicaid RCC rate and the Title XIX medicaid DRG CBCF used to determine the respective state-administered program's reduced rates, the department:

     (a) Adds the hospital's medicaid revenue (medicaid revenue as reported by department of health (DOH) includes all medicaid revenue and all other medical assistance revenue) and medicare revenue to the value of the hospital's charity care and bad debts, all of which is taken from the most recent complete calendar year data available from DOH at the time of the ratable calculation; then

     (b) Deducts the hospital's low-income disproportionate share hospital (LIDSH) revenue from the amount derived in (a) of this subsection to arrive at the hospital's community care dollars; then

     (c) Subtracts the hospital-based physicians revenue that is reported in the hospital's most recent HCFA-2552 medicare cost report received by the department at the time of the ratable calculation, from the total hospital revenue reported by DOH from the same source as discussed in (a) of this subsection, to arrive at the net hospital revenue; then

     (d) Divides the amount derived in (b) of this subsection by the amount derived in (c) of this subsection to obtain the ratio of community care dollars to net hospital revenue (also called the preliminary ratable factor); then

     (e) Subtracts the amount derived in (d) of this subsection from 1.0 to obtain the hospital's preliminary ratable; then

     (f) Determines a neutrality factor by:

     (i) Multiplying hospital-specific medicaid revenue that is reported by DOH from the same source as discussed in (a) of this subsection by the preliminary ratable factor; then

     (ii) Multiplying that same hospital-specific medicaid revenue by the prior year's final ratable factor; then

     (iii) Summing all hospital-medicaid revenue from the hospital-specific calculations that used the preliminary ratable factor discussed in (f)(i) of this subsection; then

     (iv) Summing all hospital revenue from the hospital-specific calculations that used the prior year's final ratable factor discussed in (f)(ii) of this subsection; then

     (v) Comparing the two totals; and

     (vi) Setting the neutrality factor at 1.0 if the total using the preliminary ratable factor is less than the total using the prior year's final ratable factor; or

     (vii) Establishing a neutrality factor that is less than 1.0 that will reduce the total using the preliminary ratable factor to the level of the total using the prior year's final ratable factor, if the total using the preliminary ratable factor is greater than the total using the prior year's ratable factor; then

     (g) Multiplies, for each specific hospital, the preliminary ratable by the neutrality factor to establish hospital-specific final ratables for the year; then

     (h) Subtracts each hospital-specific final ratable from 1.0 to determine hospital-specific final ratable factors for the year; then

     (i) Calculates an instate-average ratable and an instate-average ratable factor used for new hospitals with no prior year history.

     (10) The department updates each hospital's ratable annually on August 1.

     (11) The department:

     (a) Uses the equivalency factor (EF) to hold the hospital specific state-administered programs' DRG CF at the same level prior to rebasing, adjusted for inflation; and

     (b) Calculates a hospital's EF as follows:

     EF = State-administered programs' prior DRG CF divided by current Title XIX medicaid DRG CBCF x (one minus the prior ratable)

     (12) For dates of admission on and after August 1, 2007, the department pays for services provided to a client eligible for a state administered program based on state-administered program rates. The state administered program rates are established independently from the process used in setting the medicaid payment rates. The state administered program rates may not be changed unless the legislature authorizes the changes. The department uses the ratable factor and equivalency factor to keep the state administered program payment rates at the same level they were at before the state medicaid rates are rebased.

     (13) The table in this subsection shows a comparison of the payment policy for the department's inpatient payment system for dates of admission before August 1, 2007, and the inpatient payment system effective for dates of admission on and after August 1, 2007. Under this inpatient payment system effective August 1, 2007, the per diem rates are used to pay for many services previously paid using the RCC payment method.

     The following table indicates differences in policy for the two inpatient payment systems:

	Inpatient payment system for dates of admission before August 1, 2007	Inpatient payment system for dates of admission on and after August 1, 2007
Stable DRGs	DRG Grouper v 14.1	DRG grouper v 23.0
Unstable/Medical DRGs	RCC	Per diem
Unstable Surgical DRGs Unstable Neonate DRGs	RCC RCC	Per diem Per diem
Psych	RCC	Per diem
Rehab	RCC	Per diem
Detox	RCC	Per diem
Transplant	RCC	RCC
Military hospitals	RCC	RCC
HIV Chronic pain management	RCC Per diem	Not separately defined Per diem
Bariatric surgery	Per case rate	Per case rate
CUP	Not separately defined	Per diem
Burns	Not separately defined	Per diem

     See specific sections in the chapter 388-550 WAC to determine how the department pays hospitals participating in the critical access hospital (CAH) program, the long term acute care (LTAC) program, and the certified public expenditure (CPE) payment program.

     (14) Due to changes in payment methodologies established for the inpatient payment system effective August 1, 2007, the department has established the following state administered program rates used for dates of admission on and after August 1, 2007:

     (a) State administered program DRG conversion factor for claims grouped under stable DRG classifications services.

     (b) State administered program per diem rates for claims grouped under the following specialty service categories:

     (i) CUP;

     (ii) Detoxification; and

     (iii) Physical medicine and rehabilitation.

     (c) State administered program per diem rates for the claims grouped to unstable DRG classifications under the following nonspecialty service categories:

     (i) Surgical;

     (ii) Medical;

     (iii) Burns; and

     (iv) Neonate and pediatric.

     (d) State administered program per diem rates for claims grouped under psychiatric services.

     (e) State administered program per case rate for claims grouped under bariatric services.

     (f) State administered program RCC rates for claims grouped under transplant services.

     (15) This subsection describes the state administered program (DRG) conversion factor and payment calculation processes used by the department to pay claims paid using the DRG payment method. The department pays for services grouped to a stable DRG classification that are provided to clients eligible for a state administered program based on use of a DRG conversion factor and a DRG relative weight. This process is similar to the payment method used to pay for medicaid and SCHIP services that are grouped to a stable DRG classification.

     (a) The department's state administered program DRG conversion factor calculation process is as follows:

     (i) For instate and critical border hospitals, the hospital's specific DRG conversion factor that is used to calculate payment for a state administered program claim, is based on the medicaid conversion factor adjusted by the most available ratable factor and the applicable equivalency factor. Mathematically the calculation is:

     State administered program DRG CF =

     ((Medicaid DRG CF x applicable Equivalency Factor) x most available ratable factor)

     (ii) For instate and critical border hospitals that do not have a current state administered program DRG conversion factor, the state administered program conversion factor is the hospital's specific proposed medicaid conversion factor multiplied by the average applicable equivalent factor and average applicable ratable.

     (iii) For bordering city hospitals that are not critical border hospitals, and for other out-of-state hospitals that are not critical border hospitals, the state administered program DRG conversion factor is the lowest instate medicaid DRG conversion factor multiplied by the average ratable and equivalency factor.

     (b) The department's state administered program DRG equivalency factor calculation process is as follows:

     (i) The equivalency factor is a factor used to hold the hospital's specific state administered program DRG conversion factor or rates at the same level before and after the medicaid DRG rate is rebased. Mathematically the calculation is:

     Equivalency factor = (State administered program DRG CF/(medicaid DRG CF x ratable))

     (ii) The department may make an adjustment to the equivalency factor to address the differences in the relative weight values of the two DRG grouper versions due to the recalibration of the weights.

     (iii) Refer to the ratable and ratable factor definition and calculation for the ratable factor determination.

     (c) The department's DRG payment calculation process for DRG classifications grouped to stable DRG relative weights is as follows:

     (i) The department determines the allowed amount for the inlier portion of the state-administered program DRG payment calculation. Mathematically the calculation is:

     State administered program DRG inlier portion allowed amount of the payment = (State administered program DRG CF x DRG relative weight)

     (ii) The department determines the high outlier claim calculation for the state administered program DRG payment. See WAC 388-550-3700 for more information about high outlier qualification and calculation processes. Mathematically the calculation is:

     State-administered program DRG inlier and outlier portion allowed amount of the payment = (State-administered program DRG CF x DRG relative weight) + outlier adjustment

     (iii) The outlier payment adjustment calculation for a state administered program claim is different than the outlier payment calculation for a medicaid claim. The outlier adjustment for a state administered program claim is adjusted by the ratable factor.

     (iv) The outlier threshold amount for claims that are eligible for a high outlier payment and are grouped to nonneonatal DRGs and nonpediatric DRGs, equals one hundred seventy-five percent of the DRG inlier allowed amount calculation. This same outlier threshold is used for claims that are eligible for a high outlier payment in hospitals other than Children's Hospital Regional Medical Center and Mary Bridge Children's Hospital and Health Center.

     (v) The outlier threshold amount for claims that are eligible for a high outlier payment and are grouped to neonatal DRGs, pediatric DRGs, equals one hundred fifty percent of the DRG inlier allowed amount calculation. This same outlier threshold is used for claims that are eligible for a high outlier payment when the claim is from Children's Hospital Regional Medical Center or Mary Bridge Children's Hospital and Health Center.

     (vi) The outlier transfer provision is applied for the calculation of services paid under the state administered program DRG payments.

     (vii) Refer to the medicaid percent of outlier adjustment factor described in WAC 388-550-3700 and (d) of this subsection for how the percent of outlier adjustment factor is reduced by a ratable to determine the outlier portion allowed amount for the claim.

     (d) The department determines the outlier portion allowed amount calculation for the state-administered program high outlier claim DRG payment as follows. Mathematically the calculation is:

     State administered program outlier portion allowed amount of claim = ((Covered charges x RCC) - outlier threshold) x (Percent of outlier adjustment factor x ratable factor)

     (i) A claim is an outlier claim when the claim cost (covered charges x RCC) is greater than both the fixed loss amount of fifty thousand dollars and one hundred seventy-five percent (one hundred fifty percent for neonatal, pediatric DRGs, Children's Hospital Regional Medical Center or Mary Bridge Children's Hospital and Health Center) of the DRG inlier allowed amount for payment.

     (ii) The outlier threshold used in calculation of the outlier payment adjustment will always be one hundred seventy-five percent (one hundred fifty percent for neonatal, pediatric DRGs, Children's Hospital Regional Medical Center or Mary Bridge Children's Hospital and Health Center) of the DRG inlier allowed amount for payment.

     (iii) Refer to the ratable and ratable factor definition and calculation for the ratable factor determination.

     (16) This subsection describes the state-administered program per diem rate and payment calculation for the following specialty service categories and unstable DRG nonspecialty service categories.

     (a) The per diem rate is separately established for each of the following services:

     (i) CUP;

     (ii) Detoxification;

     (iii) Physical medicine and rehabilitation;

     (iv) Surgical;

     (v) Medical;

     (vi) Burns; and

     (v) Neonate and pediatric.

     (b) The per diem rate calculation process for CUP, detoxification, physical medicine and rehabilitation, surgical, medical, burns, and neonate and pediatric services is, for instate and critical border hospitals, the hospital's specific state administered program per diem rate is based on the Title XIX medicaid rates multiplied by the most available ratable factor and the equivalency factor. Mathematically the calculation is:

     State administered program per diem rate =

     ((Hospital's specific medicaid per diem x ratable factor) x Equivalency factor)

     (c) The per diem equivalency factor calculation process is as follows:

     (i) The per diem equivalency factor is a factor used to hold the aggregate payment for all non-medicaid claims grouped under per diem payment method at the same level before and after the per diem medicaid rate is rebased. The equivalency factor is the calculated based on the estimate non-medicaid per diem, the medicaid per diem, and the hospital's specific ratable factor. Mathematically the calculation is:

     Equivalency factor =

     (Estimated state administered program per diem rate/(medicaid per diem rate x ratable))

     (ii) For bordering city hospitals that are not critical border hospitals, and for other out-of-state hospitals that are not critical border hospitals, the state administered program per diem rate is the lowest instate medicaid per diem rate multiplied by the average ratable and equivalency factor.

     (iii) The state administered program per diem rate is an estimate based on the actual payment per day. The actual payment per day equals the aggregate payment amount (inflated from the base year to the implementation year) divided by the number of days associated with the aggregate costs.

     (iv) For a hospital with more than twenty state administered program claims that grouped in the base year data to DRG classifications that are paid using the per diem payment method, a hospital's specific equivalency factor is established based on the hospital's data.

     (v) For a hospital with less than twenty state administered program claims that grouped in the base year data to DRG classifications are paid using the per diem payment method, an average equivalency factor is established based on the hospital data base of all hospitals.

     (d) The state administered program per diem allowed amount of payment calculation process for CUP, detoxification, and physical medicine and rehabilitation services is as follows. Mathematically the calculation is:

     Per diem payment =

     Hospital's state administered program per diem rate x patient stay LOS recognized by the department for payment

     The high outlier and transfer policy is not applied to payment calculations for CUP, detoxification, and physical medicine and rehabilitation services.

     (e) The state administered program per diem allowed amount of payment calculation process for surgical, medical, burns, and neonate services is as follows. Mathematically the calculation is:

     Per diem payment =

     Hospital's state administered program per diem rate x patient stay LOS recognized by the department for payment

     (i) The outlier policy is applied to payment calculations for a claim grouped to an unstable DRG classification when the claim is for surgical, medical, burns, neonate and pediatric services (see WAC 388-550-3700). Refer to the state administered program outlier DRG adjustment payment calculation for the outlier calculation.

     (ii) The transfer policy is not applied to payment calculations for a claim grouped to an unstable DRG classification when the claim is for surgical, medical, burns, neonate and pediatric services.

     (17) The state administered program per diem rate and payment calculation for psychiatric services is as follows:

     (a) The department uses a payment method similar to the method used to pay for medicaid psychiatric services, for state administered program psychiatric services provided to clients eligible for those services. Psychiatric services provided to state administered program clients are paid using a psychiatric per diem rate. The per diem rate calculation process for state administered program psychiatric services is as follows:

     (i) For instate hospitals, the hospital's specific state administered program psychiatric per diem rate used to calculate the allowed amount for payment is based on the Title XIX medicaid rate adjusted by a ratable factor specified by the legislature to reduce the medicaid psychiatric per diem to a state program per diem. Mathematically the calculation is:

     State administered program psychiatric per diem rate =

     Medicaid psychiatric per diem x a ratable factor specified by the legislature to reduce the medicaid psychiatric per diem to a state program per diem.

     (ii) For hospitals located outside the state of Washington, including bordering city hospitals, critical border hospitals, and other out-of-state hospitals, psychiatric services and involuntary treatment act (ITA) services are not covered or paid by the department.

     (b) The per diem payment calculation process for state-administered program psychiatric services is as follows. Mathematically the calculation is:

     Psychiatric payment =

     State administered program hospital's specific per diem rate x patient stay LOS recognized by the department's MHD designee for payment

     (i) Outlier payment and transfer policies are not applied to state administered program psychiatric claims.

     (ii) The ratable factor was provided to the department by the legislature.

     (18) This subsection describes the state administered program per case rate and payment processes for bariatric surgery services.

     (a) The department limits provision of bariatric surgery services to medical assistance clients to hospitals that are approved by the department to provide those services. Bariatric surgery services provided to a medical assistance client by an approved hospital must also be prior authorized by the department for the hospital to receive payment from the department for those services. Effective August 1, 2007, the department approved bariatric surgery services programs at the Sacred Heart Medical Center, the University of Washington Medical Center, and the Oregon Health Science University. The department may approve other programs based on department discretion.

     (b) The department calculates the state administered program per case rate for bariatric surgery services by multiplying the hospital's specific medicaid per case rate for bariatric surgery services by the hospital's specific ratable factor and DRG-equivalency factor. Mathematically the calculation is:

     State administered program per case rate =

     Medicaid per case rate x hospital's specific ratable factor x DRG equivalency factor

     The per case payment rate for bariatric surgery services is an all-inclusive rate. No outlier provision is applied to the per case rate.

     (19) This subsection describes the state administered program RCC rates and payment calculation processes for transplant services and other RCC paid services. Transplant services provided to a client eligible for those services through a state administered program are paid using the RCC payment method. There are some other services that may be paid using the RCC payment method, e.g., services provided by military hospitals when no other payment method is agreed upon by the department and the hospital. The state administered program RCC rate is calculated by multiplying the medicaid RCC rate by the ratable factor. Mathematically the calculation is:

     State administered program RCC rate = Medicaid RCC x ratable factor

     (20) The department may pay for authorized psychiatric indigent inpatient claims submitted by an instate community hospital designated as an institution for mental diseases (IMD) using state funds when such funds are provided by the state legislature specifically for this purpose.

     (21) The department's policy for payment on state-administered program claims that involve third party liability (TPL) and/or client responsibility payments is the same policy indicated in the table in WAC 388-550-2800, except that when the department determines the payment on the claim, it applies state-administered program rates, not medicaid or SCHIP rates, when comparing the lesser of billed charges or the allowed amount on the claim.



[Statutory Authority: RCW 74.08.090, 74.09.500 and 2005 c 518. 07-14-051, § 388-550-4800, filed 6/28/07, effective 8/1/07. Statutory Authority: RCW 74.04.050, 74.08.090. 05-12-132, § 388-550-4800, filed 6/1/05, effective 7/1/05. Statutory Authority: RCW 74.08.090 and 74.09.500. 04-19-113, § 388-550-4800, filed 9/21/04, effective 10/22/04. Statutory Authority: RCW 74.08.090, 74.09.500, 74.09.035(1), and43.88.290 . 02-21-019, § 388-550-4800, filed 10/8/02, effective 11/8/02. Statutory Authority: RCW 74.08.090 and 42 U.S.C. 1395x(v), 42 C.F.R. 447.271, .11303, and .2652. 01-16-142, § 388-550-4800, filed 7/31/01, effective 8/31/01. Statutory Authority: RCW 74.09.080, 74.09.730, 42 U.S.C. 1395x(v) and 1396r-4, 42 C.F.R. 447.271 and 2652. 99-14-026, § 388-550-4800, filed 6/28/99, effective 7/1/99. Statutory Authority: RCW 74.08.090, 42 USC 1395 x(v), 42 CFR 447.271, 447.11303, and 447.2652. 99-06-046, § 388-550-4800, filed 2/26/99, effective 3/29/99. 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, § 388-550-4800, filed 12/18/97, effective 1/18/98.]