Indiana Administrative Code › Title 405 - OFFICE OF THE SECRETARY OF FAMILY AND SOCIAL SERVICES › Article 1 - MEDICAID PROVIDERS AND SERVICES › Rule 10.5 - Reimbursement for Inpatient Hospital Services › Section 10.5-3 - Prospective reimbursement methodology

Current through July 10, 2024
Authority: IC 12-15-21-2; IC 12-15-21-3
Affected: IC 12-15-15-1
Sec. 3.
(a) The
				purpose of this section is to establish a prospective, cost-based reimbursement
				methodology for services provided by inpatient hospital facilities that are
				covered by Medicaid. The methodology for reimbursement described in this
				section shall be a prospective system wherein a payment rate for each hospital
				stay will be established according to a DRG reimbursement methodology or a
				level-of-care reimbursement methodology or, in the case of intestinal or
				multivisceral transplants, as described under subsection (j). Prospective
				payment shall constitute full reimbursement unless otherwise indicated herein
				or as indicated in provider manuals and update bulletins. There shall be no
				year-end cost settlement payments.
(b) Rebasing of the DRG and level-of-care
				methodologies will apply information from the most recent available cost report
				that has been filed and audited by the office.
(c) Payment for inpatient stays reimbursed
				according to the DRG methodology shall be equal to the lower of billed charges
				or the sum of the DRG rate, the capital rate, the medical education rate, and,
				if applicable, the outlier payment amount.
(d) Payment for inpatient stays reimbursed as
				level-of-care cases shall be equal to the lower of billed charges or the sum of
				the per diem rate for each Medicaid day, the capital rate, the medical
				education rate, and, if applicable, the outlier payment amount (burn cases
				only).
(e) Inpatient stays
				reimbursed according to the DRG methodology shall be assigned to a DRG using
				the all patient refined DRG grouper.
(f) The DRG rate is equal to the product of
				the relative weight and the base amount.
(g) Relative weights will be reviewed
				periodically by the office and adjusted no more often than annually by using
				the most recent reliable claims data and cost report data to reflect changes in
				treatment patterns, technology, and other factors that may change the relative
				use of hospital resources. Interim adjustments to the relative weights will not
				be made except in response to legislative mandates affecting Medicaid
				participating hospitals. Each legislative mandate will be evaluated
				individually to determine whether an adjustment to the relative weights will be
				made. DRG average length of stay values and outlier thresholds will be revised
				when relative weights are adjusted. The office shall include the costs of
				outpatient hospital and ambulatory surgical center services that lead to an
				inpatient admission when determining relative weights. Such costs occurring
				within three (3) calendar days of an inpatient admission will not be eligible
				for outpatient reimbursement under
				405 IAC 1-8-3. For reporting
				purposes, the day on which the patient is formally admitted as an inpatient is
				counted as the first inpatient day.
(h) Base amounts will be reviewed
				periodically by the office and adjusted no more often than every second year by
				using the most recent reliable claims data and cost report data to reflect
				changes in treatment patterns, technology, and other factors that may change
				the cost of efficiently providing hospital services.
(i) The office may establish a separate base
				amount for children's hospitals to the extent necessary to reflect significant
				differences in cost. Each children's hospital will be evaluated individually
				for eligibility for the separate base amount. Children's hospitals with a case
				mix adjusted cost per discharge greater than one (1) standard deviation above
				the mean cost per discharge for DRG services will be eligible to receive the
				separate base amount established under this subsection. The separate base
				amount is equal to one hundred twenty percent (120%) of the statewide base
				amount for DRG services.
(j) The
				reimbursement methodology for all covered intestinal and multivisceral
				transplants shall be equal to ninety percent (90%) of reasonable cost, until
				such time an appropriate DRG as determined by the office can be assigned. The
				office will use the most recent cost report data that has been filed and
				audited by the office to determine reasonable costs.
(k) Level-of-care rates will be reviewed
				periodically by the office and adjusted no more often than every second year by
				using the most recent reliable claims data and cost report data to reflect
				changes in treatment patterns, technology, and other factors that may change
				the cost of efficiently providing hospital services. The office shall not set
				separate level-of-care rates for different categories of facilities except as
				specifically noted in this section.
(l) Level-of-care cases are categorized as
				DRG numbers 740, 750-756, 757 (excluding diagnosis codes for intellectual
				disabilities-mild, moderate, severe, and profound or not otherwise specified
				classifiable to F70-F79), 758-760, 841-844, and 860, as defined and grouped
				using the all patient refined DRG grouper, version 30. These DRG numbers
				represent burn, psychiatric, and rehabilitative care.
(m) In addition to the burn level-of-care
				rate, the office may establish an enhanced burn level-of-care rate for
				hospitals with specialized burn facilities, equipment, and resources for
				treating severe burn cases. In order to be eligible for the enhanced burn rate,
				facilities must offer a burn intensive care unit.
(n) The office may establish separate
				level-of-care rates for children's hospitals to the extent necessary to reflect
				significant differences in cost. Each children's hospital will be evaluated
				individually for eligibility for the separate level-of-care rate. Children's
				hospitals with a cost per day greater than one (1) standard deviation above the
				mean cost per day for level-of-care services will be eligible to receive the
				separate base amount. Determinations will be made for each level-of-care
				category. The separate base amount is equal to one hundred twenty percent
				(120%) of the statewide level-of-care rate.
(o) The office may establish separate
				level-of-care rates, policies, billing instructions, and frequency for long
				term care hospitals to the extent necessary to reflect differences in treatment
				patterns for patients in such facilities. Hospitals must meet the definition of
				long term hospital set forth in this rule to be eligible for the separate
				level-of-care rate.
(p) Capital
				payment rates shall be prospectively determined and shall constitute full
				reimbursement for capital costs. Capital per diem rates will be reviewed
				periodically by the office and adjusted no more often than every second year by
				using the most recent reliable claims data and cost report data to reflect
				changes in treatment patterns, technology, and other factors that may change
				the capital costs associated with efficiently providing hospital services.
				Capital payment rates shall be adjusted to reflect a minimum occupancy level
				for nonnursery beds of eighty percent (80%).
(q) The capital payment amount for Medicaid
				stays reimbursed under the DRG methodology shall be equal to the product of the
				per diem capital rate and the average length of stay for all cases within the
				particular DRG. Medicaid stays reimbursed under the level-of-care methodology
				will be paid the per diem capital rate for each covered day of care. The office
				shall not set separate capital per diem rates for different categories of
				facilities except as specifically noted in this rule.
(r) Medical education rates shall be
				prospective, hospital-specific per diem amounts. The medical education payment
				amount for stays reimbursed under the DRG methodology shall be equal to the
				product of the medical education per diem rate and the average length of stay
				for the DRG. Payment amounts for medical education for stays reimbursed under
				the level-of-care methodology shall be equal to the medical education per diem
				rate for each covered day of care.
(s) Facility-specific, per diem medical
				education rates shall be based on medical education costs per day multiplied by
				the number of residents reported by the facility. In subsequent years, but no
				more often than every second year, the office will use the most recent cost
				report data that has been filed and audited by the office to determine a
				medical education cost per day that more accurately reflects the cost of
				efficiently providing hospital services. For hospitals with approved graduate
				medical education programs, the number of residents will be determined
				according to the most recent available cost report that has been filed and
				audited by the office or its contractor. Indirect medical education costs shall
				not be reimbursed.
(t) Medical
				education payments will only be available to hospitals that continue to operate
				medical education programs. Hospitals must notify the office within thirty (30)
				days following discontinuance of their medical education program.
(u) For hospitals with new medical education
				programs, the corresponding medical education per diem will not be effective
				prior to notification to the office that the program has been implemented. The
				medical education per diem shall be based on the most recent reliable claims
				data and cost report data.
(v) Cost
				outlier cases are determined according to a threshold established by the
				office. For purposes of establishing outlier payment amounts, prospective
				determination of costs per inpatient stay shall be calculated by multiplying a
				cost-to-charge ratio by submitted and approved charges. Outlier payment amounts
				shall be equal to the marginal cost factor multiplied by the difference between
				the prospective cost per stay and the outlier threshold amount. Cost outlier
				payments are not available for cases reimbursed using the level-of-care
				methodology except for burn cases that exceed the established
				threshold.
(w) Readmissions for the
				same or related diagnoses within three (3) calendar days after discharge will
				be treated as the same admission for payment purposes. Readmissions that occur
				after three (3) calendar days will be treated as separate stays for payment
				purposes but will be subject to medical review.
(x) Special payment policies shall apply to
				certain transfer cases. The transferee, or receiving, hospital is paid
				according to the DRG methodology or level-of-care methodology. The transferring
				hospital is paid the sum of the following:
(1) A DRG daily rate for each Medicaid day of
				the member's stay, not to exceed the appropriate full DRG payment, or the
				level-of-care per diem payment rate for each Medicaid day of care
				provided.
(2) The capital per diem
				rate.
(3) The medical education per
				diem rate. Certain DRGs are established to specifically include only transfer
				cases; for these DRGs, reimbursement shall be equal to the DRG rate.