AB925: Bill Text

LRB-2561/1

DAK:cmh&rs:rs

2001 - 2002 LEGISLATURE

2001 Assembly BILL 925

March 14, 2002 - Introduced by Representatives Johnsrud, Coggs, Berceau, J. Lehman, Miller, Bies, Urban and Hines, cosponsored by Senator Moen. Referred to Committee on Health.

AB925,1,7 An Act to repeal 153.08, 153.75 (1) (g) and 165.40; to amend 50.35, 50.36 (1), 146.37 (1g) and 632.75 (5); and to create 15.105 (27), 15.107 (18), 20.438, 49.45 (3) (e) 11., subchapter III of chapter 150 [precedes 150.61] and 230.08 (2) (mp) of the statutes; relating to: establishing a hospital rate-setting commission and hospital rate-setting council; setting hospital rates; creating a program to review hospital capital expenditures and other activities of hospitals; granting rule-making authority; making appropriations; and providing penalties.

Analysis by the Legislative Reference Bureau

Hospital rate-setting

This bill creates a hospital rate-setting commission (commission) attached to the department of administration (DOA). The bill requires the commission to set maximum rates that a hospital may charge for services. Under the bill, a hospital may request rate changes according to a schedule created by the commission. As part of the rate-change review procedure, the hospital must publish a notice of review stating the process by which interested persons may become parties to the review. The hospital must also submit to the commission its proposed financial requirements. The financial requirements include all of the following:

1. Necessary operating expenses.

2. Interest expenses on debt incurred for capital or operating costs.

3. Costs of medical education.

4. Costs of services, facilities, and supplies that organizations related to the hospital by common ownership or control supply.

5. Unrecovered costs from private parties who fail to pay the full charge for services provided.

6. Fees assessed by the commission or other regulatory agency.

7. Capital requirements.

The bill specifies standards for the commission's decision making including:

1. The need to reduce the rate of hospital cost increases while preserving the quality of health care.

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.