Health and Family Services
Medicaid Reimbursement of Hospitals Annual Rate Update
The State of Wisconsin reimburses hospitals for medical services provided to low-income persons under the authority of Title XIX of the Federal Social Security Act and ss. 49.43
, Stats. The Wisconsin Department of Health and Family Services administers this program which is called Medicaid or Medical Assistance (MA). Federal statutes and regulations require state plans, one for outpatient services and one for inpatient services, which provide the methods and standards for paying for hospital outpatient and inpatient services including specific payment rates and methodologies.
The Department is proposing to update inpatient hospital payment rates based on current methodologies and to reflect more recent hospital cost reports and/or other information relevant to hospital reimbursement. The final rates will apply to Medicaid payments for hospital discharges in the state fiscal year beginning July 1, 2001. The outpatient hospital annual rate update was previously published.
As required by federal statute and regulations, the proposed payment rates are restricted by the federal Medicare upper limit requirement and target a share of funding to hospitals which serve a disproportionate number of low-income patients.
Inpatient Hospital Services
For each rate year, July 1 through June 30, the Department updates standard factors used in determining the amount of payment hospitals receive for services covered by the Diagnosis Related Group (DRG) based payment method.
DRG Weights. The weights assigned to specific DRGs for groups of hospitals are updated to reflect the current, relative resource consumption of each inpatient stay. Weights are determined by an analysis of past services provided by hospitals, claim charges for those services and the relative cost of those services. For the rate year beginning July 1, 2001, the proposed weights for acute care and psychiatric services are based on a three-year average cost for all discharges between October 1, 1996 and September 30, 1999 and on the most recently completed audited cost report available to the Department as of February 29, 2000.
Weights for Psychiatric Stays
DRG payment weights for psychiatric stays are determined on the basis of the following groupings of hospitals. These groupings are based on analysis of historical claims for psychiatric stays which result in each group being assigned its own set of psychiatric stay DRG weights.
a. Milwaukee County Mental Health Complex
b. All other IMD hospitals
c. General medical-surgical hospitals with Medicare-exempt psychiatric units
d. Other general medical-surgical hospitals
Psychiatric groups are no longer subdivided between IMDs located in Milwaukee and IMDs not located in Milwaukee.
The weighting factor for a DRG is based on an analysis that relates the average cost of claims under the respective DRG to the average cost of all claims. Weights are established for over 600 DRGs.
Base Rate. The statewide base rates were originally established in 1989 based on the most current Wisconsin Medicaid paid claims data available at that time. The base rates provide consideration for variance between general medical/surgical hospitals and institutions for mental disease (IMD), and hospitals in an HMO mandated county and hospitals in all other counties. The result is a proposed standard DRG rate for each of the following four groups of hospitals.
1. General Medical/Surgical Hospitals in Milwaukee County
2. General Medical/Surgical Hospitals not in Milwaukee County
3. Institutions for Mental Disease (IMD) in Milwaukee County
4. IMDs not in Milwaukee County
The base rates are adjusted annually to reflect legislatively authorized increases. Provisions of 2001 Wisconsin Act 16
(the 2001-03 biennial budget) authorized funding for a $3 million Disproportionate Share Hospital (DSH) increase in payments for inpatient hospital services in the rate year beginning July 1, 2001. A 3.4 percent administrative adjustment to the base is also included in the proposed rates for acute care hospitals.
Hospital-Specific DRG Rate. A DRG rate is calculated for each specific hospital. The appropriate standard DRG group base rate for each hospital is adjusted by the applicable wage area index for that hospital. For hospitals that qualify, additional adjustments may be made for costs related to graduate medical education, capital expenditures, serving a disproportionate share of low-income patients, and having a rural location. These adjustment factors are described below.
a) Wage Area Adjustment Index. The wage area index is a relative index based on wage data from the Health Care Financing Administration (HCFA) hospital wage survey as of May 15, 1999 and Wisconsin statewide average wage data.
b) Direct Medical Education Add-On. An adjustment for the direct costs of graduate medical education programs of qualifying Wisconsin hospitals.
c) Indirect Medical Education. An adjustment percentage based on the ratio of interns and residents to staffed beds of qualifying Wisconsin hospitals.
d) Capital Add-On. An adjustment based on audited capital costs.
e) Disproportionate Share Factor. An adjustment percentage for hospitals serving a disproportionate share of services to low-income patients.
f) Inpatient Rural Adjustment. An adjustment percentage for hospitals with a combined Medicare and Medicaid utilization rate equal to or greater than 50 percent.
Border Status Hospitals. Major and minor border status hospitals are reimbursed according to the same DRG based payment method used for in-state hospitals. With the exception of the rural adjustment, indirect medical education adjustment and direct medical education add-on, major border status hospitals receive the same hospital-specific adjustments and add-ons described above for in-state hospitals. The rates for minor border status hospitals include adjustments for wages and capital, but do not consider other hospital-specific costs or characteristics. Minor border status hospitals, may, however, request recognition of other costs or characteristics through the administrative adjustment process described in the Inpatient Hospital State Plan.
Hospitals Paid for Critical Access Hospital Inpatient Services
Critical Access Hospitals. Critical Access Hospitals (CAH) located in Wisconsin will be reimbursed according to a determination of the hospital's allowable audited costs for Medicaid inpatient services. If allowable costs are determined to exceed the total amount of DRG based payments made to the CAH for discharges of Medicaid recipients during the fiscal year, the Department will reimburse the hospital by the amount by which a CAH costs exceed payments. If payments exceed costs the Department will not recover excess payments from the hospital. However, excess payments may be applied to any amount owed to the hospital under the critical access hospital outpatient services reimbursement provisions. Critical access hospitals are not eligible for a rural hospital adjustment.
Hospitals Paid Under a Per Diem Rate for Inpatient Services
State Mental Health Institutes. State IMDs are reimbursed for hospital service days at an interim rate per diem. The interim rates are established based on the interim rate in the prior rate year adjusted for inflation.
A final reimbursement settlement is calculated based on the hospital's audited allowable costs for Medicaid inpatient services, including capital and direct medical education costs. If the hospital qualifies a disproportionate share adjustment is also included. The determination of final reimbursement may result in additional payment if allowable costs are above the interim rate per diem or recoupment of funds if allowable costs are less than total interim payments.
Rehabilitation Hospitals. Rehabilitation hospitals are reimbursed for inpatient hospital services at a rate per diem based on a three-year base allowable cost that includes direct medical education and capital costs, and any applicable disproportionate share factor, and indexed by legislatively authorized increases through the current year.
Payment Rates for Services Exempted from DRG Payment System.
Payment for certain services exempt from the DRG system are reimbursed at rates established by applying any general legislatively authorized payment increase in the current fiscal year to the rate in effect for the prior rate year. The following services and rates per diem are effective for the current rate year beginning July 1, 2001:
Services Rate Per Diem
AIDS Acute Care $597
AIDS Extended Care $329
Long-Term Ventilator Service $465
Brain Injury Care
Neurobehavioral Program Care $816
Coma-Recovery Program Care $981
Proposed Weights and Rates for the 2001-2002 Rate Year
Attachment A: Acute care DRG weights and psychiatric care DRG weights.
Attachment B. Inpatient DRG base rates (including adjustments) for each hospital.
The Wisconsin Medicaid Inpatient and Outpatient Hospital State Plans include a complete description of hospital payment methodology.
Copies of Proposed Changes and Proposed Payment Rates
For more information, interested persons may fax or write to:
Hospitals, Physicians, and Clinics Section
FAX (608) 266-1096
Bureau of Fee-for-Service Health Care Benefits
Division of Health Care Financing
P. O. Box 309