NOTICES
DEPARTMENT OF
PUBLIC WELFARE
Disproportionate Share and Supplemental Hospital Payments
[40 Pa.B. 5536]
[Saturday, September 25, 2010]The Department of Public Welfare (Department) is announcing its intent to amend the qualifying criteria and payment methodology for inpatient disproportionate share hospital (DSH), outpatient DSH and direct medical education payments and to allocate funding for Fiscal Year (FY) 2010-2011 for these payments. Additionally, the Department is announcing its intent to establish an additional class of DSH payments and two additional classes of supplemental payment for acute care general hospitals and a new supplemental payment for freestanding rehabilitation hospitals.
Background
The General Assembly enacted the act of July 9, 2010 (P. L. 336, No. 49) (Act 49). Among other things, Act 49 added Article VIII-G to the Public Welfare Code authorizing the Department to impose a monetary assessment on the net operating revenue of all Commonwealth licensed hospitals, other than certain exempt hospitals.1 See 62 P. S. §§ 801-G—816-G.
Under Act 49, all funds generated by the hospital assessment must be deposited into a restricted account called the Quality Care Assessment Fund. See 62 P. S. § 805-G(a). Consistent with Act 49, the Department intends to use funds from the hospital assessment to update the Medical Assistance (MA) fee-for-service (FFS) payment system for inpatient services, modify some existing DSH and supplemental payments and create several new DSH and supplemental payments for MA hospital providers. To ensure receipt of Federal matching funds for the MA payments that will be made with the assessment revenues, the Department must obtain the Centers for Medicare and Medicaid Services (CMS) approval of a waiver allowing the assessment to be implemented as specified in Act 49. The Department must also obtain CMS' approval of amendments to the Commonwealth's Title XIX State Plan, the Department's 1915(b) waiver for the HealthChoices Medicaid managed care program, and the Department's contracts with MA managed care organizations (MCOs).
On June 26, 2010, the Department published a notice in the Pennsylvania Bulletin announcing its intent to use assessment revenues to update and improve the FFS Diagnosis Related Group (DRG) prospective payment system for inpatient acute care general hospital services. In that same notice, the Department stated that it would publish a separate notice describing any proposed changes to hospital DSH and supplemental payments which would also be funded with assessment revenues. This notice announces the changes that the Department intends to make to the DSH and supplemental payments made to hospitals under the MA FFS Program. These changes, along with the changes to the FFS DRG prospective payment system described in the June 26, 2010, notice, will result in aggregate increases in payments to MA hospital providers and are intended to insure that MA recipients continue to receive access to medically necessary inpatient and outpatient services. The changes are contingent upon the CMS approvals noted previously.
Changes to and Funding Allocation for DSH Payments
Inpatient DSH Payments
Under the Commonwealth's current approved State Plan, the Department makes inpatient DSH payments to MA acute care general hospitals that meet certain eligibility criteria.
The Department intends to provide an additional way for a hospital to qualify for inpatient DSH payments. Specifically, the Department is proposing to make inpatient DSH payments to an MA acute care general hospital that meets either the eligibility criteria in effect as of July 1, 2010, or the following criteria:
(1) The hospital is located in a county that is ranked above the 96th percentile for all counties in this Commonwealth as determined using data contained in the Department's December 2009 report of Unduplicated Persons Eligible for MA and based on either:
(i) The percentile rank of the county's percent of population eligible for MA; or
(ii) The percentile rank of the county's total number of persons eligible for MA; and
(2) The hospital has a ratio of total MA acute inpatient days to total acute inpatient days which exceeds the average ratio of MA acute inpatient days to total hospital acute inpatient days of all hospitals within that county based on data from the FY 2007-2008 MA hospital cost report (MA 336) available to the Department as of July 2010.
In addition to providing another way for a hospital to qualify for inpatient DSH payments, the Department intends to change how it calculates inpatient DSH payment amounts as follows:
(1) The Department will use the FY 2007-2008 MA hospital cost report data available to the Department as of July 2010 to calculate an inpatient DSH payment amount for each qualifying hospital.
(2) For FY 2010-2011, a qualifying hospital's inpatient DSH payment amount will be the higher of:
(i) The payment amount calculated under previously listed (1); or
(ii) The inpatient DSH payment amount the hospital received for FY 2009-2010.
(3) For FY 2011-2012, unless a qualifying hospital meets the conditions specified in (5) as follows, the hospital's inpatient DSH payment amount will be the higher of:
(i) The payment amount calculated under previously listed (1); or
(ii) The payment amount calculated under previously listed (1) plus one half of the difference between the inpatient DSH payment amount the hospital received for FY 2009-2010 and payment amount calculated under previously listed (1), if the FY 2009-2010 payment amount is greater than the amount calculated under previously listed (1).
(4) For FY 2012-2013, unless a qualifying hospital meets the conditions specified in (5) as follows, the hospital's inpatient DSH payment amount will equal the payment amount calculated under (1).
(5) For FY 2011-2012 and FY 2012-2013, using the FY 2007-2008 MA hospital cost report available to the Department as of July 2010, if a qualifying acute care general hospital has a ratio of MA days to total days (FFS and MCO days) that exceeds 40% as calculated by determining its ratio of Title XIX and General Assistance inpatient days to total inpatient days; and has greater than 20,000 days total (FFS and MCO days) as calculated by determining its ratio of Title XIX and General Assistance inpatient days to total inpatient days; and has a low-income utilization rate that exceeds 40% as reported on its MA hospital cost report computation of low income utilization rate worksheet, the hospital's inpatient DSH payment will be the higher of:
(i) The payment amount calculated under previously listed (1); or
(ii) The inpatient DSH payment amount the hospital received for FY 2009-2010.
Annual inpatient DSH payments will be distributed to qualifying hospitals in quarterly payments adjusted to reflect the aggregate amount allocated for the fiscal year.
For FY 2010-2011, the Department intends to allocate $42.372 million in State General Funds for inpatient DSH with the aggregate amount of inpatient DSH payments not to exceed $95.149 million in total funds.
Outpatient DSH Payments
Under the Commonwealth's current approved State Plan, the Department makes outpatient DSH payments to eligible disproportionate share hospitals. The Department intends to add another way for a hospital to qualify for outpatient DSH payments. Specifically, the Department intends to make outpatient DSH payments to MA acute care general hospitals whose percentage of MA FFS and managed care outpatient charges to total hospital outpatient charges is greater than the Statewide average percentage of such charges. The Department will use data from the FY 2007-2008 MA hospital cost reports available to the Department as of July 2010 to compute these percentages.
Hospitals that qualify for outpatient DSH payments under the eligibility criteria in effect as of June 30, 2010, will also remain eligible to receive outpatient DSH payments, even if they do not qualify under the new eligibility criterion.
The Department intends to calculate outpatient DSH payment amounts as follows:
(1) For each hospital that qualifies for an outpatient DSH payment under the new eligibility criterion previously described, the Department will determine the hospital's ratio of MA FFS and managed care outpatient revenue to the total MA outpatient revenue for all hospitals qualifying under the new criterion. The Department will then multiply the hospital's ratio by the sum of the outpatient DSH payments for FY 2008-2009 that were made to hospitals which were in operation as of July 1, 2010, to determine a payment amount.
(2) If a hospital that qualifies for outpatient DSH under the new eligibility criterion did not receive an outpatient DSH payment in FY 2008-2009, the hospital's outpatient DSH payment amount will equal the payment amount determined in previously listed (1).
(3) If a hospital that qualifies for outpatient DSH under the new eligibility criterion received an outpatient DSH payment in FY 2008-2009, the hospital's outpatient DSH payment will equal the outpatient DSH payment amount the hospital received for FY 2008-2009.
(4) If a hospital does not qualify for outpatient DSH under the new eligibility criterion, but the hospital received an outpatient DSH payment amount in FY 2008-2009, the hospital's outpatient DSH payment will equal the outpatient DSH payment amount the hospital received for FY 2008-2009.
Annual outpatient DSH payments will be distributed to qualifying hospitals in quarterly payments adjusted to reflect the aggregate amount allocated for the fiscal year.
For FY 2010-2011, the Department intends to allocate $32.245 million in State General Funds for outpatient DSH with the aggregate amount of outpatient DSH payments not to exceed $89.689 million in total funds.
New Small and Sole-Community Hospital DSH Payments
The Department intends to establish an additional class of DSH payments for qualifying small hospitals and sole community hospitals participating in the MA Program that meet any one of the following criteria:
(1) As of July 1, 2010, the hospital meets the Medicare definition of a sole community hospital (42 CFR 412.92).
(2) As of July 1, 2010, the hospital only:
(i) Received a DSH payment for hospitals that incur significant uncompensated care costs or that experience a high volume of inpatient cases, the cost of which exceeds twice the hospital's average cost per stay for all patients as provided in page 21b of Attachment 4.19A; and/or
(ii) Is scheduled to receive a DSH payment for hospitals that qualify as a trauma center for FY 2008-2009 as provided in page 21c of Attachment 4.19A.
(3) The hospital has 150 set up/staffed hospital beds or less as reported on the hospital's FY 2007-2008 MA hospital cost report available to the Department as of July 2010 and is identified by the Department as experiencing an estimated annual loss of over $1.0 million when the MA Program moves to a revised hospital payment system effective July 1, 2010.
Hospitals eligible for this DSH payment will receive quarterly payments adjusted to reflect the aggregate amount equal to the payment amount determined using the following methodology:
• Hospitals that meet the criteria in (1) will receive a payment of $200,000 annually.
• Hospitals that meet the criteria in (2) will receive a payment equal to 25.3% of the hospital's calculated DSH OBRA '93 limit (as estimated using the FY 2007-2008 MA cost report data available to the Department as of July 2010) as reduced by all current MA rate, supplemental and DSH payments and as further reduced by the MA Dependency payment, MA Stability payment, outpatient DSH adjustment amount and the hospital's increased payments related to the revised hospital payment system effective July 1, 2010.
• Hospitals that meet the criteria in (3) will receive a payment equal to 40% of the hospital's calculated DSH OBRA '93 limit (as estimated using the FY 2007-2008 MA cost report data available to the Department as of July 2010) as reduced by all current MA rate, supplemental and DSH payments and as further reduced by the MA Dependency payment, MA Stability payment, outpatient DSH adjustment amount and the hospital's increased payments related to the revised hospital payment system effective July 1, 2010.
• Hospitals that meet the criteria in both (1) and (2) or both (1) and (3) will receive the sum of those two payment amounts.
For FY 2010-2011, the Department intends to allocate $58.893 million ($26.125 million in State General Funds) for this additional class of DSH payments.
Changes to Hospital Supplemental Payments
Modification to Direct Medical Education Payments
Under the Commonwealth's current approved State Plan, the Department makes Direct Medical Education (DME) payments to MA acute care general hospitals with DME costs that are allowable under Medicare cost principles in effect as of June 30, 1985. The Department intends to adopt a different method for DME payments which will allow additional hospitals with DME costs to qualify for these payments.
The Department proposes to reimburse hospitals with DME costs a percentage of their total MA DME costs as follows. The Department will add the hospital's MA FFS DME costs as reported on the hospital's FY 2007-2008 MA cost report available to the Department as of July 2010 to the hospital's estimated MA managed care DME costs. To estimate the hospital's MA managed care DME costs, the Department will calculate the ratio of the hospital's MA FFS acute care days to MA managed care acute care days and apply this ratio to the MA FFS DME costs from the MA cost report. The hospital's payment amount will be equal to 75% of the hospital's total MA DME costs.
For hospitals that received DME payments in FY 2008-2009, the Department is proposing a 2-year phase in to the new payment methodology.
For FY 2010-2011, hospitals that received DME payments in FY 2008-2009 will receive the higher of the payment amount which the hospital would receive under the payment methodology in effect as of June 30, 2009, or the payment amount which the hospital would receive under the new payment methodology previously described. Eligible hospitals that did not receive DME payments in FY 2008-2009 will receive DME payments calculated using the new payment methodology.
For FY 2011-2012, all eligible hospitals will receive a DME payment amount determined using the new payment methodology. If a hospital that received DME payments in FY 2008-2009 receives a DME payment amount under the new payment methodology that is lower that the payment amount the hospital would have received under the payment methodology in effect as of June 30, 2009, the hospital's DME payment amount, based on the new payment methodology, will be increased by an amount equal to half the difference between the payment amount which the hospital would have received under the payment methodology in effect as of June 30, 2009, and the hospital's new DME payment amount.
For FY 2012-2013, all eligible hospitals will receive DME payment amounts determined using the new payment methodology.
For FY 2010-2011, the Department intends to allocate $43.823 million in State General Funds for direct medical education payments with the aggregate amount of direct medical education payments not to exceed $125.950 million in total funds.
The Department will make DME payments to eligible hospitals in quarterly payments that are adjusted to reflect the aggregate annual amount.
New MA Stability Payments
To ensure a smooth transition to the new MA FFS DRG payment system, the Department intends to establish supplemental payments which will be made to all acute care general hospitals enrolled in the MA Program as of July 1, 2010, that have a submitted a FY 2007-2008 MA hospital cost report available to the Department as of July 2010. These payments will be calculated as follows:
The Department will determine a per diem amount by dividing all Commonwealth MA FFS days for all eligible hospitals into the amount allocated for these payments. Each qualifying hospital's annual payment amount will be equal to this per diem amount multiplied by the hospital's Commonwealth MA FFS days using the FY 2007-2008 MA cost report data available to the Department as of July 2010. The Department will distribute quarterly payments to qualifying hospitals adjusted to reflect the total amount allocated per fiscal year for this payment.
For FY 2010-2011, the Department intends to allocate $151.444 million ($59.031 million in State General Funds) for these supplemental payments.
New MA Dependency Payments
The Department intends to establish supplemental payments for acute care general hospitals that are highly dependent upon MA Program payment for their financial stability and have a reduced ability to offset the costs of providing services with revenue from private insurers and other sources.
To qualify for these supplemental payments, an acute care general hospital must provide at least 50,000 FFS and managed care acute care days of inpatient care to this Commonwealth's MA recipients as identified in the FY 2007-2008 MA cost report data available to the Department as of July 2010.
The Department will determine a qualifying hospital's annual payment amount by multiplying the number of the hospital's this Commonwealth's MA FFS acute care inpatient days, as identified in the FY 2007-2008 MA cost report data available to the Department as of July 2010, by $230. The Department will distribute quarterly payments to qualifying hospitals adjusted to reflect the total amount allocated per fiscal year for this payment.
For FY 2010-2011, the Department intends to allocate $11.564 million ($4.300 million in State General Funds) for these supplemental payments.
New MA Rehabilitation Adjustment Payments
The Department intends to make supplemental payments to freestanding rehabilitation hospitals enrolled in the MA Program as an inpatient rehabilitation hospital provider as of July 1, 2010.
The Department will calculate an annual payment amount for qualifying freestanding rehabilitation hospitals equal to 92% of the total inpatient FFS MA amount paid to the hospital as reported in the FY 2007-2008 MA cost report data available to the Department as of July 2010. The Department will distribute quarterly payments to qualifying hospitals adjusted to reflect the total amount allocated per fiscal year for this payment. The Department may adjust this payment amount to reflect the funding that is available for this payment.
For FY 2010-2011, the Department intends to allocate $14.421 million ($5.362 million in State General Funds) for these supplemental payments.
Fiscal Impact
The FY 2010-2011 impact is $547.110 million ($213.258 million in State General Funds). The increase in State fund costs associated with the changes outlined in this notice will be offset by the hospital assessment revenue.
Public Comment
Interested persons are invited to submit written comments regarding this notice to the Department of Public Welfare, Office of Medical Assistance Programs, c/o Regulations Coordinator, Room 515, Health and Welfare Building, Harrisburg, PA 17120. Comments received within 30 days will be reviewed and considered for any subsequent revision of the notice.
Persons with a disability who require an auxiliary aid or service may submit comments using the Pennsylvania AT&T Relay Service at (800) 654-5984 (TDD users) or (800) 654-5988 (voice users).
HARRIET DICHTER,
SecretaryFiscal Note: 14-NOT-660. (1) General Fund:
MA—Inpatient MA—Outpatient (2) Implementing Year 2010-11 is $181,013,000 $32,245,000 (3) 1st Succeeding Year 2011-12 is $196,839,000 $39,786,000 2nd Succeeding Year 2012-13 is $196,839,000 $39,786,000 3rd Succeeding Year 2013-14 is $0 $0 4th Succeeding Year 2014-15 is $0 $0 5th Succeeding Year 2015-16 is $0 $0 (4) 2009-10 Program— $373,515,000 $435,939,000 2008-09 Program— $426,822,000 $555,085,000 2007-08 Program— $468,589,000 $593,992,000 (7) MA—Inpatient and MA—Outpatient; (8) recommends adoption. Funds have been included in the budget to cover this increase.
[Pa.B. Doc. No. 10-1845. Filed for public inspection September 24, 2010, 9:00 a.m.]
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1 Act 49 exempts the following hospitals from the assessment: (1) Federal veterans' affairs hospitals; (2) Hospitals that provide care, including inpatient hospital services, to all patients free of charge; (3) Private psychiatric hospitals; (4) State-owned psychiatric hospitals; (5) Critical access hospitals; and (6) Long-term acute care hospitals.
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