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PA Bulletin, Doc. No. 00-1059



Inpatient Hospital Services; Final Public Notice

[30 Pa.B. 3125]

   The purpose of this announcement is to provide final public notice of the Department of Public Welfare's (Department) payment methodology for the period July 1, 1999, through June 30, 2000. The payment methodology affects acute care general hospitals, private psychiatric hospitals, psychiatric units of general hospitals, rehabilitation hospitals and rehabilitation units of general hospitals.

   On June 26, 1999, the Department published a public notice at 29 Pa.B. 3258 which stated that the Department was involved in discussions with representatives of Pennsylvania's hospitals regarding the possibility of extending the hospital rate agreement which was effective July 1, 1997, through June 30, 1999. The notice set forth proposed methods for inpatient hospital payments. The Department received no comments during the public comment period as a result of the notice.

   The discussions between the Department and the hospital representatives ended in March 1999, without universal agreement among the hospitals to extend the rate agreement. Although there was consensus that the current rate setting and payment methods would be maintained, consensus was not reached regarding the inflationary adjustment to the base rates and the inpatient and outpatient disproportionate share and direct medical education payments.

   During the past several weeks, the Department has received written comments from several hospitals and from some members of the General Assembly requesting that the Department increase the hospitals' base payment rates and disproportionate share and direct medical education payments by 4%.

   The Department, upon review of Medical Assistance costs and payments relating to inpatient services for Fiscal Year 1999-2000 and consideration of the comments and proposals it recently received, has decided to adopt the current rate setting and payment methods with inflationary adjustments of 2.8% to the base rates and 2% to the inpatient and outpatient disproportionate share and direct medical education payments. These increases are comparable to objective indicators of projected rates of inflation for hospital costs, including rates of inflation projected by DRI/McGraw Hill.

   The Department will implement payment provisions using the basic methods of the expired rate agreement and will include the following:

   *  For the period July 1, 1999, through December 31, 1999, the Department will make no changes to the rates and payment methodologies previously in effect. The rates for inpatient services had been increased by 2.0% effective January 1, 1999.

   *  Effective January 1, 2000, inpatient base payment rates in effect as of December 31, 1999 will increase by 2.8%. The Department anticipates that this rate increase will result in additional Medical Assistance payments of approximately $5 million for inpatient services under the fee for service program for this 6-month period.

   *  For the period January 1, 2000, through June 30, 2000, inpatient and outpatient disproportionate share and direct medical education payments total the aggregate annualized amount of $178.5 million. This amount represents a 2% increase over the aggregate payment for Fiscal Year 1998-99. These payments will continue to be paid quarterly in the month following the end of the quarter.

   *  The Statewide prospective capital add-on percentage remains at 5.92%.

   *  The Department will maintain the change of ownership policy set forth under the expired rate agreement. Payment rates will not be rebased for changes of ownership occurring on or after July 1, 1993.

   *  The Department will continue the augmented payment policy for certain high volume medical assistance hospitals.

Fiscal Impact

   This change will result in a cost of $6.721 million in total funds ($3.144 million in State funds and $3.577 million in Federal funds) for Fiscal Year 1999-00.


   Fiscal Note:  14-NOT-246; (1)  General Fund;

Medical Assistance
Medical Assistance
(2)  Implementing Year 1999-00 is $2.897 Million$0.247 Million
(3)  1st Succeeding Year 2000-01 is $8.317 Million$0.619 Million
2nd Succeeding Year 2001-02 is $8.037 Million$0.495 Million
3rd Succeeding Year 2002-03 is $8.037 Million$0.495 Million
4th Succeeding Year 2003-04 is $8.037 Million$0.495 Million
5th Succeeding Year 2004-05 is $8.037 Million$0.495 Million
Medical Assistance
Medical Assistance
(4)  1998-99 Program--$453.594 Million$695.395 Million
1997-98 Program--$428.079 Million$662.740 Million
1996-97 Program--$436.941 Million$798.836 Million

   (8)  recommends adoption. There are funds available in the Department's budget to cover the costs resulting from this revision.

[Pa.B. Doc. No. 00-1059. Filed for public inspection June 16, 2000, 9:00 a.m.]

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