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PA Bulletin, Doc. No. 97-1044


Inpatient Hospital Services

[27 Pa.B. 3109]

   The purpose of this announcement is to provide advance public notice that the Department of Public Welfare will revise its payment method for inpatient hospital services effective July 1, 1997. These revisions will affect acute care general hospitals, private psychiatric hospitals, psychiatric units of general hospitals, rehabilitation hospitals and rehabilitation units of general hospitals.

   The Department currently is discussing with representatives of the hospital industry the possibility of extending the existing Hospital Rate Agreement which governs the payment methods and standards applicable to hospitals participating in the Medical Assistance Program. The Agreement was effective July 1, 1995, and will expire on June 30, 1997. If a revised Agreement is adopted by and between the Department and participating hospitals, the Department expects the payment provisions to be generally similar to those set forth in the current Agreement and that the aggregate payments under the Agreement will be as reflected in the following fiscal note.

   If the negotiated agreement is reached, it is expected that it will provide for a 2% rate increase effective January 1, 1998 and January 1, 1999. Additionally, it will include a provision to distribute to providers who are eligible for direct medical education payments and/or disproportionate share payments the amount of approximately $158 million for fiscal year (FY) 1997-98.

   In the absence of a revised rate Agreement, the Department currently intends to adopt the following significant changes to its hospital payment systems effective July 1, 1997:

   1.  The rebasing of inpatient hospital rates to FY 1993-94.

   2.  The elimination of exceptional capital payments to acute care general hospitals. All hospitals have now had a 7-year phase-in period to adjust to the Department's prospective capital payment system.

   3.  The acute care general hospital prospective capital add-on will be adjusted to reflect the ratio of capital to operating costs for FY 1993-94.

   4.  A revision to the inpatient disproportionate share eligibility criteria and payment standards. The Department has been utilizing eligibility criteria that exceed Federal requirements and payment standards. The revisions would reflect minimum eligibility criteria.

   5.  The discontinuation of direct medical education payments. These payments relate to costs that need not be incurred by hospitals in order to achieve licensure or certification to participate in the Medical Assistance Program and are not required to be made under either Federal or State law.

   6.  The discontinuation of outpatient disproportionate share payments which are not required to be made under either Federal or State law.

   7.  For the acute care general hospital, psychiatric hospital and rehabilitation hospital inflation factor, the use of the DRI/McGraw-Hill, PPS type hospital, market basket index, with adjustments that allow for cost and policy-related considerations not fully addressed by the DRI/McGraw-Hill Index.

   8.  Hospital-specific upper limits based on peer groupings for all hospital types. The Department has determined that a payment system base that relies on each hospital's historical costs allows inefficient hospitals to receive excessive payments.

   9.  A total cost moratorium for new or additional beds and technical changes to the current capital moratoriums will be adopted.

   10.  A moratorium on all new hospital enrollments in the Medical Assistance Program.

   The Department is also considering the discontinuation of exceptional payments to ''financially distressed'' hospitals.

Fiscal Impact

   This change will result in a savings of $34.292 million in total funds ($17.812 million in State funds) for FY 1997-98 and a savings of $21.459 million in total funds ($12.176 million in State funds) for FY 1998-99.

Contact Person

   A copy of this notice is available for review at local county assistance offices. Interested persons are invited to submit written comments to this notice within 30 days of this publication. These comments should be sent to the Department of Public Welfare, Office of Medical Assistance Programs, c/o Deputy Secretary's Office, Attention: Regulations Coordinator, Room 515 Health and Welfare Building, Harrisburg, PA 17120.


   Fiscal Note: 14-NOT-148. (1) General Fund; (2) Implementing Year 1996-97 is $7,369,000; (3) 1st Succeeding Year 1997-98 is $13,760,000; 2nd Succeeding Year 1998-99 is $14,173,000; 3rd Succeeding Year 1999-00 is $14,598,000; 4th Succeeding Year 2000-01 is $15,036,000; 5th Succeeding Year 2001-02 is $15,487,000; (4) FY 1995-96 $452,180,000; FY 1994-95 $551,811,000; FY 1993-94 $681,793,000; (7) Medical Assistance-Inpatient; (8) recommends adoption.

[Pa.B. Doc. No. 97-1044. Filed for public inspection June 27, 1997, 9:00 a.m.]

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