Administrative Adjustment to Inpatient Per Diem Rate

(1) A hospital may apply for a discretionary administrative adjustment to its Inpatient Per Diem Rate. Any such application, except for those related to New Governmental Requirements and Disaster Losses, must be based upon the grounds set forth below and must be filed within 90 days of initial rate approval to receive consideration. Applications for New Governmental Requirements and Disaster Losses must be based upon the grounds set forth below and must be filed within 60 days from the date the costs were incurredtoreceiveconsideration. Except for adjustments granted for Mechanical Error, adjustments shall be effective onthelater of 1) the beginning of the quarter (October 1, January 1, April 1, July 1) in which a complete application is received or 2) the date the costs will be incurred. Adjustments granted for Mechanical Error shall be effective on the date the rate containing the error went into effect Adjustments granted for New Governmental Requirements and Disaster Losses shall be effective on the date the costs were incurred. (2) In order to qualify for an administrative adjustment, the hospital must demonstrate the following: (a) the timing and amount of the increase in costs is reasonably certain; and (b) the category of cost for which an administrative adjustment is sought is not included in the base year cost; (c) the amount requested is greater than 1% of the hospital's total patient care costs. Multiple unrelated requests for administrative adjustments may be grouped together to meet the materiality limit; however, each individual item must equal or exceed 1/10 of 1% (.10%). (d) the adjustment is necessary for the appropriate provision of services. The Division will consider a cost "necessary" only if it can be demonstrated to the satisfaction of the Division that such costs cannot be met through efficient management and economic operation at the existing reimbursable cost level. (3) Requests for an administrative adjustment shall be accompanied by full and complete documentation of the request. The Division may deny any request for an administrative adjustment for which documentation is not submitted. (4) A hospital must begin to expend the costs for which it has received approval within 60 days of the effective date of the administrative adjustment. An interim financial report demonstrating these expenditures must be submitted within 90 days of the effective date of the administrative adjustment. Failure to submit this will result in the approved amount being deducted from current rate year rates. If the hospital does not begin to expend such costs within 60 days, the hospital must notify the Division that approved amounts were not expended. The approved amount will then be deducted from current rate year rates. (5) The Division will not allow an administrative adjustment for the following types of costs: (a) a cost increase which results from or is attributable to a hospital's voluntary business decision; (b) an increase in the cost of doing business which affects the industry as a whole; (c) costs incurred to correct Department of Public Health or JCAHO deficiencies; and (d) costs which fall within a category encompassed by an inflation factor. (6) The following are grounds for an administrative adjustment provided the criteria set forth in 114.1 CMR 39.05(2) and 39.05(3) are met: (a) Mechanical Error. There has been a mechanical error in calculating the Inpatient or Outpatient Per Diem Rate approved under 114.1 CMR 39.00. (b) New Governmental Requirements. Statutory or regulatory requirements of a governmental unit or federal government have generated a substantial increase in allowable costs as adjusted pursuant to 114.1 CMR 39.05. An increase in existing governmental requirements shall not be considered to be a new governmental requirement. Documentation shall include written certificationor a copy of an official notice from the governmental unit detailing thenewrequirements imposed on the hospital and the verification of the costs. (c) Disaster Losses. The hospital has incurred disaster losses in excess of insurance or extraordinary costs related to disaster losses not covered by outside sources. Documentation shall include verification of loss or extraordinary cost and the insurance or outside source payment. If, however, the loss or extraordinary cost is caused by a facility being inadequately insured according to the standards of the hospital industry, or through negligence on the part of hospital management, such losses or costs shall not be approved. (d) DON Operating Costs. A hospital has incurred or expects to incur an increase in operating costs associated with a major capital expenditure or substantial change in services which is subject to and has received a determination of need pursuant to M.G.L. c. 111, §§ 25B through 25G. In its application, the hospitalmust segregate the increased costs from other allowed operating costs and must demonstrate that the increased costs requested are reasonable. If an approved DON results in increased patient days, those increased patient days will be added to the Inpatient Per Diem Patient Day Divisor. (e) Wage Parity. The Commission may allow an administrative adjustment for costs for reasonableincreases in direct care staff salaries and wages in excess of the amountallowed through inflation. This administrative adjustment is not to exceed actual rate year expenditures for such increases. 1. Wage relief may be requested for technicians, nurses, nursing aides, orderlies, attendants, occupational therapists, speech therapists, recreational therapists, physical therapists, and respiratory therapists. Any personnel in these categories who are primarily conducting administrative job duties and are not directly involved with providing patient care are not eligible for wage relief under this exception. 2. The adjustment for reasonable increases in direct care staff salaries and wages is defined as the reasonable rate year wage rate less the inflated base year wage rate, times the lesser of the rate year FTE direct care labor force or the base year FTE direct care labor. The reasonable rate year wage shall be the level of increase required to attract sufficient staff to ensure minimum quality of care as determined by the Department of Public Health for current patients. The rate will be determined by the Commission with reference to average rates prevailing at other hospitals within the same Medicare labor market region, subject to the following conditions: a. Outlier wage rates as defined by the Commission shall be excluded from the computation; b. Special weight shall be given to rates prevailing at non-acute hospitals located in the hospital's Medicare labor market region; and c. In no case shall the reasonable rate year wage rate used in this calculation exceed the wage rate actually prevailing at hospitals located in the hospital's Medicare labor market region at the time of application. d. The determined Medicare Labor Market Regions and their associated counties are as follows: Medicare Labor Market Region Counties Eastern Mass Bristol Essex Middlesex Norfolk Plymouth Suffolk Worcester Berkshire Berkshire Springfield Hampden Hampshire Barnstable Barnstable Dukes Nantucket Rural Franklin 3. In order to be eligible for this adjustment, a hospital must demonstrate that it is facing extraordinary difficulties in the market for direct care staff, as indicated by one or more of the criteria established in St. 1988, c. 270. These criteria include, but are not limited to: a. existence of significant vacancy rates for a period of time sufficient to jeopardize the welfare ofpatients according to Department of Public Health standards, JCAHO standards or other qualifying guidelines utilized in Massachusetts to ensure adequate care; and b. persistent difficulty in recruitment. (f) Case Mix Intensity. The Division may allow an administrative adjustment for an increase in inpatient care costs generated by increased care or services required by a more intensely ill patient population. 1. In order to qualify for an administrative adjustment for case mix intensity, the hospital must demonstrate a net increase in Medicaid patient care intensity between the base upon which the rate is calculated. 2. If the Division determines that the hospital has demonstrated a net increase in intensity, the hospital must document the increase in patient care costs resulting from the higher level of intensity. (g) Transfers of Costs. 1. Where a hospital has reduced or increased costs bythe transfer of those costs to or from other persons or entities which provide health care and services, the Division may modify the allowable cost pursuant to 114.1 CMR 39.05(2)(b) to reflect the change in cost. In order to give effect to a transfer of cost each hospital must file information concerning cost, volume and revenue 30 days prior to implementation of a proposed transfer of cost, and must submit any additional information regarding the transfer of cost which the Division may require. 2. An increase (transfer on) or decrease (transfer off) of hospital costs related to persons or entities which provide hospital careor services, and which change compensation arrangements fromnon-hospitalbased to hospital-based (transfer on ) or from hospital-based to non-hospital based (transfer off). A transfer on of physiciancompensationwillonlybe allowed if reasonable.