LRB-2561/1
DAK:cmh&rs:rs
2001 - 2002 LEGISLATURE
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
1An Act to repeal 153.08, 153.75 (1) (g) and 165.40;
to amend 50.35, 50.36 (1),
2146.37 (1g) and 632.75 (5); and
to create 15.105 (27), 15.107 (18), 20.438, 49.45
3(3) (e) 11., subchapter III of chapter 150 [precedes 150.61] and 230.08 (2) (mp)
4of the statutes;
relating to: establishing a hospital rate-setting commission
5and hospital rate-setting council; setting hospital rates; creating a program to
6review hospital capital expenditures and other activities of hospitals; granting
7rule-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
1Section
1. 15.105 (27) of the statutes is created to read:
AB925,4,82
15.105
(27) Hospital rate-setting commission. There is created a hospital
3rate-setting commission, which is attached to the department of administration
4under s. 15.03. No member of the council may have a financial interest in a hospital,
5as defined in s. 50.33 (2). Any member of the commission who voluntarily assumes
6a financial interest in a hospital shall vacate the office. Any member of the
7commission who involuntarily assumes a financial interest in a hospital shall divest
8himself or herself of the office within a reasonable time or shall vacate the office.
AB925, s. 2
9Section
2. 15.107 (18) of the statutes is created to read:
AB925,4,1410
15.107
(18) Hospital rate-setting council. There is created in the department
11of administration a hospital rate-setting council. The council shall consist of 11
12members appointed for staggered 4-year terms, who shall represent a balance of
13economic, provider, scientific, government, and consumer viewpoints. No more than
143 members may be state employees. The council shall include all of the following:
AB925,4,1515
(a) Three members nominated by the Wisconsin Hospital Association.
AB925,4,1716
(b) One member who is a physician and nominated by the State Medical Society
17of Wisconsin.
AB925,5,218
(c) One member nominated by the largest service insurance corporations
19licensed under ch. 613. The size of a service insurance corporation shall be based on
1premium volume as reported in the most recent Wisconsin insurance commissioner's
2report on business.
AB925,5,43
(d) One member nominated by the Wisconsin division of the Health Insurance
4Association of America.
AB925,5,65
(e) One member who is a registered nurse and nominated by the Wisconsin
6Nurses Association.