Title of Regulation: 12VAC30-70. Methods and Standards for Establishing Payment Rates - Inpatient Hospital Services (adding 12VAC30-70-411).

Statutory Authority: § 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: October 3, 2018.

Effective Date: October 18, 2018.

Agency Contact: Emily McClellan, Regulatory Supervisor, Policy Division, Department of Medical Assistance Services, 600 East Broad Street, Suite 1300, Richmond, VA 23219, telephone (804) 371-4300, FAX (804) 786-1680, or email emily.mcclellan@dmas.virginia.gov.

Basis: Section 32.1-325 of the Code of Virginia grants to the Board of Medical Assistance Services the authority to administer and amend the State Plan for Medical Assistance. Section 32.1-324 of the Code of Virginia authorizes the Director of the Department of Medical Assistance Services (DMAS) to administer and amend the State Plan for Medical Assistance according to the board's requirements. The Medicaid authority as established by § 1902(a) of the Social Security Act (42 USC § 1396) provides governing authority for payments for services.

In addition, authority for these changes is provided in Item 306 RRR 1 of Chapter 836 of the the 2017 Acts of Assembly, which states: "The Department of Medical Assistance Services shall promulgate regulations to make supplemental Medicaid payments to the primary teaching hospitals affiliated with a Liaison Committee on Medical Education (LCME) accredited medical school located in Planning District 23 that is a political subdivision of the Commonwealth and an LCME accredited medical school located in Planning District 5 that has a partnership with a public university. The amount of the supplemental payment shall be based on the reimbursement methodology established for such payments in Attachments 4.19-A and 4.19-B of the State Plan for Medical Assistance and/or the department's contracts with managed care organizations. The department shall have the authority to implement these reimbursement changes consistent with the effective date in the State Plan amendment or the managed care contracts approved by the Centers for Medicare and Medicaid Services (CMS) and prior to completion of any regulatory process in order to effect such changes. No payment shall be made without approval from CMS."

Approval was received from CMS on December 13, 2017, for an effective date of July 1, 2017, in State Plan Amendment Transmittal Number 17-006.

Purpose: The purpose of this action is to add a new section regarding supplemental payments for certain teaching hospitals.

A Liaison Committee on Medical Education (LCME) affiliated teaching hospital, known as Sentara Norfolk General, and a LCME affiliated teaching hospital, known as Carilion Medical Center, will receive quarterly supplemental payments effective July 1, 2017, for inpatient services.

Sentara Norfolk General is located in Planning District 23 and Carilion Medical Center is located in Planning District 5. The implementation of these supplemental payments is essential to protect the health, safety, and welfare of citizens by increasing access to care for the citizens of the Commonwealth. These two primary teaching hospitals are affiliated with public medical schools that will transfer the funds to the department for the state share for these payments.

Rationale for Using Fast-Track Rulemaking Process: This regulatory action is being promulgated as a fast-track rulemaking action because it is not expected to be controversial as it increases access to medical care without increasing state costs. These changes have already been approved by CMS and comply with the state Appropriations Act.

Substance: Effective July 1, 2017, supplemental payments to Sentara Norfolk General and Carilion Medical Center will be made quarterly. The supplemental payments shall be calculated based on inpatient services rendered during the quarter equal to the difference between the hospital's Medicaid payments and the hospital's disproportionate share hospital (DSH) payment limit for the most recent year for which the DSH payment has been calculated divided by four.

The maximum aggregate payments to all qualifying hospitals shall not exceed the available upper payment limit per state fiscal year.

Issues: The primary advantage of this regulatory action is that it increases access to medical care without increasing state costs. These changes create no disadvantages to the public, the agency, the Commonwealth, or the regulated community.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. Chapter 836, Item 306.RRR.6.a, of the 2017 Acts of Assembly¹ requires that the Department of Medical Assistance Services (DMAS) "promulgate regulations to make supplemental Medicaid payments to the primary teaching hospitals affiliated with a Liaison Committee on Medical Education (LCME) accredited medical school located in Planning District 23 that is a political subdivision of the Commonwealth and an LCME accredited medical school located in Planning District 5 that has a partnership with a public university."

Thus, on behalf of the Board of Medical Assistance Services, the Director of DMAS proposes to add a section to this regulation that specifies qualifying criteria, reimbursement methodology, and maximum aggregate payments for such supplemental Medicaid payments.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. The primary teaching hospital affiliated with an LCME accredited medical school located in Planning District 23 is Sentara Norfolk General, which is affiliated with Eastern Virginia Medical School. The primary teaching hospital affiliated with an LCME accredited medical school located in Planning District 5 is Carilion Medical Center in Roanoke, which is affiliated with Virginia Tech.

According to DMAS, the two hospitals are considered safety net hospitals for their area, and serve a disproportionate number of patients without insurance and ability to pay. The supplemental payments are not tied to providing specific services, but help pay unreimbursed costs such as for indigent patients.

The proposed action would help Sentara Norfolk General and Carilion Medical Center obtain approximately $41 million of federal funds annually without increasing costs for the Commonwealth. As these funds help provide healthcare services for Virginians without increasing costs for the state, the proposed action would create a net benefit for the Commonwealth.

Businesses and Entities Affected. The proposed amendments primarily affect two hospitals: Sentara Norfolk General and Carilion Medical Center.

Localities Particularly Affected. The proposed amendments particularly affect hospitals located in Norfolk and Roanoke. Thus, the proposals particularly affect those localities and other nearby localities.

Projected Impact on Employment. The proposed action would help the two hospitals gain significant federal funding that could be used in part to hire additional staff.

Effects on the Use and Value of Private Property. The two hospitals are private. The proposed action would increase their funding, and would likely increase their value.

Real Estate Development Costs. The proposed amendments do not affect real estate development costs.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. The proposed amendments do not affect costs for small businesses.

Alternative Method that Minimizes Adverse Impact. The proposed amendments do not adversely affect small businesses.

Adverse Impacts:

Businesses. The proposed amendments do not adversely affect businesses.

Localities. The proposed amendments do not adversely affect localities.

Other Entities. The proposed amendments do not adversely affect other entities.

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¹See https://budget.lis.virginia.gov/item/2017/1/HB1500/Chapter/1/306/

Agency's Response to Economic Impact Analysis: The agency has reviewed the economic impact analysis prepared by the Department of Planning and Budget and raises no issues with this analysis.

Summary:

The amendments add language pertaining to supplemental payments made to primary teaching hospitals affiliated with Liaison Committee on Medical Education (LCME) accredited medical schools in Planning Districts 5 and 23 effective July 1, 2017.

12VAC30-70-411. Supplemental payments for certain teaching hospitals.

A. Effective for dates of service on or after July 1, 2017, quarterly supplemental payments will be issued to qualifying private hospitals for inpatient services rendered during the quarter.

B. Qualifying criteria. The primary teaching hospitals affiliated with a Liaison Committee on Medical Education (LCME) accredited medical school located in Planning District 23 that is a political subdivision of the Commonwealth and an LCME accredited medical school located in Planning District 5 that has a partnership with a public university.

C. Reimbursement methodology. Each qualifying hospital shall receive quarterly supplemental payments for the inpatient services rendered during the quarter equal to the difference between the hospital's Medicaid payments and the hospital's disproportionate share limit (Omnibus Budget Reconciliation Act 93 disproportionate share hospital limit) for the most recent year for which the disproportionate share limit has been calculated divided by four. The supplemental payment amount will be determined prior to the beginning of the fiscal year.

D. Limit. Maximum aggregate payments to all qualifying hospitals shall not exceed the available upper payment limit per state fiscal year.