Current through Register Vol. 50, No. 6, December 1, 2023
RELATES TO:
KRS
13B.140,
205.510(16),
205.637,
205.638,
205.639,
205.640,
205.6405,
205.6406,
205.6407,
205.6408,
216.380,
42 C.F.R. Parts 412, 413,
440.10,
440.140,
447.250447.280,
42 U.S.C.
1395f(l),
1395x(mm),
1395tt,
1395ww(d)(5)(F),
1396a,
1396b,
1396d,
1396r-4
NECESSITY, FUNCTION, AND CONFORMITY: The Cabinet for Health and
Family Services, Department for Medicaid Services has responsibility to
administer the Medicaid program.
KRS
205.520(3) authorizes the
cabinet, by administrative regulation, to comply with a requirement that may be
imposed, or opportunity presented by federal law for the provision of medical
assistance to Kentucky's indigent citizenry. This administrative regulation
establishes provisions related to per diem inpatient hospital reimbursement
including provisions necessary to enhance reimbursement pursuant to
KRS
205.638.
Section
1. Definitions.
(1) "Base year"
means the state fiscal year cost reporting period used to establish a per diem
rate.
(2) "Capital costs" means
capital related expenses including insurance, taxes, interest, and depreciation
related to plant and equipment.
(3)
"CMS" means Centers for Medicare and Medicaid Services.
(4) "Critical access hospital" or "CAH" means
a hospital meeting the licensure requirements established in
906 KAR
1:110.
(5)
"Department" means the Department for Medicaid Services or its
designee.
(6) "Diagnosis related
group" or "DRG" means a clinically-similar grouping of services that can be
expected to consume similar amounts of hospital resources.
(7) "Distinct part unit" means a separate
unit within an acute care hospital that meets the qualifications established in
42 C.F.R.
412.25.
(8) "DRG service" means a discharge,
excluding crossover claims or no pay claims, assigned a discharge
classification by the diagnosis related group grouper used by the department
pursuant to
907
KAR 10:830, whether the discharge is reimbursed by
discharge or via a per diem basis.
(9) "GII" means Global Insight,
Incorporated.
(10) "Indexing
factor" means the percentage that the cost of providing a service is expected
to increase during the universal rate year.
(11) "Inflation factor" means the percentage
that the cost of providing a service has increased, or is expected to increase,
for a specific period of time.
(12)
"Long-term acute care hospital" or "LTAC hospital" means a hospital that meets
the requirements established in
42 C.F.R.
412.23(e).
(13) "Medical education cost" means a direct
cost that is:
(a) Associated with an approved
intern and resident program; and
(b) Subject to limits established by
Medicare.
(14)
"Operating cost" means allowable routine, ancillary service, or special care
unit cost related to inpatient hospital care.
(15) "Parity factor" means a factor applied
to a per diem rate to establish cost coverage parity with diagnosis related
group hospital reimbursement.
(16)
"Per diem rate" means a hospital's all-inclusive daily rate as calculated by
the department.
(17) "Psychiatric
hospital" means a hospital meeting the licensure requirements established in
902 KAR
20:180.
(18) "Rebase" means to redetermine per diem
rates using more recent data.
(19)
"Rehabilitation hospital" means a hospital meeting the licensure requirements
established in
902
KAR 20:240.
(20) "State-designated free-standing
rehabilitation teaching hospital that is not state-owned or operated" means a
hospital not state-owned or operated that:
(a) Provides at least 3,000 days of
rehabilitation care to Medicaid-eligible recipients in a fiscal year;
(b) Provides at least fifty-one (51) percent
of the statewide total of inpatient acute rehabilitation care to
Medicaid-eligible recipients;
(c)
Provides physical and occupational therapy services to Medicaid recipients
needing inpatient rehabilitation services in order to function independently
outside of an institution postdischarge;
(d) Is licensed as an acute hospital limited
to rehabilitation; and
(e) Is a
teaching hospital.
(21)
"Swing bed" means a bed approved pursuant to
42 U.S.C.
1395tt to be used to provide either acute
care or extended skilled nursing care to a recipient.
(22) "Third party" means a payor of a third
party pursuant to
KRS
205.510(18).
(23) "Trending factor" means the inflation
factor as applied to that period of time between a facility's base fiscal year
end and the beginning of the universal rate year.
(24) "Universal rate year" means the twelve
(12) month period under the prospective payment system, beginning July of each
year, for which a payment rate is established for a hospital regardless of the
hospital's fiscal year end.
(25)
"Weighted average" means an average that reflects an individual element's
proportionality to all elements.
Section 2. Payment for Rehabilitation or
Psychiatric Care in an In-State Acute Care Hospital.
(1) For rehabilitation care in an in-state
acute care hospital that has a Medicare-designated rehabilitation or
psychiatric distinct part unit, the department shall reimburse:
(a) A facility specific per diem rate based
on the most recently received Medicare cost report received prior to the rate
year, trended and indexed to the current state fiscal year; and
(b) In accordance with Sections 6 and 9 of
this administrative regulation.
(2) The department shall reimburse for
rehabilitation or psychiatric care provided in an in-state hospital that does
not have a Medicare-designated distinct part unit:
(a) On a facility specific per diem basis
equivalent to its aggregate projected payments for DRG services divided by its
aggregate projected Medicaid paid days. Aggregate projected payments and
projected Medicaid paid days shall be the sum of:
1. Aggregate projected payments and aggregate
projected Medicaid paid days for non-per diem DRG services as calculated by the
model established in
907
KAR 10:830;
2. Actual prior year payments inflated by the
GII; and
3. Per diem DRG service
Medicaid days; and
(b)
In accordance with Sections 6 and 9 of this administrative
regulation.
Section
3. Payment for Long-term Acute Care Hospital Care, In-State
Freestanding Psychiatric Hospital Care, and In-State Freestanding
Rehabilitation Hospital Care.
(1) The
department shall reimburse for inpatient care provided to eligible Medicaid
recipients in an instate freestanding psychiatric hospital, in-state
freestanding rehabilitation hospital, or LTAC hospital on a per diem
basis.
(2) The department shall
calculate a per diem rate by:
(a) Using a
hospital's state fiscal year 2005 cost report, allowable cost and paid days to
calculate a base cost per day for the hospital;
(b) Trending and indexing a hospital's
specific cost, excluding capital cost, per day to the current state fiscal
year;
(c) Calculating an average
base cost per day for hospitals within similar categories, for example
rehabilitation hospitals, using the indexed and trended base cost per
day;
(d) Assigning no hospital a
base cost per day equaling less than ninety-five (95) percent of the weighted
average trended and indexed base cost per day of hospitals within the
corresponding category;
(e)
Applying a parity factor equivalent to aggregate cost coverage established by
the DRG reimbursement methodology established in
907
KAR 10:830; and
(f) Applying available provider tax funds on
a pro-rata basis to the pre-provider tax per diem calculated in paragraphs (a)
through (e) of this subsection.
Section 4. Payment to a Newly-participating
In-State Freestanding Psychiatric Hospital, Freestanding Rehabilitation
Hospital or a Long-Term Acute Care Hospital.
(1) The department shall reimburse a
newly-participating in-state freestanding psychiatric hospital, freestanding
rehabilitation hospital or long-term acute care hospital the minimum per diem
rate paid to hospitals in their category until the first fiscal year cost
report submitted by the hospital has been finalized.
(2) Upon finalization of the first fiscal
year cost report for a facility, the department shall reimburse the facility a
per diem rate in accordance with Section 3 of this administrative
regulation.
Section 5.
Payment for Critical Access Hospital Care.
(1) The department shall pay a per diem rate
to a critical access hospital equal to the hospital's Medicare rate.
(2) A critical access hospital's final
reimbursement for a fiscal year shall reflect any adjustment made by
CMS.
(3)
(a) A critical access hospital shall comply
with the cost reporting requirements established in Section 10 of this
administrative regulation.
(b) A
cost report submitted by a critical access hospital to the department shall be
subject to audit and review.
(4) An out-of-state critical access hospital
shall be reimbursed under the same methodology as an in-state critical access
hospital.
(5) The department shall
reimburse for care in a federally defined swing bed in a critical access
hospital pursuant to
907 KAR
1:065.
Section 6. Reimbursement Limit. Total
reimbursement to a hospital, other than to a critical access hospital, shall be
subject to the limitation established in
42 C.F.R.
447.271.
Section 7. In-State Hospital Reimbursement
Updating Procedures.
(1) The department shall
adjust an in-state hospital's per diem rate annually according to the
following:
(a) An operating and professional
component per diem rate shall be inflated from the midpoint of the previous
universal rate year to the midpoint of the current universal rate year using
the GII; and
(b) A capital per diem
rate shall not be adjusted for inflation.
(2) The department shall, except for a
critical access hospital, rebase an in-state hospital's per diem rate every
four (4) years.
(3) Except for an
adjustment resulting from an appeal in accordance with Section 21 of this
administrative regulation, the department shall make no other
adjustment.
Section 8.
Use of a Universal Rate Year.
(1) A universal
rate year shall be established as July 1 through June 30 to coincide with the
state fiscal year.
(2) A hospital
shall not be required to change its fiscal year to conform to a universal rate
year.
Section 9. Cost
Basis.
(1) An allowable Medicaid cost shall:
(a) Be a cost allowed after a Medicaid or
Medicare audit;
(b) Be in
accordance with 42 C.F.R. Parts 412 and 413;
(c) Include an in-state hospital's provider
tax; and
(d) Not include a cost
listed in Section 11 of this administrative regulation.
(2) A prospective rate shall include both
routine and ancillary costs.
(3) A
prospective rate shall not be subject to retroactive adjustment, except for:
(a) A critical access hospital; or
(b) A facility with a rate based on
un-audited data.
(4) An
overpayment shall be recouped by the department as follows:
(a) A provider owing an overpayment shall
submit the amount of the overpayment to the department; or
(b) The department shall withhold the
overpayment amount from a future Medicaid payment due the provider.
Section 10. In-State
Hospital Cost Reporting Requirements.
(1) An
in-state hospital participating in the Medicaid program shall submit to the
department a copy of each Medicare cost report it submits to CMS, an electronic
cost report file (ECR), and the Supplemental Medicaid Schedule KMAP-1:
(a) A cost report shall be submitted:
1. For the fiscal year used by the hospital;
and
2. Within five (5) months after
the close of the hospital's fiscal year.
(b) Except as provided in subparagraph 1 or 2
of this paragraph, the department shall not grant a cost report submittal
extension.
1. If an extension has been granted
by Medicare, the cost report shall be submitted simultaneously with the
submittal of the Medicare cost report.
2. If a catastrophic circumstance exists, for
example flood, fire, or other equivalent occurrence, the department shall grant
a thirty (30) day extension.
(2) If a cost report submittal date lapses
and no extension has been granted, the department shall immediately suspend all
payment to the hospital until a complete cost report is received.
(3) A cost report submitted by a hospital to
the department shall be subject to audit and review.
(4) An in-state hospital shall submit a final
Medicare-audited cost report upon completion by the Medicare intermediary to
the department.
Section
11. Unallowable Costs.
(1) The
following shall not be allowable cost for Medicaid reimbursement:
(a) A cost associated with a political
contribution;
(b) A cost associated
with a legal fee for an unsuccessful lawsuit against the Cabinet for Health and
Family Services. A legal fee relating to a lawsuit against the Cabinet for
Health and Family Services shall only be included as a reimbursable cost in the
period in which the suit is settled after a final decision has been made that
the lawsuit is successful or if otherwise agreed to by the parties involved or
ordered by the court; and
(c) A
cost for travel and associated expenses outside the Commonwealth of Kentucky
for the purpose of a convention, meeting, assembly, conference, or a related
activity, subject to the limitations of subparagraphs 1. and 2. of this
paragraph:
1. A cost for a training or
educational purpose outside the Commonwealth of Kentucky shall be
allowable.
2. If a meeting is not
solely educational, the cost, excluding transportation, shall be allowable if
an educational or training component is included.
(2) A hospital shall identify an
unallowable cost on a Supplemental Medicaid Schedule KMAP-1.
(3) A Supplemental Medicaid Schedule KMAP-1
shall be completed and submitted to the department with an annual cost
report.
Section 12.
Trending of an In-state Hospital's Cost Report Used for Rate Setting Purposes.
(1) An allowable Medicaid cost, excluding a
capital cost, as shown in a cost report on file in the department, either
audited or un-audited, shall be trended to the beginning of the universal rate
year to update an in-state hospital's Medicaid cost.
(2) The trending factor, referenced in
subsection (1) of this section, to be used shall be the inflation factor
prepared by GII for the period being trended.
Section 13. In-State Hospital Indexing for
Inflation.
(1) After an allowable Medicaid
cost has been trended to the beginning of a universal rate year, an indexing
factor shall be applied to project inflationary cost in the universal rate
year.
(2) The department shall
apply the inflation factor prepared by GII for the universal rate year as the
indexing factor.
Section
14. In-State Hospital Minimum Occupancy Factor.
(1) If an in-state hospital's minimum
occupancy is not met, allowable Medicaid capital costs shall be reduced by:
(a) Artificially increasing the occupancy
factor to the minimum factor; and
(b) Calculating the capital costs using the
calculated minimum occupancy factor.
(2) The following minimum occupancy factors
shall apply:
(a) A sixty (60) percent minimum
occupancy factor shall apply to a hospital with 100 or fewer total licensed
beds;
(b) A seventy-five (75)
percent minimum occupancy factor shall apply to a hospital with 101 or more
total licensed beds; and
(c) A
newly-constructed in-state hospital shall be allowed one (1) full universal
rate year before a minimum occupancy factor shall be applied.
Section 15. Reduced
Depreciation Allowance. The allowable amount for depreciation on a hospital
building and fixtures, excluding major movable equipment, shall be sixty-five
(65) percent of the reported depreciation amount as shown in the hospital's
cost reports.
Section 16.
Reimbursement for Out-of-state Hospitals.
(1)
For inpatient psychiatric or rehabilitation care provided by an acute
out-of-state hospital, the department shall reimburse a per diem rate comprised
of an operating per diem rate and a capital per diem rate.
(a) The psychiatric operating per diem rate
shall be the median operating rate, excluding graduate medical education cost
or any provider tax cost, per day for all in-state acute care hospitals that
have licensed psychiatric beds pursuant to
902 KAR
20:180.
(b) The psychiatric capital per diem rate
shall be the median psychiatric capital per diem rate paid for all in-state
acute care hospitals that have licensed psychiatric beds pursuant to
902 KAR
20:180.
(c) The per diem rate shall not include any
adjustment mandated for in-state hospitals pursuant to 2006 Ky Acts ch.
252.
(2) For care
provided by an out-of-state freestanding psychiatric hospital, the department
shall reimburse a per diem rate comprised of a psychiatric operating per diem
rate and a capital per diem rate.
(a) The
psychiatric operating per diem rate shall equal seventy (70) percent of equal
the median operating rate, excluding graduate medical education cost or any
provider tax cost, per day for all in-state freestanding psychiatric
hospitals.
(b) The psychiatric
capital per diem rate shall equal seventy (70) percent of the median
psychiatric capital per diem cost for all in-state freestanding psychiatric
hospitals.
(c) The per diem rate
shall not include any adjustment mandated for in-state hospitals pursuant to
2006 Ky Acts ch. 252.
(3) For care in an out-of-state
rehabilitation hospital, the department shall reimburse a per diem rate equal
to the median rehabilitation per diem rate for all in-state rehabilitation
hospitals minus any adjustment mandated for in-state hospitals pursuant to 2006
Ky Acts. ch. 252.
(4) The
department shall apply the requirements of
42 C.F.R.
447.271 on a claim-specific basis to payments
made via this section of this administrative regulation.
Section 17. Supplemental Payments. In
addition to a payment based on a rate developed under Section 2, 3, or 4 of
this administrative regulation, the department:
(1)
(a)
Shall make quarterly supplemental payments to an in-state hospital which
qualifies as a psychiatric access hospital in an amount:
1. Equal to the hospital's uncompensated
costs of providing care to Medicaid recipients and individuals not covered by a
third party, not to exceed $6 million annually; and
2. Consistent with the requirements of
42 C.F.R.
447.271; or
(b) May allow an in-state hospital that
qualifies as a psychiatric access hospital to participate in and receive
enhanced funding under the Hospital Rate Improvement Program described in
907
KAR 10:840 to provide funding for payments described
in paragraph (a) of this subsection if an average commercial rate methodology
is available for that program, if:
1. Upon
request of the Department for Behavioral Health, Developmental, and
Intellectual Disabilities, the qualifying hospital or hospital system agrees to
provide behavioral health care for Medicaid recipients and uninsured
individuals with no third party coverage;
2. The hospital functions as the state
hospital for state mental health in District IV pursuant to
908 KAR
2:040;
3.
The payments described in paragraph (a) of this subsection are not duplicated
within the fee-for-service or Hospital Rate Improvement Programs; and
4. The hospital complies with the qualifying
hospital requirements established in
907
KAR 10:840; and
(2) Shall make an annual payment to an
in-state state-designated free-standing rehabilitation teaching hospital that
is not state-owned or operated in an amount:
(a) Determined on a per diem or per discharge
basis equal to the nonreimbursed costs of providing care to Medicaid
recipients. Costs shall be the amount of cost identified on a hospital's most
recent cost report received by the department for a fiscal year reduced by the
cost of care covered by third parties; and
(b) Equal to the amount of per diem payments
pursuant to this administrative regulation or per discharge diagnosis related
group payments pursuant to
907
KAR 10:830 received by the hospital for Medicaid
recipients not covered by third parties.
Section 18. Certified Public Expenditures.
(1) The department shall reimburse an
in-state public government-owned hospital the full cost of inpatient care via a
certified public expenditure (CPE) contingent upon approval by CMS.
(2) To determine the amount of costs eligible
for a CPE, an in-state hospital's allowed charges shall be multiplied by the
hospital's operating cost-to-total charges ratio.
(3) The department shall verify whether or
not a given CPE is allowable as a Medicaid cost.
(4)
(a)
Subsequent to a cost report being submitted to the department and finalized, a
CPE shall be reconciled with the actual costs reported to determine the actual
CPE for the period.
(b) If any
difference between actual cost and submitted cost remains, the department shall
reconcile any difference with the provider.
Section 19. Access to Subcontractor's
Records. If a hospital has a contract with a subcontractor for services costing
or valued at $10,000 or more over a twelve (12) month period:
(1) The contract shall contain a provision
granting the department access:
(a) To the
subcontractor's financial information; and
(b) In accordance with
907
KAR 1:672; and
(2) Access shall be granted to the department
for a subcontract between the subcontractor and an organization related to the
subcontractor.
Section
20. New Provider, Change of Ownership, or Merged Facility.
(1) If a hospital undergoes a change of
ownership, the new owner shall continue to be reimbursed at the rate in effect
at the time of the change of ownership.
(2) Until a fiscal year end cost report is
available, a newly constructed or newly participating hospital shall submit an
operating budget and projected number of patient days within thirty (30) days
of receiving Medicaid certification.
(a) A
prospective per diem shall be set based on the operating budget and projected
number of patient days for care not subject to a diagnosis related group method
of reimbursement.
(b) A prospective
per diem rate set in accordance with paragraph (a) of this subsection shall be
tentative and subject to settlement at the time the first audited fiscal year
end report is available to the department.
(c) During the projected rate year, the
budget shall be adjusted if indicated and justified by the submittal of
additional information.
(3) If two (2) or more separate entities
merge into one (1) organization, the department shall:
(a) Merge the latest available data used for
rate setting;
(b) Combine bed
utilization statistics, creating a new occupancy ratio;
(c) Combine costs using the trending and
indexing figures applicable to each entity in order to arrive at correctly
trended and indexed costs;
(d)
Compute on a weighted average the rate of increase control applicable to each
entity, based on the reported paid Medicaid days for each entity taken from the
cost report previously used for rate setting;
(e) If one (1) of the entities merging has
disproportionate status and the other does not, retain for the merged entity
the status of the entity which reported the highest number of Medicaid days
paid;
(f) Recognize an appeal of
the merged per diem rate in accordance with
907
KAR 1:671; and
(g) Require each provider to submit a
Medicaid cost report for the period:
1. Ended
as of the day before the merger within five (5) months of the end of the
hospital's fiscal year end; and
2.
Starting with the day of the merger and ending on the fiscal year end of the
merged entity in accordance with Section 10 of this administrative
regulation.
Section 21. Appeals.
(1) An administrative review shall not be
available for a facility or service reimbursed via the per diem methodology for
the determination of the requirement, or the proportional amount, of any budget
neutrality adjustment used in the calculation of the per diem rate.
(2) An administrative review shall be
available for a calculation error in the establishment of a per diem
rate.
(3) An appeal shall comply
with the review and appeal provisions established in
907
KAR 1:671.
Section 22. Federal Financial Participation.
A policy established in this administrative regulation shall be null and void
if the Centers for Medicare and Medicaid Services:
(1) Denies federal financial participation
for the policy; or
(2) Disapproves
the policy.
Section 23.
Incorporation by Reference.
(1) "Supplemental
Medicaid Schedule KMAP-1", January 2007, is incorporated by
reference.
(2) This material may be
inspected, copied, or obtained, subject to applicable copyright law, at:
(a) The Department for Medicaid Services, 275
East Main Street, Frankfort, Kentucky 40621, Monday through Friday, 8 a.m. to
4:30 p.m.; or
34 Ky.R. 1605;
2190; 2406; eff. 6-6-2008; Recodified from 907 KAR 1:815; eff. 5-3-2011; Crt
eff. 7-23-2018;
48
Ky.R. 1055, 1814, 2098; eff.
1/13/2022.
STATUTORY AUTHORITY:
KRS
194A.030(2),
194A.050(1),
205.520(3),
205.560(2),,
42 C.F.R.
447.252,
447.253,
42 U.S.C.
1396a,