Title 7 . Health and Social Services

Chapter 43 . Hearings

Section 689. Optional payment rate methodology and criteria for small facilities

7 AAC 43.689. Optional payment rate methodology and criteria for small facilities

(a) The provisions of this section apply to a small facility that

(1) had 4,000 or fewer acute care patient days at an acute care, specialty, or psychiatric hospital or at a combined acute care hospital-nursing facility or had 15,000 or fewer Medicaid nursing facility days at a nursing facility that is not combined with an acute care hospital during the small facility's fiscal year that ended 12 months before the beginning of the prospective year; and

(2) elects to participate in rate setting under (c) of this section.

(b) The department will use the methodology and criteria set out in this section to review and set prospective payment rates for a small facility that elects rate setting under (c) of this section.

(c) A small facility without a rate agreement may not elect to participate in a rate agreement under (d) of this section until after a re-basing occurs under 7 AAC 43.685. A small facility that does not elect to participate in a new rate agreement after a rate agreement expires may not elect to participate in a rate agreement under (d) of this section until after a re-basing occurs under 7 AAC 43.685. A small facility that elects to participate in rate setting under this section must

(1) make an affirmative election to do so; and

(2) notify the department staff that oversees Medicaid payment rates of the facility's election on the written notification form provided by the department under this section and return the form to the department staff that oversees Medicaid payment rates no later than 30 days after the date of the department's mailing of the notification.

(d) The department will not establish prospective payment rates under this section for a small facility unless the

(1) small facility enters into a rate agreement with the department that contains at least the following terms:

(A) the rate agreement between the department and the small facility may not expire or lapse before four facility fiscal years have elapsed;

(B) the small facility may not revoke its election to participate in rate setting under this section until after the last day of the small facility's fourth fiscal year; and

(2) department determines that the rate agreement does not conflict with the public concern that needy persons in the state receive uniform and high quality medical care; factors that the department will consider in making that determination include

(A) the distribution of medical services and resources in the communities of the state; and

(B) whether during the term of the rate agreement, appropriations to the department are expected to be available in amounts adequate to pay the Medicaid rates proposed in the small facility rate agreement.

(e) A prospective payment rate established under this section is not subject to 7 AAC 43.703, except as provided by (k) of this section and is not subject to 7 AAC 43.683.

(f) Except as otherwise specified under (1) of this section, the department will base the small facility prospective payment rate for a rate agreement made under (d) of this section on the rate calculated under 7 AAC 43.685 after the election of the small facility is exercised under (c) of this section. For the eligible small facilities' fiscal year beginning in calendar year 2003, each small facility may

(1) terminate its current small facility rate agreement and enter into a new rate agreement in which the prospective payment rate is based on the rate calculated under 7 AAC 43.685, using fiscal year 2000 as the base year for facilities whose fiscal year ends on December 31, and using fiscal year 2001 as the base year for all other facilities; or

(2) enter into a rate agreement in which the prospective payment rate based on the rate calculated under 7 AAC 43.685, using fiscal year 2000 as the base year for facilities whose fiscal year ends on December 31, and using fiscal year 2001 as the base year for all other facilities.

(g) The first year payment rate established under a rate agreement made under (d) of this section will be calculated as follows, except that the adjustment factors identified in 7 AAC 43.683 will not be applied:

(1) the first year payment rate for inpatient acute care services will be expressed as a per-day rate calculated under 7 AAC 43.685(b) ; for each complete fiscal year of the small facility that begins during the period after the first payment year of the rate agreement made under (d) of this section and that ends at the expiration of the rate agreement, the first year payment rate will be increased by updating the non-capital portion of the payment rate annually at the rate of three percent per year and by updating the capital portion of the payment rate annually at the rate of 1.1 percent per year;

(2) a prospective payment rate for all outpatient acute care services will be expressed as the percentage of charges component calculated under 7 AAC 43.685(c) ;

(3) a first year payment rate for long-term care will be expressed as a per-day rate as calculated in 7 AAC 43.685(e) ; for each complete fiscal year of the small facility that begins during the period after the first payment year of the rate agreement made under (d) of this section and that ends at the expiration of the rate agreement, the first year payment rate will be increased by updating the non-capital portion of the payment rate annually at the rate of three percent per year and by updating the capital portion of the payment rate annually at the rate of 1.1 percent per year;

(4) the department will allow an increase in the capital component under (1) or (3) of this subsection of the prospective payment rate for new assets that the small facility places in service after its base year as set out in 7 AAC 43.685(f) , if

(A) the assets that are placed in service by the small facility have a value of at least $5,000,000;

(B) the small facility obtains one or more certificates of need for the assets that will be placed in service; and

(C) no later than 60 days before the effective date of the increase in the prospective payment rate for the small facility, the small facility provides to the department a detailed capital budget in accordance with 7 AAC 43.679(b) that reflects the allowance for the new assets that have been placed in service.

(h) Notwithstanding (g) of this section, the prospective per-day payment rate established for a small facility may not exceed the charges made by the small facility. The charges will be compared in the aggregate.

(i) If, after execution of a rate agreement made under (d) of this section, federal or state law mandates a change to a prospective payment rate, the department will consider recommendations made by the small facility before amending the prospective payment rate for the small facility.

(j) If a small facility elects rate setting under this section, the reporting requirements of 7 AAC 43.679 and 7 AAC 43.680 that are applicable to the small facility during the rate agreement period under (d) of this section are modified as follows:

(1) the small facility shall submit the Medicare cost report and forms YET-1, T-2, SS-1A, SS-1B, and SS-1C of the required financial reporting forms from the Medicaid Hospital and Long-Term Care Facility Reporting Manual, adopted by reference in 7 AAC 43.679(a) ;

(2) except if the small facility requests a prospective payment rate adjustment for new assets under (g)(4) of this section, the small facility is not required to submit the budget report;

(3) in place of the audited financial statement, the small facility may submit a review of the small facility's financial statements; the department will accept the review that is submitted if the review

(A) was conducted by an independent certified public accountant; and

(B) includes the balance sheet and related statements of income, retained earnings, and cash flows in accordance with the Statement on Standards for Accounting and Review Services No. 7 (1992) issued by the American Institute of Certified Public Accountants.

(k) If a small facility elects rate setting under this section,

(1) except as otherwise specifically provided in (2) of this subsection, the exceptional relief process set out in 7 AAC 43.708 is the sole administrative review and appeals process available to a small facility; and

(2) small facility use of the administrative appeal provisions of 7 AAC 43.703 is limited to appeal of an action or decision of the department that relates to

(A) the small facility's eligibility to elect rate setting under this section;

(B) the violation of a term of the rate agreement made under (d) of this section; or

(C) denial of an increase in the prospective payment rate based on a determination made under (g)(4) of this section.

( l ) A small facility acute care hospital may elect a new four-year rate agreement under (d) of this section if the facility becomes a combined acute care hospital-nursing facility. The combined facility may choose this option within 30 days after the combination of the two facilities. The payment rate changes become effective the date the facilities combine and will be calculated as follows:

(1) the small facility acute care per-day rate and the nursing facility per-day rate will be calculated at the statewide weighted average of the payment rates in effect for small facilities qualified under (a) of this section as of the date the facilities combine;

(2) the outpatient acute care percentage rate will be calculated as the statewide average of the outpatient payment rates in effect for all qualified acute care hospital small facilities as of the date the facilities combine.

(m) A rate agreement made under (d) of this section may be renewed if the small facility still qualifies under this section. The department will perform a re-basing in accordance with 7 AAC 43.685 for rates for renewed rate agreements established under this section.

History: Eff. 1/1/98, Register 144; am 12/30/2000, Register 156; am 9/1/2002, Register 163; am 1/1/2004, Register 168; am 7/1/2004, Register 170

Authority: AS 47.05.010

AS 47.07.070

AS 47.07.073

Editor's note: The address for filing notifications under 7 AAC 43.689 is Department of Health and Social Services, Office of Rate Review, 4710 Business Park Boulevard, Suite 44, Anchorage, Alaska 99503-7100.