Virginia Administrative Code › Title 12 - HEALTH › Agency 30 - DEPARTMENT OF MEDICAL ASSISTANCE SERVICES › Chapter 70 - METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES - INPATIENT HOSPITAL SERVICES › Part I - Per Diem Methodology › Section 12VAC30-70-50 - Hospital reimbursement system

Current through Register Vol. 40, No. 24, July 15, 2024
The reimbursement system for hospitals includes the
					 following components:
A. Hospitals
				  were grouped by classes according to number of beds and urban versus rural.
				  (Three groupings for rural - 0 to 100 beds, 101 to 170 beds, and over 170 beds;
				  four groupings for urban - 0 to 100, 101 to 400, 401 to 600, and over 600
				  beds.) Groupings are similar to those used by the Centers for Medicare and
				  Medicaid Services in determining routine cost limitations.
B. Prospective reimbursement ceilings on
				  allowable operating costs were established as of July 1, 1982, for each
				  grouping. Hospitals with a fiscal year end after June 30, 1982, were subject to
				  the new reimbursement ceilings.
1. The
				  calculation of the initial group ceilings as of July 1, 1982, was based on
				  available, allowable cost data for hospitals in calendar year 1981. Individual
				  hospital operating costs were advanced by a reimbursement escalator from the
				  hospital's year end to July 1, 1982. After this advancement, the operating
				  costs were standardized using SMSA wage indices, and a median was determined
				  for each group. These medians were readjusted by the wage index to set an
				  actual cost ceiling for each SMSA. Therefore, each hospital grouping has a
				  series of ceilings representing one of each SMSA area. The wage index is based
				  on those used by HCFA in computing its Market Basket Index for routine cost
				  limitations.
2. Effective July 1,
				  1986, and until June 30, 1988, providers subject to the prospective payment
				  system of reimbursement had their prospective operating cost rate and
				  prospective operating cost ceiling computed using a new methodology. This
				  method uses an allowance for inflation based on the percent of change in the
				  quarterly average of the Medical Care Index of the Chase Econometrics -
				  Standard Forecast determined in the quarter in which the provider's new fiscal
				  year began.
3. The prospective
				  operating cost rate is based on the provider's allowable cost from the most
				  recent filed cost report, plus the inflation percentage add-on.
4. The prospective operating cost ceiling is
				  determined by using the base that was in effect for the provider's fiscal year
				  that began between July 1, 1985, and June 1, 1986. The allowance for inflation
				  percent of change for the quarter in which the provider's new fiscal year began
				  is added to this base to determine the new operating cost ceiling. This new
				  ceiling was effective for all providers on July 1, 1986. For subsequent cost
				  reporting periods beginning on or after July 1, 1986, the last prospective
				  operating rate ceiling determined under this new methodology will become the
				  base for computing the next prospective year ceiling.
5. Effective on and after July 1, 1988, and
				  until June 30, 1989, for providers subject to the prospective payment system,
				  the allowance for inflation shall be based on the percent of change in the
				  moving average of the Data Resources, Incorporated Health Care Cost HCFA-Type
				  Hospital Market Basket determined in the quarter in which the provider's new
				  fiscal year begins. Such providers shall have their prospective operating cost
				  rate and prospective operating cost ceiling established in accordance with the
				  methodology which became effective July 1, 1986. Rates and ceilings in effect
				  July 1, 1988, for all such hospitals shall be adjusted to reflect this
				  change.
6. Effective on or after
				  July 1, 1989, for providers subject to the prospective payment system, the
				  allowance for inflation shall be based on the percent of change in the Virginia
				  moving average values as compiled and published by Global Insight (or its
				  successor) determined in the quarter in which the provider's new fiscal year
				  begins. Such providers shall have their prospective operating cost rate and
				  prospective operating cost ceiling established in accordance with the
				  methodology which became effective July 1, 1986. Rates and ceilings in effect
				  July 1, 1989, for all such hospitals shall be adjusted to reflect this
				  change.
7. Effective on and after
				  July 1, 1992, for providers subject to the prospective payment system, the
				  allowance for inflation, as described in this section, which became effective
				  on July 1, 1989, shall be converted to an escalation factor by adding two
				  percentage points, (200 basis points) to the then current allowance for
				  inflation. The escalation factor shall be applied in accordance with the
				  inpatient hospital reimbursement methodology in effect on June 30, 1992. On
				  July 1, 1992, the conversion to the new escalation factor shall be accomplished
				  by a transition methodology which, for non-June 30 year end hospitals, applies
				  the escalation factor to escalate their payment rates for the months between
				  July 1, 1992, and their next fiscal year ending on or before May 31, 1993.
Effective July 1, 2009, the escalation factor shall be
					 equal to the allowance for inflation.
Effective July 1, 2010, through June 30, 2012, the
					 escalation factor shall be zero. In addition, ceilings shall remain at the same
					 level as the ceilings for long stay hospitals with fiscal year's end of June
					 30, 2010.
Effective July 1, 2012, through June 30, 2013, the
					 escalation factor for inpatient hospitals, including long stay hospitals, shall
					 be 2.6%.
Effective July 1, 2013, through June 30, 2016, the
					 escalation factor for inpatient hospitals, including long stay hospitals, shall
					 be 0.0%.
8. The new method
				  will still require comparison of the prospective operating cost rate to the
				  prospective operating ceiling. The provider is allowed the lower of the two
				  amounts subject to the lower of cost or charges principles.