SB599,6,8 7REGULATION OF PUBLIC UTILITIES
8service commission
SB599, s. 11 9Section 11. Subchapter I (title) of chapter 196 [precedes 196.01] of the statutes
10is created to read:
SB599,6,1111 chapter 196
SB599,6,1212 subchapter I
SB599,6,1313 regulation of public utilities
SB599, s. 12 14Section 12. 196.01 (intro.) of the statutes is amended to read:
SB599,6,16 15196.01 Definitions. (intro.) As used in this chapter subchapter and ch. 197,
16unless the context requires otherwise:
SB599, s. 13 17Section 13. Subchapter II of chapter 196 [precedes 196.991] of the statutes is
18created to read:
SB599,6,1919 Chapter 196
SB599,6,2120 Subchapter II
21 Hospital rate setting
SB599,6,22 22196.991 Definitions. In this subchapter:
SB599,6,24 23(1) "Capital expenditure limit" means the maximum amount of capital expen
24ditures that may be approved under s. 196.9998.
SB599,7,3
1(1m) "Capital project" means a proposed capital expenditure that exceeds
2$1,000,000 or, if the purpose of converting to a new use or renovating part or all of
3a hospital, a proposed capital expenditure that exceeds $1,500,000.
SB599,7,4 4(2) "Commission" means the public service commission.
SB599,7,5 5(3) "Consumer price index" has the meaning given in s. 16.004 (8) (e) 1.
SB599,7,7 6(4) "Hospital" has the meaning given in s. 50.33 (2), except that "hospital" does
7not include a center for the developmentally disabled, as defined in s. 51.01 (3).
SB599,7,10 8(5) "Rates" means individual charges of a hospital for the services that it pro
9vides or, if authorized under s. 196.999 (3), the aggregate charges based on case mix
10measurements.
SB599,7,15 11196.992 Prospective rate setting. Beginning on July 1, 1997, the commis
12sion shall establish and may regularly revise maximum hospital rates on a prospec
13tive basis. The commission shall publish biennial reports showing its proceedings,
14together with information necessary to describe the rate of hospital cost increases
15and the financial condition of hospitals.
SB599,7,16 16196.993 Rule making. The commission shall promulgate all of the following:
SB599,7,18 17(1) Rules that implement this subchapter. At least 2 commissioners must sign
18any rules that are promulgated to interpret s. 196.992.
SB599,7,20 19(2) Rules that establish the rate for assessments that are authorized under s.
20196.9996.
SB599,8,2 21196.994 Requests for a rate change. (1) The commission shall create a
22schedule allowing each hospital to request rate changes annually, on or after the date
23the hospital receives its audited financial statements. The commission may schedule
24a review of the hospital's rates and revise the rates on its own initiative or at the

1request of any person when good cause is shown. A hospital may submit a rate
2request on or after the scheduled date.
SB599,8,11 3(2) Within 10 days after it submits a rate request under sub. (1), the hospital
4shall publish a class 1 notice under ch. 985. If the hospital fails to submit a rate re
5quest by the date scheduled for a review under sub. (1), the commission shall publish
6a class 1 notice under ch. 985 within 10 days after the date scheduled for the review.
7 This notice, whether published by the hospital or the commission, shall inform the
8public of the review, summarize the rate sought, if any, and state the process by which
9interested persons may become parties to the review. A person may become a party
10to the review only by notifying the commission in writing within 30 days after the
11date the notice is published.
SB599,8,21 12(3) Each hospital shall submit its proposed financial requirements to the com
13mission at the same time that it submits a rate request. Except as provided in s.
14196.999 (4) (g), each hospital shall provide the commission with the information that
15the commission determines is necessary to perform its responsibilities with respect
16to setting rates and monitoring established rates. Patient care and other organiza
17tions and hospital corporate affiliates that generate financial requirements of a hos
18pital under review shall also release to the commission financial or other statistical
19information related to the financial requirements that the commission determines
20is necessary to perform its responsibilities with respect to setting rates and monitor
21ing established rates.
SB599,8,23 22(4) The commission may require hospitals to conform with a uniform reporting
23system.
SB599,8,25 24(5) The commission shall establish and regularly publish a list of the 25 most
25heavily used charge elements for hospitals.
SB599,9,2
1196.995 Financial requirements. (1) Financial requirements of each hospi
2tal that submits a rate request shall include:
SB599,9,103 (a) Necessary operating expenses, including wages, employe fringe benefits,
4purchased services, professional fees, repairs and maintenance, dietary and medical
5supplies, pharmaceuticals, utilities, insurance, standby costs and applicable taxes.
6Any amount representing the value of services performed by members of a religious
7order or other organized religious group may only be included if actually paid to
8members of the religious group and shall be equivalent to the amounts paid to em
9ployes for similar work. The commission may not use previously accumulated de
10preciation of capitalized assets to offset operating expenses.
SB599,9,1611 (b) Interest expenses on debt incurred for capital or operating costs. Interest
12payments on debts incurred for capital costs shall be offset by income earned on in
13vestments unless the income is assigned by the donor. For the purpose of calculating
14the interest expense on debt incurred for capital costs to be included as financial re
15quirements after the sale and revaluation of a hospital, the debt may not exceed the
16revalued price of the hospital, as provided in sub. (4).
SB599,9,2117 (c) Direct and indirect costs of medical education, allied education and research
18programs approved by the commission, to the extent that the costs are reasonable
19and necessary to maintain the quality of these programs. Costs under this para
20graph shall be reduced by tuition, scholarships, endowments, gifts, grants and simi
21lar sources of revenue.
SB599,9,2422 (d) Costs of services, facilities and supplies that organizations related to the
23hospital by common ownership or control furnish to the hospital. These costs shall
24be calculated as the charge of the furnishing organization, but may not exceed a rea

1sonable amount in relation to the price of comparable services, facilities or supplies
2that could be purchased elsewhere.
SB599,10,53 (e) Unrecovered costs from private parties who fail to pay the full charge for
4care provided, unless the hospital fails to maintain sound credit and collection poli
5cies to minimize these costs.
SB599,10,66 (f) Fees assessed by the commission or other regulatory agencies.
SB599,10,147 (g) Operating fund working capital requirements. In this paragraph, "working
8capital requirements" means capital in use to operate the hospital at a level sufficient
9to avoid unnecessary borrowing, including cash, accounts receivable, inventory and
10prepaid expenses less accounts payable and accrued interest. Working capital re
11quirements shall be calculated independently of available funds, as defined in par.
12(i) 1. Working capital requirements shall be calculated based on the net change in
13the estimated year-end balance of the hospital's year under review, compared to the
14year-end balance of the hospital's prior fiscal year, for the following accounts:
SB599,10,1515 1. Cash.
SB599,10,1616 2. Accounts receivable.
SB599,10,1717 3. Inventories.
SB599,10,1818 4. Prepaid expenses.
SB599,10,1919 5. Trade accounts payable.
SB599,10,2020 6. Accrued interest payable.
SB599,11,221 (h) An amount necessary to establish and maintain a contingency fund in cash
22and investments equal to 2% of the budgeted gross revenue for the hospital's year
23under review. The hospital shall use cash and investments to establish and maintain
24its contingency fund and shall use the fund to meet unexpected expenses. The com
25mission may review any expenditure of contingency funds in a prior year that

1requires restoration in the hospital's year under review for reasonableness, consis
2tent with the nature of the unexpected expense.
SB599,11,63 (i) Capital requirements, calculated as the greater of historical, straight-line
4depreciation of plant and equipment or the cost of proposed capital purchases as off
5set by available funds, plus debt retirement expenses, prospective accumulation and
6capitalized interest. In this paragraph:
SB599,11,207 1. "Available funds" includes cash and investments that are not assigned by the
8donor and are available to meet capital needs. "Available funds" does not include op
9erating fund working capital requirements, prospective accumulations that are au
10thorized by the commission, donor-restricted or creditor-restricted funds, grants,
11commitments for capital requirements, debt retirement expenses or the amounts
12disallowed under s. 196.997 (1) (b). The commission may authorize prospective accu
13mulations if a capital project has lending requirements that necessitate such an ac
14cumulation or can lower its interest costs by borrowing, or if financial needs of a hos
15pital occur because of balloon payments. The commission may also authorize
16prospective accumulations to finance a capital project, if the cost of the capital project
17equals or exceeds 25% of the hospital's gross patient revenue for the current fiscal
18year, the hospital has submitted a 3-year capital expenditure plan to the commission
19and the department indicates that the capital project is consistent with the projected
20needs of the community.
SB599,11,2221 2. "Capital purchases" includes minor remodeling and the purchase of equip
22ment, land, land improvements and leasehold improvements.
SB599,11,2423 3. "Depreciation" means the rational allocation of the historical cost of capital
24ized assets throughout their useful lives.
SB599,12,2
14. "Prospective accumulation" does not include funds that exceed the cost of the
2capital project for which the funds are accumulated.
SB599,12,43 (j) The amount by which estimated payments by government payers under s.
4196.999 (1) (a) exceed actual payments.
SB599,12,65 (k) Financial incentives. The commission shall, by rule, allow financial incen
6tives as additional financial requirements for efficiently operated hospitals.
SB599,12,19 7(2) Hospitals may collect revenue from sources other than patients, including
8gifts and grants, investment income or income from activities incidental to patient
9care. Revenues from endowment funds or donor-restricted gifts to provide services
10for designated patients shall offset the cost of those services. No revenue from gener
11al endowment funds or unrestricted gifts may be used to offset operating expenses
12except that revenue from these funds or gifts may be used to offset interest expenses.
13Revenues received to finance special projects or wages paid to special project em
14ployes shall offset the cost of patient services. Revenues from meals sold to visitors
15or employes, from drugs sold to persons who are not patients, from the operation of
16gift shops or parking lots or from the provision of televisions, radios or telephones to
17patients shall offset the cost of these services, subject to the limitation that the
18amount of revenue offset from any of these services may not exceed the cost of the
19service.
SB599,12,25 20(3) Purchase discounts, the amount by which actual payments by government
21payers exceed estimated payments under s. 196.999 (1) (a) and allowances and re
22funds of expenses shall be subtracted from the calculation of financial requirements
23under sub. (1). Revenues from invested funds shall also be subtracted from the cal
24culation of financial requirements but may not offset an amount that exceeds the
25hospital's interest expenses.
SB599,13,5
1(4) After the sale of a hospital, the commission may calculate depreciation un
2der sub. (1) based on a revaluation of the hospital's plant and equipment in order to
3determine its reasonable value. The revaluation shall be based on appraisals con
4ducted by 2 independent appraisers, one of whom shall be selected by the hospital
5and one by the commission. The hospital shall pay the cost of both appraisals.
SB599,13,8 6196.996 Standards for decision making. The commission and its staff shall
7review and evaluate each hospital's proposed financial requirements and rate re
8quest in light of a variety of standards for decision making, including:
SB599,13,11 9(1) The need to reduce the rate of hospital cost increases while preserving the
10quality of health care in all parts of the state and taking into account the financial
11viability of economically and efficiently operated hospitals.
SB599,13,15 12(2) Comparisons with prudently administered hospitals of similar size or pro
13viding similar services that offer quality health care with sufficient staff. In classify
14ing hospitals according to size and services, the commission shall consider volume,
15intensity and educational programs and special services provided by hospitals.
SB599,13,17 16(3) A variety of cost-related trend factors based on nationally or regionally rec
17ognized economic models.
SB599,13,18 18(4) The special circumstances of rural hospitals and teaching hospitals.
SB599,13,20 19(5) The past budget and rate experiences of the hospital that submits the rate
20request.
SB599,13,22 21(6) Findings of the utilization review program under s. 196.9993 (3) concerning
22the hospital that submits the rate request.
SB599,13,24 23196.997 Initial determinations. (1) After reviewing a hospital's proposed
24financial requirements, the commission may disallow any of the following:
SB599,14,2
1(a) Costs associated with medical services that a utilization review program un
2der s. 196.9993 determines are medically unnecessary or inappropriate.
SB599,14,103 (b) Forty percent of the amount by which patient revenue generated by the hos
4pital during its previous fiscal year exceeds 104% of the hospital's budgeted patient
5revenue for that year, if the hospital's annual gross patient revenue is less than
6$5,000,000, adjusted as provided in s. 196.9995, or exceeds 102% of the hospital's
7budgeted patient revenue for that year, if the hospital's annual gross patient revenue
8equals or exceeds $5,000,000, adjusted as provided in s. 196.9995. The commission
9shall, by rule, establish a procedure under which hospitals whose variable costs ex
10ceed 65% are subject to a lesser disallowance under this paragraph.
SB599,14,1211 (c) Rate overcharges of the hospital that occurred in a prior year and for which
12payers have not been reimbursed.
SB599,14,1613 (d) The amount by which incremental expenses that are associated with the
14cost of a capital project exceed 105% of the expenses projected in the hospital's ap
15plication for approval of the capital project. This paragraph does not apply if any of
16the following applies:
SB599,14,1817 1. The hospital demonstrates to the satisfaction of the commission that the ex
18cess was due to conditions beyond its control.
SB599,14,1919 2. The excess occurs more than 3 years after completion of the capital project.
SB599,14,2020 (e) Costs that the commission determines under s. 196.996 are unreasonable.
SB599,15,221 (f) Wages that the record demonstrates to be excessive. In making determina
22tions under this paragraph, the commission shall consider the wage levels offered by
23hospitals located in a relevant geographic area surrounding the hospital that sub
24mitted the rate request as well as by hospitals of similar size or providing similar ser
25vices. In addition, the commission shall consider the hospital's ability to attract ade

1quate staff and the wage trends in nonregulated, related sectors of the Wisconsin
2economy.
SB599,15,33 (g) Amounts paid for services regulated under s. 111.18 (2) (a) 1.
SB599,15,10 4(2) (a) After reviewing the hospital's financial requirements and rate request,
5the commission staff shall suggest any disallowances authorized under sub. (1) and
6shall submit its rate recommendations to the hospital and commission. If it considers
7the hospital proposal unacceptable, the commission staff shall explain to the hospital
8what facts and standards cause it to disagree and shall submit alternate recommen
9dations. A hospital that fails to accept any part of the commission staff's recommen
10dations shall request a settlement conference under s. 196.998.
SB599,15,1611 (b) 1. Except as provided in subd. 2., the commission staff shall submit its rec
12ommendations under par. (a) within 60 days after the date that review commences
13under s. 196.994 (1), even if the commission staff determines that the data provided
14by the hospital for a scheduled review are incomplete. The commission staff may,
15however, recommend a disallowance or an alternate rate, including no rate increase,
16on the grounds of insufficient data.
SB599,15,1917 2. a. The commission staff may extend the deadline specified in subd. 1. by 15
18days if it determines that the rate request submitted involves particularly complex
19issues of fact.
SB599,15,2120 b. The deadline specified in subd. 1. may be extended with the consent of the
21hospital and the commission staff.
SB599,16,5 22196.998 Review of determinations. (1) Any hospital that disputes any part
23of the recommendations of the commission staff under s. 196.997 shall, within 10
24days after the recommendations are submitted under s. 196.997 (2), request a settle
25ment conference between its representatives and the commission staff for the pur

1pose of resolving their differences or defining more precisely the nature of their dif
2ferences. The chairperson of the commission, or a commissioner designated by the
3chairperson, shall preside over each settlement conference. Within 20 days after the
4hospital requests a settlement conference, the settlement conference shall be com
5pleted.
SB599,16,13 6(2) Any hospital that is dissatisfied with the results of its settlement conference
7under sub. (1) is entitled to a hearing before the commission under sub. (3) if it sub
8mits a timely request. Each request for a hearing shall be submitted to the commis
9sion within 10 days after the completion of the settlement conference. The hospital
10may present testimony based on any standard for decision making listed in s.
11196.996. All questions of fact shall be determined without ascribing greater weight
12to evidence presented by commission staff than to evidence presented by any other
13party solely due to its presentation by the staff.
SB599,16,19 14(3) (a) Informal hearings shall be conducted before at least 2 commissioners.
15Sworn testimony is required only if the presiding commissioners so specify. The com
16missioners may establish time limits for cross-examination of witnesses and rebut
17tal arguments and may limit the number of persons who may appear at the hearing.
18Rules of evidence, except the rule that evidence be relevant to the issues presented,
19do not apply to informal hearings.
SB599,17,220 (b) A hospital that requests an informal hearing shall present the reasons sup
21porting its proposed rate increase and financial requirements. Commission staff
22shall respond by explaining its disagreement and its alternate recommendations.
23Within the time limits specified in par. (a), the hospital, parties to the review and
24commission staff may each cross-examine witnesses and rebut arguments pres
25ented. The hospital, parties to the review and the commission staff may use outside

1experts to present their position. The presiding commissioners may impose an over
2all time limit on the length of the hearing.
SB599,17,43 (c) The commission may, by order, conduct a class 1 contested case proceeding
4under ch. 227 in place of an informal hearing under pars. (a) and (b).
SB599,17,9 5(5) The commission shall keep a complete record of all hearings and investiga
6tions conducted under sub. (3) using a stenographic, electronic or other method to re
7cord all testimony presented. The commission shall provide a transcribed, certified
8copy of all or any part of this record on the request of any party to a hearing or inves
9tigation, but may charge the requester for the costs involved.
SB599,17,14 10(6) (a) Any person may request a hearing under s. 227.44, regardless of whether
11any other hearing is authorized by law or is authorized at the discretion of the com
12mission or whether any other proceeding is authorized by rule of the commission,
13subject to the limitation that no person may receive more than one contested case
14hearing concerning a particular act or failure to act by the commission.
SB599,17,1615 (b) Notwithstanding par. (a), no person may request a hearing under s. 227.44
16pertaining to the subject matter of a hearing under sub. (3).
SB599,17,1817 (c) The right to a hearing under s. 227.44, as specified in this subsection, applies
18only to subject matter pertaining to this subchapter.
SB599,18,6 19196.999 Commission orders. (1) (a) The commission shall determine allow
20able financial requirements under s. 196.995 and disallowances under s. 196.997.
21From the difference between these amounts, the commission shall subtract the hos
22pital's estimated relief payments and medical assistance payments under ch. 49 and
23medicare payments under 42 USC 1395 to 1395ccc, unless the commission deter
24mines that the hospital's estimates are incorrect, in which case the commission shall
25subtract its own estimates of the hospital's relief, medical assistance and medicare

1payments. The commission shall, by order, establish maximum rates that allow the
2hospital to generate revenue sufficient to provide this remainder. The commission
3shall, by rule, establish acceptable methods of estimating payments by relief, medi
4cal assistance and medicare under this paragraph. Each hospital shall choose one
5of these methods and use it consistently unless the commission authorizes the hospi
6tal to change its method.
SB599,18,157 (b) Unless the hospital requests a hearing under s. 196.998 (3), the commission
8shall issue its order under par. (a) within 15 days after the commission staff submits
9its recommendations or, if the hospital requests a settlement conference under s.
10196.998 (1), within 15 days after the commission determines that the hospital will
11not seek a hearing following the conclusion of the settlement conference. If the hospi
12tal disputes only part of the recommendations of the commission staff, the commis
13sion may establish maximum rates under par. (a) concerning the recommendations
14with which the hospital agrees prior to the conclusion of the hearing under s. 196.998
15(3).
SB599,18,2116 (c) If the hospital disputes the recommendations of the commission staff and
17a hearing is held under s. 196.998 (3) (c), the commission shall establish by order
18maximum rates for the hospital's year under review at the conclusion of the hearing.
19If the commission conducts an informal hearing under s. 196.998 (3) (a) and (b), it
20shall issue its order within 50 days after the date on which the hospital requested
21the hearing.
SB599,18,2522 (d) 1. The commission shall state findings of fact and the reasons supporting
23each order that it issues concerning financial requirements and rates. If the commis
24sion denies any part of a rate request, it shall also specify, as part of its order, any
25financial requirements that it has disallowed.
SB599,19,21
12. Any hospital may apply an increase in its rates selectively, if the aggregate
2increase in its rates does not exceed the amount authorized by the commission. Prior
3to instituting its rate increase, the hospital shall explain to the commission its meth
4od of applying the rate increase and allow the commission 5 working days, as defined
5in s. 227.01 (14), to determine if the aggregate increase in rates exceeds the autho
6rized amount. Failure to disapprove the hospital's method of applying the rate in
7crease within this period constitutes an approval. If the commission approves the
8hospital's method of applying the rate increase, the commission may not challenge
9the method prior to the date of a succeeding review under s. 196.994 (1) except as pro
10vided in sub. (4) (a). If the commission disapproves the hospital's method of applying
11the rate increase, it shall recommend an alternate method. If the hospital fails to
12modify its method of applying the rate increase, the commission may challenge the
13method in circuit court. In addition to any other remedy the court may impose under
14s. 196.9994, if the court finds that the hospital's method generates an aggregate in
15crease in the hospital's rates that is inconsistent with the amount authorized by the
16commission, the hospital shall forfeit an amount equal to 50% of the amount over
17charged and shall comply with the alternate method recommended by the commis
18sion or with any other method ordered by the court that the court finds more consis
19tent with the commission's order. No hospital may change a method of applying its
20rate increase that has received the commission's approval without submitting the
21changes to the commission for its approval under this subdivision.
SB599,20,222 3. Any hospital receiving a rate increase that may only commence between the
232nd and 7th months of its fiscal year may make an adjustment to the rate increase,
24that applies to that fiscal year only, in order to generate an amount of revenue equal

1to the amount that would have been generated if the hospital could have commenced
2the rate increase beginning with the first month of its fiscal year.
SB599,20,63 (e) Except as provided in s. 196.9991, even if a party seeks judicial review of
4a commission order, the affected hospital may continue to bill payers at the rates es
5tablished by the commission. No hospital that bills payers under this paragraph ad
6versely affects its right to contest the rates established by the commission.
SB599,20,9 7(1m) Notwithstanding sub. (1) (b) and ss. 196.994 (1), 196.997 (2) and 196.998,
8at the request of a hospital the commission may waive the procedures for review of
9a rate request and issue an interim order in an emergency.
Loading...
Loading...