department of health and social services

Division of Medicaid and Medical Assistance

PUBLIC NOTICE

proposed

Title XIX Medicaid State Plan Inpatient Hospital Services

In compliance with the State's Administrative Procedures Act (APA - Title 29, Chapter 101 of the Delaware Code), and with 42CFR §447.205, and under the authority of Title 31 of the Delaware Code, Chapter 5, Section 512, Delaware Health and Social Services (DHSS) / Division of Medicaid & Medical Assistance is proposing to amend the Title XIX Medicaid State Plan regarding the reimbursement cycle and the payment methodology for inpatient hospital services.

Any person who wishes to make written suggestions, compilations of data, testimony, briefs or other written materials concerning the proposed new regulations must submit same to Sharon L. Summers, Policy & Program Development Unit, Division of Medicaid & Medical Assistance, P.O. Box 906, New Castle, Delaware 19720-0906 by September 30, 2005.

The action concerning the determination of whether to adopt the proposed regulation will be based upon the results of Department and Division staff analysis and the consideration of the comments and written materials filed by other interested persons.

SUMMARY OF PROPOSED CHANGES

Title of Regulation

Methods and Standards for Establishing Payment Rates – Inpatient Hospital Care

Statutory Authority

42 CFR, Subpart C – Payment for Inpatient Hospital and Long-Term Care Facility Services

Amending the Following State Plan Pages

Attachment 4.19-A, Pages 1 and 3

Summary of Proposal

This regulatory action proposes to amend the reimbursement methodology for inpatient hospitals with two (2) changes regarding the: 1) reimbursement cycle and, 2) interim outlier payment methodology.

Reimbursement Cycle

Effective July 1, 2006, the proposed amendment would revise state plan language changing the reimbursement cycle for hospital payments from a twelve (12) month period to a fifteen (15) month period.

Interim Outlier Payment Methodology

Effective January 1, 2006, the proposed amendment revises the methodology for determining payment for high cost outliers. An interim payment will be made for that inpatient stay when the client’s charges have reached twenty-five (25) times the general discharge rate of that facility, or when the client’s stay is greater than sixty (60) days. Additional interim payments will be made when either of the outlier conditions for an interim payment is met again.

DSS PROPOSED REGULATION #05-41

REVISIONS:

ATTACHMENT 4.19-A

Page 1

STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT

STATE OF DELAWARE

METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES – INPATIENT HOSPITAL CARE

Reimbursement Principle

Effective for discharges on or after July 1, 1994, the Delaware Medicaid Program will reimburse all acute care hospitals at prospective per discharge rates.

The prospective rates are set by accommodation type. Reimbursement rates have been set for two accommodation types: general services and nursery services. For each of these accommodation types, there are three components to the payment: operating payment per discharge, capital payment per discharge and medical education payment per discharge.

Rate Setting Method – Operating Payment

The base year is the Delaware hospitals’ 1992 fiscal year. The operating payment per discharge for the base year was calculated by applying a cost-to-charge ratio to allowed charges from the Medicaid claims data. This allowed cost value was then divided by the total charges to obtain the operating payment per discharge.

The cost-to-charge ratio was identified from FY92 hospital cost reports; the categories of cost included in the cost-to-charge ratio are those related to routine services (including hospital-based physicians’ costs and malpractice costs) and ancillary services.

The allowed charge data was taken from the FY92 Medicaid claims data for Delaware hospitals. Medicaid allowable hospital-specific charges associated with inpatient revenue codes appropriate to the accommodation type were identified. The hospital-specific cost-to-charge ratio was applied to the allowed charges to obtain hospital-specific allowed costs for the accommodation type.

Effective July 1, 2006, the fiscal year/period for the reimbursement of Medicaid hospital services will be based on a fifteen month period. A rate adjustment will be made on July 1, 2006 and for every fifteen month period thereafter.

The total hospital-specific allowed costs for the accommodation type were then divided by the total number of discharges on the claims date for the accommodation type to obtain the hospital-specific operating payment per discharge in the base year.

(Break In Continuity of Sections)

ATTACHMENT 4.19-A

Page 3

METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES – INPATIENT HOSPITAL CARE (Continued)

Rate Setting Methods - Development of Implementation Year Operating Rates, Updates and Rebasing (Continued)

The implementation year rates will be updated in FY96 using published TEFRA inflation indices. Rates will be rebased using fiscal year 1994 claims and cost report data for implementation in State FY97, and every three years thereafter.

Other Related Inpatient Reimbursement Policies

Outliers - High cost outliers will be identified when the cost of the discharge exceeds the threshold of three times the hospital operating rate per discharge. Outlier cases will be reimbursed at the discharge rate plus 79 percent of the difference between the outlier threshold and the total cost of the case. Costs of the case will be determined by applying the hospital-specific cost to charge ratio to the allowed charges reported on the claim for discharge.

For certain high cost cases, providers may request an interim payment, that is, a payment prior to the discharge of the patient when the discharge is not likely to occur in the near future. Cases that are approved by the State for reimbursement on an interim payment basis must meet all of the following conditions: (1) length of stay over one year, and (2) over one million dollars in costs as determined in the paragraph above, and (3) attempts to find non-acute care placements have proven unsuccessful and are documented to the State's satisfaction. Interim payment cases will be subject to the same outlier payment calculations as described in the paragraph above and reimbursed at the outlier amount less a 5% discount. Interim payments that are renewed must meet all of the following conditions: (1) an additional length of stay over one year (2) an additional one million dollars in costs as determined in the paragraph above and (3) continued attempts to find non-acute care placements have proven unsuccessful and are documented to the State's satisfaction. Any interim payment cases that are renewed will also be subject to the same outlier payment calculations as described in the paragraph above and reimbursed at the outlier amount less a 5% discount.

Effective January 1, 2006, any provider with a high cost client case (outlier) will receive an interim payment; that is, a payment prior to the discharge of that patient when the charge amount reaches the designated level. An interim payment will be made for that inpatient stay when the client’s charges have reached twenty-five (25) times the general discharge rate of that facility, or when the client’s stay is greater than sixty (60) days. Additional interim payments will be made when either of the outlier conditions for an interim payment is met again. The interim payment amount is based on the current reimbursement methodology used to pay outliers. Upon the discharge of the client, the facility will receive the balance of the payment that would have been paid if the case were paid in full at the time of discharge.