§ 1163.126. Computation of hospital specific base payment rates.
(a) A hospital’s base payment rate, which is exclusive of capital, will be the amount determined under this section.
(b) The Department will determine a hospital’s case mix adjusted cost per case by first identifying the hospital’s reported MA allowable costs from the hospital’s base year Fiscal Year 1986-87 Cost Report (MA 336) and from this amount subtracting each of the following items:
(1) The MA portion of the hospital’s inpatient costs for direct medical education.
(2) The MA portion of the hospital’s allowable net inpatient costs for depreciation and interest for buildings and fixtures.
(c) The Department will determine a hospital’s adjusted net MA allowable cost by adjusting the inpatient acute care MA cost determined under subsection (b) to account for differences between the hospital’s reported MA days for the base year and the MA days contained in the Department’s claims database for the base year. The Department will determine the adjustment by dividing the hospital’s MA claims days by the hospital’s reported MA days and multiplying this ratio by the hospital’s adjusted inpatient acute care MA costs determined under subsection (b).
(d) The Department will determine each hospital’s net cost to be used in payment rate calculations by subtracting from the net MA allowable costs determined under subsection (c), the following costs determined using the Department’s paid claims database for the base fiscal year:
(1) The cost outlier portion of costs for claims that qualify as cost outliers under § 1163.56 (relating to outliers).
(2) Day outlier portion of costs for claims that qualify as day outliers under § 1163.56.
(3) The costs of transfer claims except for DRGs 385 and 456.
(4) The costs of the hospital’s claims which are no longer paid as inpatient claims.
(5) The cost of psychiatric claims exclusive of the first 2 days of the hospital stay, for hospitals without a distinct part psychiatric unit enrolled in the MA Program.
(6) The full costs of psychiatric claims, for hospitals with a distinct part psychiatric unit enrolled in the MA Program.
(7) The costs of drug and alcohol claims exclusive of the first 2 days of the hospital stay, for hospitals that are not approved for drug and alcohol detoxification services.
(8) The full costs of drug and alcohol claims, for hospitals with a distinct part drug and alcohol unit enrolled in the MA Program.
(e) The Department will reduce a hospital’s net cost determined under subsection (d) by the 1.77% overreporting factor.
(f) The Department will determine a hospital’s average cost per case for the base year by dividing the hospital’s costs as established under subsection (e) by the adjusted number of MA cases for that year. The Department will determine the adjusted number of MA cases by:
(1) Identifying the hospital’s total number of MA claims in the base year using the Department’s paid claims database for the base fiscal year.
(2) Subtracting from the amount in paragraph (1) each of the following items:
(i) The number of claims identified for psychiatric services for hospitals with distinct part psychiatric units enrolled in the MA Program.
(ii) The number of claims identified for drug and alcohol treatment services for hospitals with distinct part drug and alcohol units enrolled in the MA Program.
(iii) The number of claims involving patient transfers, except for transfers occurring in DRGs 385 and 456.
(iv) The number of claims identified involving MA cases which were eligible for Medicare reimbursement.
(v) The number of claims which are no longer paid as inpatient claims.
(g) The Department will standardize a hospital’s average cost per case to account for case mix by dividing the hospital’s average cost per case as determined under subsection (f) by its case mix index. The resultant value will be referred to as the base year case mix adjusted cost per case. The Department will determine the hospital’s case mix index by:
(1) Identifying the total number of MA DRG cases for the hospital for the base year from the Department’s paid claims data.
(2) Summing the relative values of each of the cases identified under paragraph (1) to establish an aggregate relative value amount for the hospital.
(3) Dividing the hospital’s aggregate relative value amount determined under paragraph (2) by the number of MA cases determined under paragraph (1) to establish an average relative value or case mix index for the hospital.
(h) Except as specified in subsections (i) and (j), the Department will establish base rates for Fiscal Years 1993-94 and 1994-95, by trending forward each hospital’s base year case mix adjusted cost per case by use of the following inflation factors:
(1) 4.5% to account for Fiscal Year 1987-88 inflation.
(2) 5.6% to account for Fiscal Year 1988-89 inflation.
(3) 5.0% to account for Fiscal Year 1989-90 inflation.
(4) 5.3% to account for Fiscal Year 1990-91 inflation.
(5) 5.2% to account for Fiscal Year 1991-92 inflation.
(6) 4.6% to account for Fiscal Year 1992-93 inflation.
(7) 4.3% to account for Fiscal Year 1993-94 inflation, to be applied as follows:
(i) Hospitals that qualified for a volume or rural disproportionate share rate enhancement for Fiscal Year 1992-93 will receive the 4.3% inflation factor effective July 1, 1993.
(ii) Hospitals that did not qualify for a volume or rural disproportionate share rate enhancement for Fiscal Year 1992-93 will receive the 4.3% inflation factor effective January 1, 1994.
(8) For Fiscal Year 1994-95, effective January 1, 1995, acute care general hospitals will receive an inflation factor equal to the prospective payment system type hospital market basket moving average inflation factor published by DRI/McGraw-Hill in the fourth calendar quarter of 1993 for the second calendar quarter of 1995.
(i) The Department will establish base rates as follows for hospitals that changed ownership during the period July 1, 1986, through June 30, 1993:
(1) For a hospital that elected to have its rates rebased upon change of ownership, the base rate for Fiscal Year 1993-94 will be the base rate effective June 30, 1993, trended forward using applicable inflation factors.
(2) For a hospital that elected not to have its rate rebased upon change of ownership, the base rate for Fiscal Year 1993-94 will be the rate calculated under subsections (a)—(h) for the prior entity.
(j) Rates established under subsections (a)—(i) will be limited as follows:
(1) For Fiscal Year 1993-94, a hospital’s base rate may not exceed $6,244.
(2) For Fiscal Year 1994-95, a hospital’s base rate may not exceed $6,244 increased effective January 1, 1995, by the inflation factor described under subsection (h)(8).
Authority The provisions of this § 1163.126 issued under sections 201 and 443.1(1) of the Public Welfare Code (62 P. S. § § 201 and 443.1(1)).
Source The provisions of this § 1163.126 adopted June 18, 1993, effective July 1, 1993, 23 Pa.B. 2917; amended October 29, 1993, effective July 1, 1993, 23 Pa.B. 5241. Immediately preceding text appears at serial pages (181849) to (181852).
Cross References This section cited in 55 Pa. Code § 1163.52 (relating to prospective payment methodology).
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