AB925: Bill Text

2. Cost-related trend factors based on nationally recognized economic models.

3. Special circumstances of rural and teaching hospitals.

The commission is authorized under this bill to disallow certain costs and revenues in determining its rate recommendation.

Under the bill, if the hospital does not accept the commission's recommendations, the hospital must request a settlement conference between its representatives and the commission staff. If the hospital is dissatisfied with the results of the settlement conference, the hospital may request an informal hearing before the commission. The commission may conduct a formal hearing instead of an informal hearing. If a formal hearing is held, the commission must issue at the end of the hearing its order establishing maximum rates for the hospital's year under review. If an informal hearing is held, the commission must issue its order within 50 days after the date on which the hospital requested the hearing.

This bill authorizes hospitals to increase rates selectively if the aggregate increase in its rates does not exceed the amount authorized by the commission. The hospital must, prior to increasing rates, explain to the commission its method in applying the increase and allow the commission five working days to determine if the aggregate increase exceeds the authorized amount. If the commission disapproves the hospital's method in applying the increase, and the hospital fails to modify its method as recommended by the commission, the commission may challenge the method in circuit court.

Except under certain circumstances, this bill prohibits the commission from reducing rates prior to the date of the scheduled succeeding review or during the succeeding review. The bill also prohibits the commission from directly interfering with the patient-physician decision-making relationship, directly controlling the volume or intensity of hospital utilization, or directly restricting the freedom of a hospital to exercise management decisions in complying with rates established by the commission.

The bill also creates a hospital rate-setting council in DOA. The council consists of 11 members each appointed for staggered four-year terms. The bill specifies that the members shall include all of the following:

1. Three individuals nominated by the Wisconsin Health and Hospital Association.

2. One physician nominated by the State Medical Society of Wisconsin.

3. One individual nominated by the largest service insurance corporations.

4. One individual nominated by the Wisconsin division of the Health Insurance Association of America.

5. One individual who is a registered nurse and nominated by the Wisconsin Nurses Association.

Capital expenditure review program

Under current law, no person may lease or acquire an ownership or controlling interest in a hospital or system of hospitals that is owned by a nonprofit corporation, a city, a county, the state, or the University of Wisconsin Hospitals and Clinics Authority without first receiving approval of the attorney general, office of the commissioner of insurance, and the department of health and family services (DHFS), if the lease or acquisition results in one person owning or controlling more than 49% of the hospital or hospital system or results in at least a 20% change in ownership or control of the hospital or hospital system.

The bill eliminates this requirement and, instead, requires a person to receive approval from DHFS before doing any of the following:

1. Obligating by or on behalf of a hospital a capital expenditure in excess of $1,000,000 or, if the purpose of the capital expenditure is to convert a hospital to a new use or to renovate all of part of a hospital, in excess of $1,500,000.

2. Implementing an organ transplant program, burn center, neonatal intensive care program, cardiac program, or air transport services or adding psychiatric or chemical dependency beds.

3. Purchasing or otherwise acquiring a hospital.

4. Constructing or operating an ambulatory surgery center or a home health agency.

The bill creates an exemption from the approval requirements for the following activities:

1. Any project that has been agreed upon in a legally enforceable contract prior to the effective date of the bill.

2. Any obligation by or on behalf of a hospital for heating, air conditioning, electrical systems, telecommunications, computer systems, or nonsurgical outpatient services that is not a component of another project that requires DHFS approval if the obligation is not more than 20% of the hospital's gross annual patient revenue for its last fiscal year.

3. Any project that DHFS determines is for the research, development, and evaluation of innovative medical technology, the development of clinical applications of the technology, or the research, development, and evaluation of a major enhancement to existing medical technology.

The bill requires a person who intends to undertake a project or activity that is subject to DHFS approval to publish a notice describing the project or activity and to conduct a public hearing on the proposed project or activity. The bill also requires DHFS to publish a notice or receipt of an application for review of the project or activity. DHFS must also conduct a public meeting upon the request of an affected party to review projects or activities for which an application for approval has been filed. If an applicant is adversely affected by a decision of DHFS, the applicant may petition for judicial review of the decision. An approval issued under the bill is valid for one year from the date of issuance. DHFS may grant one extension of up to six months for each approval.

Finally, the bill requires DHFS to adopt a state medical facilities plan at least once every three years. The plan must include a description of the state hospital system and identify any needed or surplus hospital beds.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB925, s. 1 Section 1. 15.105 (27) of the statutes is created to read:

AB925,4,8 15.105 (27) Hospital rate-setting commission. There is created a hospital rate-setting commission, which is attached to the department of administration under s. 15.03. No member of the council may have a financial interest in a hospital, as defined in s. 50.33 (2). Any member of the commission who voluntarily assumes a financial interest in a hospital shall vacate the office. Any member of the commission who involuntarily assumes a financial interest in a hospital shall divest himself or herself of the office within a reasonable time or shall vacate the office.

AB925, s. 2 Section 2. 15.107 (18) of the statutes is created to read:

AB925,4,14 15.107 (18) Hospital rate-setting council. There is created in the department of administration a hospital rate-setting council. The council shall consist of 11 members appointed for staggered 4-year terms, who shall represent a balance of economic, provider, scientific, government, and consumer viewpoints. No more than 3 members may be state employees. The council shall include all of the following:

AB925,4,15 (a) Three members nominated by the Wisconsin Hospital Association.

AB925,4,17 (b) One member who is a physician and nominated by the State Medical Society of Wisconsin.

AB925,5,2 (c) One member nominated by the largest service insurance corporations licensed under ch. 613. The size of a service insurance corporation shall be based on premium volume as reported in the most recent Wisconsin insurance commissioner's report on business.

AB925,5,4 (d) One member nominated by the Wisconsin division of the Health Insurance Association of America.

AB925,5,6 (e) One member who is a registered nurse and nominated by the Wisconsin Nurses Association.

AB925, s. 3 Section 3. 20.005 (3) (schedule) of the statutes: at the appropriate place, insert the following amounts for the purposes indicated: - See PDF for table

AB925, s. 4 Section 4 . 20.438 of the statutes is created to read:

AB925,5,11 20.438 Hospital rate-setting commission. There is appropriated to the hospital rate-setting commission for the following programs:

AB925,5,13 (1) Hospital rate setting. (a) General program operations. The amounts in the schedule for hospital rate-setting activities under subch. III of ch. 150.

AB925,5,16 (g) Assessments. The amounts in the schedule for hospital rate-setting activities under subch. III of ch. 150. All moneys received under s. 150.67 and 2001 Wisconsin Act .... (this act), section (4 ), shall be credited to this appropriation.

AB925, s. 5 Section 5. 49.45 (3) (e) 11. of the statutes is created to read:

AB925,6,2 49.45 (3) (e) 11. Notwithstanding subds. 1. to 10., the department may authorize the hospital rate-setting commission to determine the rate of reimbursement for services provided under the medical assistance program in the manner specified under subch. III of ch. 150.

AB925, s. 6 Section 6. 50.35 of the statutes is amended to read:

AB925,6,18 50.35 Application and approval. Application for approval to maintain a hospital shall be made to the department on forms provided by the department. On receipt of an application, the department shall, except as provided in s. 50.498, issue a certificate of approval if the applicant and hospital facilities meet the requirements established by the department. Except as provided in s. 50.498, this approval shall be in effect until, for just cause and in the manner herein prescribed, it is suspended or revoked. The certificate of approval may be issued only for the premises and persons or governmental unit named in the application and is not transferable or assignable. The department shall withhold, suspend or revoke approval for a failure to comply with s. 165.40 (6) (a) 1. or 2., but, except Except as provided in s. 50.498, otherwise the department may not withhold, suspend or revoke approval unless for a substantial failure to comply with ss. 50.32 to 50.39 or the rules and standards adopted by the department after giving a reasonable notice, a fair hearing and a reasonable opportunity to comply. Failure by a hospital to comply with s. 50.36 (3m) shall be considered to be a substantial failure to comply under this section.

AB925, s. 7 Section 7. 50.36 (1) of the statutes is amended to read:

AB925,7,6 50.36 (1) The department shall promulgate, adopt, amend, and enforce such rules and standards for hospitals for the construction, maintenance , and operation of the hospitals deemed necessary to provide safe and adequate care and treatment of the patients in the hospitals and to protect the health and safety of the patients and employees; and nothing contained herein shall pertain to a person licensed to practice medicine and surgery or dentistry. The building codes and construction standards of the department of commerce shall apply to all hospitals and the department may adopt additional construction codes and standards for hospitals, provided they are not lower than the requirements of the department of commerce. Except for the construction codes and standards of the department of commerce and except as provided in s. ss. 50.39 (3) and 150.61 to 150.68, the department shall be the sole agency to adopt and enforce rules and standards pertaining to hospitals.

AB925, s. 8 Section 8. 146.37 (1g) of the statutes is amended to read:

AB925,7,23 146.37 (1g) Except as provided in s. 153.85, no person acting in good faith who participates in the review or evaluation of the services of health care providers or facilities or the charges for such services conducted in connection with any program organized and operated to help improve the quality of health care, to avoid improper utilization of the services of health care providers or facilities or to determine the reasonable charges for such services, or who participates in the obtaining of health care information under ch. 153 or in hospital rate-setting activities under subch. III of ch. 150, is liable for any civil damages as a result of any act or omission by such person in the course of such review or evaluation. Acts and omissions to which this subsection applies include, but are not limited to, acts or omissions by peer review committees or hospital governing bodies in censuring, reprimanding, limiting or revoking hospital staff privileges or notifying the medical examining board or podiatrists affiliated credentialing board under s. 50.36 or taking any other disciplinary action against a health care provider or facility and acts or omissions by a medical director, as defined in s. 146.50 (1) (j), in reviewing the performance of emergency medical technicians or ambulance service providers.

AB925, s. 9 Section 9. Subchapter III of chapter 150 [precedes 150.61] of the statutes is created to read:

AB925,8,1 chapter 150

AB925,8,4 subchapter iii Hospital rate setting and capital expenditure review

AB925,8,5 150.61 Definitions. In this subchapter:

AB925,8,6 (1) "Commission" means the hospital rate-setting commission.

AB925,8,7 (2) "Consumer price index" has the meaning given in s. 16.004 (8) (e) 1.

AB925,8,10 (3) Notwithstanding s. 150.01 (12), "hospital" has the meaning given in s. 50.33 (2), except that "hospital" does not include a center for the developmentally disabled, as defined in s. 51.01 (3).

AB925,8,13 (4) "Rates" means individual charges of a hospital for the services that it provides or, if authorized under s. 150.64 (3), the aggregate charges based on case mix measurements.

AB925,8,19 150.612 Prospective rate setting. (1) Beginning on July 1, 2003, the commission shall prescribe maximum hospital rates on a prospective basis. The commission may revise these rates as provided in this subchapter. The commission shall publish biennial reports that contain the proceedings and any information necessary to describe the rate of hospital cost increases and the financial condition of hospitals.

AB925,8,21 (2) No hospital may charge rates that exceed the rates established by the commission under this subchapter.

AB925,8,23 150.615 Rule making. The commission shall promulgate rules to implement this subchapter.

AB925,9,5 150.62 Requests for rate changes. (1) (a) The commission shall create a schedule allowing each hospital to request rate changes annually. Beginning on July 1, 2002, the schedule shall permit a hospital to request a rate change on or after the date the hospital receives its audited financial statements for the most recent fiscal year. Beginning on July 1, 2002, the commission may schedule a review of the hospital's rates and revise the rates on its own initiative or at the request of any person who has good cause for requesting review.

AB925,9,7 (b) A hospital may submit a rate request on or after the date scheduled by the commission.

AB925,9,11 (2) (a) No later than 10 days after a hospital submits a rate request under sub. (1) (a), the hospital shall publish a class 1 notice under ch. 985. If the commission schedules a review under sub. (1), the commission shall publish a class 1 notice under ch. 985 no later than 10 days after the date scheduled for the review.

AB925,9,14 (b) A notice under par. (a) shall contain a summary of the rate-change request and a description of the process by which an interested person may become a party to the review.

AB925,9,16 (c) A person may become a party to the review only by notifying the commission in writing no later than 30 days after the date the notice is published.

AB925,9,24 (3) At the time a hospital requests a rate change, the hospital shall submit to the commission the proposed financial requirements specified under s. 150.625 and, except as provided in s. 150.64 (4) (g), any information that the commission determines is necessary to set and monitor rates. Corporate affiliates of the hospital and other organizations that generate financial requirements of the hospital shall also provide to the commission financial or other statistical information related to the financial requirements that the commission determines is necessary to set and monitor rates.

AB925,10,2 (4) The commission may require hospitals to conform with a uniform reporting system.

AB925,10,4 (5) The commission shall regularly publish a list of the 25 most used charge elements for hospitals.

AB925,10,6 150.625 Financial requirements. (1) The financial requirements that a hospital must submit under s. 150.62 (3) shall include all of the following:

AB925,10,14 (a) Necessary operating expenses, including wages, employee fringe benefits, purchased services, professional fees, repairs and maintenance, dietary and medical supplies, pharmaceuticals, utilities, insurance, standby costs, and applicable taxes. A hospital may include as necessary operating expenses any amount paid to members of a religious order or other organized religious group if the amounts were actually paid to the members and are equivalent to the amounts paid to hospital employees for similar work. The commission may not use previously accumulated depreciation of capitalized assets to offset operating expenses.

AB925,10,20 (b) Interest expenses on debt incurred for capital or operating costs. Interest payments on debts incurred for capital costs shall be offset by income earned on investments unless the income is assigned by the donor. After the sale of a hospital, financial requirements shall include the interest expense on debt incurred for capital costs only if the debt does not exceed the revalued price of the hospital, as specified in sub. (4).

AB925,10,25 (c) Direct and indirect costs of medical education, allied education, and research programs that are approved by the commission as reasonable and necessary to maintain the quality of the programs less any tuition, scholarships, endowments, gifts, grants, and similar sources of revenue that are received by the hospital.

AB925,11,5 (d) Costs of services, facilities, and supplies that organizations related to the hospital by common ownership or control furnish to the hospital. These costs shall be calculated as the charge of the furnishing organization, but may not exceed a reasonable amount in relation to the price of comparable services, facilities, or supplies that could be purchased elsewhere.

AB925,11,8 (e) Unrecovered costs from private parties who fail to pay the full charge for care provided, unless the hospital fails to maintain sound credit and collection policies to minimize the costs.

AB925,11,9 (f) Fees assessed by the commission or other regulatory agencies.

AB925,11,17 (g) Operating fund working capital requirements. In this paragraph, "working capital requirements" means capital in use to operate the hospital at a level sufficient to avoid unnecessary borrowing, including cash, accounts receivable, inventory, and prepaid expenses less accounts payable and accrued interest. Working capital requirements shall be calculated independently of available funds, as defined in par. (i) 1. and be based on the net change in the estimated year-end balance of the hospital's year under review, compared to the year-end balance of the hospital's prior fiscal year, for the following accounts:

AB925,11,18 1. Cash.

AB925,11,19 2. Accounts receivable.

AB925,11,20 3. Inventories.

AB925,11,21 4. Prepaid expenses.

AB925,11,22 5. Trade accounts payable.

AB925,11,23 6. Accrued interest payable.

AB925,12,5 (h) An amount necessary to establish and maintain a contingency fund in cash and investments equal to 2% of the budgeted gross revenue for the hospital's year under review. The hospital shall use cash and investments to establish and maintain its contingency fund and shall use the fund to pay any unexpected expenses. The commission may review any expenditure of contingency funds in a prior year that requires restoration in the hospital's year under review for reasonableness, consistent with the nature of the unexpected expense.

AB925,12,9 (i) Capital requirements, calculated as the greater of historical, straight-line depreciation of plant and equipment or the cost of proposed capital purchases as offset by available funds, plus debt retirement expenses, prospective accumulation, and capitalized interest. In this paragraph:

AB925,12,23 1. "Available funds" includes cash and investments that are not assigned by the donor and are available to meet capital needs and does not include operating fund working capital requirements, prospective accumulations that are authorized by the commission, donor-restricted or creditor-restricted funds, grants, commitments for capital requirements, debt retirement expenses, or the amounts disallowed under s. 150.63 (2) (b). The commission may authorize prospective accumulations if a project that must be appeared under s. 150.71 (1), has lending requirements that necessitate such an accumulation or if the interest costs for the project may be lowered by borrowing, or if financial needs of a hospital occur because of balloon payments. The commission may also authorize prospective accumulations to finance a project that must be approved under s. 150.71 (1), if the cost of the project equals or exceeds 25% of the hospital's gross patient revenue for the current fiscal year, the hospital has submitted a 3-year capital expenditure plan to the commission, and the department indicates that the project is consistent with the projected needs of the community.

AB925,12,25 2. "Capital purchases" includes minor remodeling and the purchase of equipment, land, land improvements, and leasehold improvements.

AB925,13,2 3. "Depreciation" means the rational allocation of the historical cost of capitalized assets throughout the useful lives of those assets.

AB925,13,4 4. "Prospective accumulation" does not include funds that exceed the cost of the capital project for which the funds are accumulated.

AB925,13,7 (j) The amount by which estimated relief payments and medical assistance payments under ch. 49 and medicare payments under 42 USC 1395 to 1395ccc, as determined under s. 150.64 (1) (a), exceed actual payments.