HAR §17-1739-60. Prospective payment rate

Prospective payment rates to inpatient hospitals providing acute care services in accordance with sections 17-1737-3 and 17-1737-4 shall be established in accordance with the methodology set forth in this subchapter. [Eff 11/13/95 ] (Auth: HRS §346- 59) (Imp: 42 C.F.R. §447.252) §17-1739-61 Preparation of data for calculation of base year prospective payment rates. (a) The department shall prepare data for the calculation of base year rates using the following general methodology. (b) Base year claim charge data shall be prepared in order to establish charge ratios used in the payment calculation: (1) Claim charge data for all Medicare cross-over claims shall be considered based on dates of discharge which correspond to each facility's fiscal year end; (2) If more than one year of claim charge data is used, the charges reflected on the earlier year's claims data shall be inflated to the period covered by the most recent year's claims data in accordance with section 17-1739-57(c); UNOFFICIAL 1739-10 (3) Claims shall be edited and properly classified; (4) Claim charge data including charge amounts, days of care, and number of discharges, shall be classified into the four service categories identified in section 17-1739-59. Combined claims for the delivery of a normal newborn shall be counted as one discharge in the calculation process. Claims for newborns described in section 17-1739-66(a)(5) shall be classified into the appropriate service category; (5) Claim charge data for surgical, maternity, and medical claims in classifications II and III facilities shall be segregated into routine, special care, and ancillary service charges. Nursery charges shall be included in the routine charges; (6) Claim charge data shall be adjusted in the case of classifications II and III facilities to delete nonpsychiatric ancillary claim charges associated with claims in excess of $35,000; and (7) Claim charge data shall be adjusted to delete ancillary charges for wait listed patients. (c) Cost report data including costs, days, and discharges, shall be extracted from base year cost reports and shall be prepared in order to determine medicaid allowable inpatient facility costs: (1) Costs of services excluded under section 17-1739-56 shall be deleted from costs for purposes of the prospective rate calculation. This process shall involve identifying items pertaining to the excluded services and subtracting these costs from the cost report data; (2) Costs in excess of federal Medicare cost reimbursement limitations shall be deleted from costs for purposes of the prospective rate calculation. Costs which are not otherwise specifically addressed in this subchapter shall be included in a base year if they comply with HCFA publication number HIM 15 standards. Capital costs associated with the re-valuation of assets for any reason or due to a change in ownership, operator, or leaseholder where such re- valuation occurred after July 18, 1984 shall UNOFFICIAL 1739-11 be identified and excluded. Costs in excess of charges shall not be deleted from costs for the purpose of the prospective rate calculation; (3) Allowable medicaid inpatient facility costs shall be determined separately for routine and ancillary costs. Nursery costs shall be combined with other routine costs and reclassified into the routine service component; (4) The medicaid inpatient portion of malpractice costs shall be determined by multiplying the ratio of medicaid inpatient costs to total costs by the facility's total malpractice costs. This amount shall be added to allowable medicaid inpatient facility costs; (5) To recognize cost differences due to varying fiscal year ends and annual inflationary increases, allowable medicaid inpatient facility costs shall be standardized and inflated as described in section 17-1739-68; (6) Capital, medical education, and for proprietary facilities, return on equity and gross excise tax amounts shall be deleted from allowable medicaid inpatient facility costs and shall be reimbursed in accordance with section 17-1739-65; (7) Except as provided in section 17-1739-59, services provided to patients during an inpatient stay but billed by a provider other than the inpatient facility shall be added to allowable medicaid inpatient facility costs. To obtain the estimated amount, the department shall survey facilities and accept reasonable estimates of such services; and (8) In computing the nonpsychiatric ancillary per discharge rates, the total ancillary costs and discharges associated with nonpsychiatric outlier claims and ancillary costs associated with wait listed patients shall be deleted from allowable medicaid inpatient facility costs and discharges based on the claim charge ratios identified in subsection (b) above. Routine costs and days related to the outlier claims shall be included in inpatient costs and days extracted from the cost reports and used in computation of the prospective payment rates. Routine costs and UNOFFICIAL 1739-12 days related to wait listed patients shall not be extracted from the cost reports and shall be excluded from the computation of the inpatient rates. [Eff 11/13/95 ] (Auth: HRS §346-59) (Imp: 42 C.F.R. §447.252) §17-1739-62 Calculation of base prospective rates for psychiatric services. (a) A base per diem rate for acute psychiatric inpatient services shall be established for all inpatient facilities using the following general methodology: (1) Deduct the capital related costs allocated to psychiatric services on the base year cost report; (2) Establish facility-specific ratios from claim charge data for psychiatric routine, special care, and ancillary charges and days to total routine, special care, and ancillary charges and days; (3) Multiply the ratios in paragraph (2) by total medicaid inpatient costs excluding capital related cost, and days for routine, special care, and ancillary services to achieve total psychiatric routine, special care, and ancillary medicaid inpatient costs and days as derived from the cost report; and (4) Total the resulting psychiatric costs and days for routine, special care, and ancillary services and achieve a facility-specific average medicaid psychiatric cost per day by dividing total psychiatric medicaid inpatient costs by total psychiatric inpatient medicaid days. (b) A psychiatric per diem rate ceiling which applies to all facilities statewide shall be calculated in the following manner: (1) Total the costs, excluding capital related costs, and days for all psychiatric services for all facilities, as identified in subsection (a); (2) Divide the total psychiatric inpatient costs calculated in paragraph (1) by total psychiatric inpatient days; and (3) Multiply the result of paragraph (2) by the statewide psychiatric ceiling factor (one hundred fifteen per cent) published annually UNOFFICIAL 1739-13 by the department. This result shall be the statewide base year per diem rate ceiling for psychiatric services. (c) The prospective payment rate for psychiatric services for all facilities shall equal the lesser of either the facility-specific per diem rate or the per diem rate ceiling for inpatient psychiatric services. [Eff 11/13/95 ] (Auth: HRS §346-59) (Imp: 42 C.F.R. §447.252) §17-1739-63 Calculation of base year prospective rates for classification I - nonpsychiatric services. (a) A base per diem rate for nonpsychiatric services for classification I facilities shall be established using the following general methodology: (1) Deduct the capital related costs allocated to non-psychiatric services on the base year cost report; (2) Calculate nonpsychiatric inpatient medicaid facility costs and days for all facilities in classification I by subtracting the facility's psychiatric costs and days for routine, special care, and ancillary services as specified in section 17-1739-62 from the facility's total allowable medicaid inpatient costs and days for routine, special care, and ancillary services as derived from the cost report and as calculated in section 17-1739-61; and (3) Total the resulting costs, excluding capital related costs, and days for routine, special care, and ancillary services and achieve a facility-specific medicaid inpatient nonpsychiatric cost per day by dividing total nonpsychiatric medicaid costs by total nonpsychiatric inpatient medicaid days. (b) The classification I per diem rate ceiling for nonpsychiatric services shall be calculated as follows: (1) Total the costs, excluding capital related costs, and days for all nonpsychiatric services for all facilities in classification I, as identified in subsection (a); (2) Divide total nonpsychiatric inpatient costs calculated in paragraph (1) by total nonpsychiatric inpatient days for all facilities in classification I; and UNOFFICIAL 1739-14 (3) Multiply the result of paragraph (2) by the nonpsychiatric classification I ceiling factor (one hundred twenty per cent) published annually by the department. This result shall be the classification I per diem rate ceiling for nonpsychiatric facilities. (c) The prospective payment rate for classification I facilities shall equal the lesser of either the facility-specific per diem rates or the classification I per diem rate ceiling for nonpsychiatric inpatient services. [Eff 11/13/95 ] (Auth: HRS §346-59) (Imp: 42 C.F.R. §447.252) §17-1739-64 Calculation of base prospective rates for classifications II and III - nonpsychiatric services. (a) The facility-specific prospective payment base rates for nonpsychiatric services rendered in facilities in classifications II and III shall be comprised of two separately established rate components, one per diem rate for routine services and one per discharge rate for ancillary services. (b) The facility-specific base routine per diem and per discharge ancillary rate for nonpsychiatric services for each service category (maternity, surgical, and medical) shall be established using the following general methodology: (1) Deduct the capital related costs allocated to nonpsychiatric services and ancillaries on the base year cost report; (2) Determine separately for each service category the ratio of nonpsychiatric claim charges, days, and discharges to total claim charges, days, and discharges associated with routine, special care, and ancillary components; (3) Multiply the ratios determined in paragraph (2) by total medicaid inpatient days, discharges and costs, excluding capital related costs; (4) Determine the routine per diem costs for each service category by dividing the sum of routine and special care costs, excluding capital related costs, by the sum of routine and special care days as derived from the cost report; and UNOFFICIAL 1739-15 (5) Determine the facility ancillary cost per discharge for each service category by dividing the ancillary service costs, excluding capital related costs, by the discharges as derived from the cost report. (c) The base year per diem rate component ceiling shall be calculated for each nonpsychiatric service category for all facilities in classifications II and III as follows: (1) For all facilities within a classification, total for each service category the routine costs, excluding capital related costs, and days identified in subsection (b); (2) Divide total costs calculated in paragraph (1) for each service category by total patient days; (3) Multiply the result of paragraph (2) for each facility classification by the nonpsychiatric classification II and III ceiling factor (one hundred twenty per cent) published annually by the department; and (4) The result shall be the per diem rate component ceiling for nonpsychiatric services for each service category within each facility classification. (d) A facility's prospective payment rate component for routine services for each nonpsychiatric service category shall equal the lesser of either the facility-specific base rate component or the per diem rate ceiling for the appropriate facility classification. (e) The ancillary services per discharge rate component ceiling shall be established separately for each service category in the following manner: (1) For all facilities within a classification, total the ancillary costs, excluding capital related costs, and discharges within each nonpsychiatric service category; (2) Divide the total costs calculated in paragraph (1) by total discharges for each service category; (3) Multiply the result of paragraph (2) for each facility classification by the nonpsychiatric classification II and III ceiling factor (one hundred twenty per cent) published annually by the department; and (4) The result shall be the ancillary rate component ceiling for nonpsychiatric services UNOFFICIAL 1739-16 for each nonpsychiatric service category within each facility classification. (f) A facility's prospective per discharge base payment rate component for ancillary services for each nonpsychiatric service category shall equal the lesser of either the facility-specific per discharge base rate or the per discharge rate ceiling for the appropriate facility classification. [Eff 11/13/95 ] (Auth: HRS §346-59) (Imp: 42 C.F.R. §447.252) §17-1739-65 Addition of facility-specific factors. (a) A facility's payment rates as determined above shall be adjusted for facility-specific factors, including capital, medical education, disproportionate share, and for proprietary facilities, return on equity and gross excise tax. Adjustments shall be calculated using the following general methodology. (b) The interim capital adjustments shall be determined according to the general procedures that are used to reimburse providers for capital costs under Medicare, except that capital related costs shall be reduced by ten per cent. At the option of the department, the following procedure may be utilized: (1) Each facility shall identify its capital related costs associated with providing acute care services. If a facility provides both acute and distinct part long term care services, then only the capital related costs associated with acute care shall be identified; (2) Each facility shall submit an estimate of its allowable capital related costs and projected medicaid utilization for each PPS rate year. The projected medicaid utilization shall be based upon the ratio of medicaid patient days to total patient days; (3) The department shall review the estimates for reasonableness and determine an amount of projected allowable capital related costs for each facility; (4) For FY June 30, 1988, the projected allowable capital related costs shall be reduced by seven per cent. For all subsequent PPS fiscal years, the projected amount shall be reduced by ten per cent; UNOFFICIAL 1739-17 (5) After the appropriate reduction, the projected allowable capital related costs shall be divided by twelve; (6) The product of the foregoing computation shall, at the department's option, be multiplied either by the facility's projected medicaid utilization rate or by the facility's actual medicaid utilization (based upon the ratio of medicaid patient days to total patient days) reflected in the most recently filed cost report; and (7) The net result shall constitute the interim capital component of the facility's PPS rate, which shall be paid on a monthly basis throughout the fiscal year. (c) The final capital adjustment shall be determined as follows: (1) After the end of the fiscal year, the department shall adjust and settle the capital related costs of each facility based upon information reflected in the finally settled cost reports that cover the fiscal year under review; (2) Capital related costs shall follow the Medicare PPS capital pass through methodology in 42 C.F.R. Part 413, Subpart G, as of October 1, 1987 except the percentage reduction applied to actual costs shall be seven per cent for the fiscal year ending June 30, 1988, and ten per cent for every year thereafter; and (3) A provider may appeal the department's final settlement of capital related costs in accordance with the procedural requirements of chapter 17-1736. The department may settle tentatively on the capital related costs. (d) For proprietary facilities, a return on equity factor, which represents a hospital's percentage of return on equity received in the base year under Medicare cost reimbursement principles, and gross excise tax factor, which represents gross excise tax paid on receipts in the base year, shall be determined as follows: (1) Divide the total allowed medicaid inpatient return on equity and gross excise tax amounts separately by allowed medicaid inpatient total costs; and UNOFFICIAL 1739-18 (2) The result shall be added to 1.00 to obtain the return on equity and gross excise tax adjustment factors, respectively. (e) For facilities which participate in an approved teaching program, a medical education factor shall be determined as follows: (1) Divide allowed medicaid inpatient medical education costs by total allowed medicaid inpatient total costs; (2) The result shall be added to 1.00 to obtain the medical education adjustment factor; and (3) For new providers, the medical education factor shall be determined as part of the rate reconsideration process as authorized in section 17-1739-78(a)(3). (f) Disproportionate share providers shall receive the disproportionate share adjustment factor. (Refer to section 17-1739-53, Definitions.) (g) The facility-specific adjustment factors for return on equity, gross excise tax, disproportionate share, and medical education shall be multiplied by the facility's base prospective per diem and per discharge rates. [Eff 11/13/95 ] (Auth: HRS §346-59) (Imp: 42 C.F.R. §447.252) §17-1739-66 Final prospective payment calculation. (a) Based on the prospective payment rates as adjusted in section 17-1739-65, and inflated in section 17-1739-68, a facility's payment for each inpatient stay in each classification shall be calculated as follows: (1) For psychiatric discharges, multiply the per diem rate for a psychiatric discharge by the number of days of the psychiatric inpatient stay. The result shall be the payment for a psychiatric discharge; (2) For nonpsychiatric service discharges in classification I facilities, multiply the per diem rate for the discharge by the number of days of the inpatient stay. The result shall be the payment for a nonpsychiatric service discharge; (3) For surgical, maternity, and medical service discharges in classification II and III facilities, calculate the prospective payment for each facility as follows: UNOFFICIAL 1739-19 (A) Multiply the per diem rate component for the appropriate nonpsychiatric inpatient service category by the number of days of care for each service category for the inpatient discharge; (B) Add the ancillary rate per discharge for the appropriate service category; and (C) The result shall be the payment for each nonpsychiatric service discharge. (4) If a woman delivers a child, then payment for the mother and baby shall be made separately. A per diem payment shall be made separately for care delivered to a normal newborn based on the costs and days associated with nursery care; and (5) The following situations shall not be considered as constituting care that is delivered to a normal newborn, and shall be reimbursed as indicated: (A) If it is medically necessary for the baby to remain in the hospital more than six days following birth (including the birthday), then the payment shall be determined separately based on the same criteria as any other discharge; (B) If the claim form for services delivered to the newborn indicates an intensive care unit revenue code, then the payment for a medical case shall be made; or (C) If both of the following requirements are met: (i) The claim form reflects information that would result in the claim being characterized as a surgical case under section 17-1739-59(2); and (ii) The newborn remains in the hospital for more than three days; then the payment for a surgical case shall be made. (b) Payment shall be made under the prospective payment rate based on the date of discharge, except as provided in sections 17-1739-55(g) and 17-1739-71. (c) Capital related costs shall be reimbursed as defined in section 17-1739-65(b). [Eff 11/13/95 ] (Auth: HRS §346-59) (Imp: 42 C.F.R. §447.252) UNOFFICIAL 1739-20 §17-1739-67 Special prospective payment rate considerations. (a) For a facility with insufficient observations (less than five claims) in a given service category, the prospective payment rate shall be calculated using the weighted average for the applicable service category for the facility's classification. (b) Prospective payment rates for classification IV, the freestanding rehabilitation hospital, shall be calculated in the following manner: (1) Facility-specific claim charge data shall be prepared in accordance with section 17-1739- 61; (2) A facility-specific per diem base rate for psychiatric services shall be calculated in accordance with section 17-1739-62; (3) A facility-specific per diem base rate for nonpsychiatric services shall be calculated by dividing total nonpsychiatric costs, excluding capital related costs for the hospital by nonpsychiatric medicaid inpatient days; and (4) The facility-specific factors shall be computed or reimbursed as defined in section 17-1739-65. [Eff 11/13/95 ] (Auth: HRS §346-59) (Imp: 42 C.F.R. §447.252) §17-1739-68 Adjustment to base year costs for inflation. (a) Cost increases due to varying fiscal year ends and inflation shall be recognized for purposes of establishing prospective payment rates in accordance with the following general methodology. (b) Base year facility-specific costs shall be standardized to remove the effects caused by varying fiscal year ends of the facility. This shall be accomplished by dividing the inflation factor for the base year, as determined in accordance with section 17-1739-57 by twelve and multiplying this result by the number of months between the hospital's base year fiscal year end and June 30 of each year. This result shall be added to 1.00 to yield an inflation adjustment or which shall then be multiplied by the facility- specific costs. (c) Cost increases due to inflation which occurred from the base year shall utilize the inflation factor specified in section 17-1739-57(c): UNOFFICIAL 1739-21 (1) For years during which the department does not recalculate the rates by reference to a new base year, cost increases due to inflation for state fiscal years 1987 and beyond shall be recognized by multiplying the prospective payment rate (excluding rate reconsideration relief) in effect on June 30 of the fiscal year by one plus the inflation factor for the following fiscal year. To insure the prospective nature of the PPS, the inflation factor shall not be retroactively adjusted nor modified except as noted below; (2) For each year in which the department does recalculate the rates by reference to a new base year, cost increases due to inflation shall be recognized by multiplying the base year rates by one plus the inflation factor for each subsequent year, using the most current and accurate inflation data then available from Data Resources, Inc. (DRI). To insure the prospective nature of the PPS, that data shall not be retroactively adjusted nor modified; and (3) For years in which the department does not recalculate the rates by reference to a new base year and in which the inflation factor for the prior year was reduced pursuant to subsection (d), then the average rates for the prior fiscal year shall be deemed to be the rates in effect on June 30. (d) Absent circumstances beyond the control of the department, before the expiration of six months in each fiscal year the department shall determine whether the aggregate amount of reimbursement for that state fiscal year is projected to exceed the amount that would be paid for the same services under Medicare principles of reimbursement. In making that determination, the department shall exclude sums paid pursuant to section 17-1739-77(c) or any exception to or exemption from the inpatient operating cost limits as defined pursuant to 42 C.F.R. Part 413. In making its determination, the department shall use the most current information available, including the most recent cost reports filed by the facilities. If the projected aggregate amount of reimbursement is reasonably anticipated to exceed the amount that would be paid under Medicare principles of reimbursement, then the department shall reduce the inflation factor UNOFFICIAL 1739-22 used to calculate the rates for the remainder of the fiscal year so that the aggregate payments for the entire fiscal year (excluding the disproportionate share adjustments) are reasonably projected to be no more than that which would be paid under Medicare principles of reimbursement. [Eff 11/13/95 ] (Auth: HRS §346-59) (Imp: 42 C.F.R. §447.252)