Kentucky Statutes 205.6406 – Hospital rate improvement programs — Calculation and payment of assessment on hospitals to provide state matching dollars for federal Medicaid funds — Supplemental payments to hospitals — Federal participation and appr…
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(1) To the extent allowable under federal law, the department shall develop the following programs to increase Medicaid reimbursement for inpatient and outpatient hospital services provided by a qualifying hospital to Medicaid recipients:
(a) A program to increase inpatient reimbursement to qualifying hospitals within the Medicaid fee-for-service program in an aggregate amount equivalent to the UPL gap;
(b) A program to increase inpatient reimbursement to qualifying hospitals within the Medicaid managed care program in an aggregate amount equivalent to the managed care gap for inpatient services; and
(c) A program to increase outpatient reimbursement to qualifying hospitals within the Medicaid managed care program in an aggregate amount equivalent to the managed care gap for outpatient services.
(2) On an annual basis prior to the start of each program year, the department shall determine:
(a) The maximum allowable UPL for inpatient services provided in the Kentucky
Medicaid fee-for-service program;
(b) The fee-for-service UPL gap for applicable ownership groups;
(c) A per discharge uniform add-on amount to be applied to Medicaid fee-for- service discharges at qualifying hospitals for that program year, determined by dividing the UPL gap for the applicable ownership group by total fee-for- service hospital inpatient discharges at qualifying hospitals in the data used to calculate the UPL gap. Claims for discharges that already receive an enhanced rate at qualifying hospitals that also are classified as a pediatric teaching hospital or as a psychiatric access hospital shall be excluded from the calculation of the per discharge uniform add-on, unless the department is required to include these claims to obtain federal approval;
(d) The maximum managed care gap for inpatient services;
(e) A per discharge uniform add-on amount to be applied to Medicaid managed care discharges at qualifying hospitals for that program year in an amount that is calculated by dividing the managed care gap for inpatient services by total managed care in-state qualifying hospital inpatient discharges in the data used to calculate the managed care gap. Claims for discharges that already receive an enhanced rate at qualifying hospitals that also are classified as a pediatric teaching hospital or as a psychiatric access hospital shall be excluded from the calculation of the per discharge uniform add-on, unless the department is required to include these claims to obtain federal approval;
(f) The maximum managed care gap for outpatient services; and
(g) A uniform add-on amount to be paid to each qualifying hospital to supplement Medicaid managed care payments for outpatient services performed by the qualifying hospital in a program year. The uniform add-on amount payable to each qualifying hospital shall be:
1. A uniform percentage increase calculated by dividing the managed care gap for outpatient services by the total payments from managed care to in-state qualifying hospitals for outpatient services taken from the data used to calculate the managed care gap for outpatient services unless a different method for calculating the uniform add-on amount is required by the Centers for Medicare and Medicaid Services; and
2. Made as a lump-sum payment to each qualifying hospital on a quarterly basis unless a different method for paying qualifying hospitals the uniform add-on amount is required by the Centers for Medicare and Medicaid Services.
At least thirty (30) days prior to the beginning of each program year, the department shall provide each qualifying hospital the opportunity to verify the base data to be utilized in both the fee-for-service and managed care gap calculations for both inpatient and outpatient services, with data sources and methodologies identified.
(3) On a quarterly basis in the program year, the department shall:
(a) Calculate a fee-for-service quarterly supplemental payment for each qualifying hospital using fee-for-service claims for inpatient discharges paid in the quarter to the qualifying hospital multiplied by the uniform add-on amount determined in subsection (2)(c) of this section;
(b) Calculate a managed care quarterly supplemental payment for each qualifying hospital to be paid by each managed care organization using managed care encounter claims for inpatient discharges received in the quarter multiplied by the uniform add-on amount determined in subsection (2)(e) of this section;
(c) Calculate a managed care quarterly supplemental payment for each qualifying hospital to be paid by each managed care organization as determined in subsection (2)(g) of this section;
(d) Make the quarterly supplemental payment calculated under paragraph (a) of this subsection;
(e) Provide each managed care organization with a listing of the supplemental payments as calculated under paragraphs (b) and (c) of this subsection to be paid by each managed care organization to each qualifying hospital for both inpatient and outpatient services;
(f) Provide each managed care organization with a supplemental capitation payment to cover the managed care organization’s quarterly supplemental payments to be paid to qualifying hospitals for both inpatient and outpatient services in the quarter;
(g) Determine the amount of state funds necessary to obtain federal matching funds that equal the total quarterly supplemental payments to be paid to all qualifying hospitals in both the fee-for-service and the Medicaid managed care programs authorized by this section;
(h) For purposes of the inpatient program authorized by subsection (1)(b) of this section, determine a per discharge hospital inpatient assessment for the quarter for each qualifying hospital, which shall be calculated by first applying towards the state share determined under paragraph (g) of this subsection the qualifying hospital disproportionate share percentage of the excess disproportionate share taxes and then dividing the remaining state share by the total discharges reported by all in-state qualifying hospitals on the Medicare cost report filed by those qualifying hospitals in the calendar year two (2) years prior to the program year;
(i) Determine each qualifying hospital’s quarterly inpatient assessment by multiplying the assessment established in paragraph (h) of this subsection by the hospital’s total discharges from the qualifying hospital’s Medicare cost report filed in the calendar year two (2) years prior to the program year;
(j) For purposes of the outpatient program authorized by subsection (1)(c) of this section, determine each qualifying hospital’s assessment to be contributed to the state’s share of this outpatient program as calculated under paragraph (g) of this subsection. Each qualifying hospital’s outpatient assessment shall be a percentage of the state share calculated as the qualifying hospital’s total outpatient net revenue divided by the total outpatient net revenue of all qualifying hospitals on the Medicare cost reports filed in the calendar year two (2) years prior to the program year;
(k) Determine each qualifying hospital’s quarterly outpatient assessment by multiplying the outpatient portion of the assessment established in paragraph (g) of this subsection by the hospital’s percentage established in paragraph (j) of this subsection; and
(l) Provide each qualifying hospital with a notice sent on the same day as the distribution to managed care organizations of the supplemental capitation payments pursuant to paragraph (f) of this subsection, of the qualifying hospital’s quarterly assessment, that shall state the total amount due from the assessment, the date assessment is due, the total number of inpatient paid claims and total outpatient payments used to calculate the qualifying hospital’s quarterly supplemental distribution, and the amount of quarterly supplemental distribution payments for inpatient and outpatient services due to be received by the qualifying hospital from the department and each Medicaid managed care organization.
(4) In calculating the quarterly supplemental payments under subsection (3)(a), (b), and (c) of this section for qualifying hospitals that are also classified as a pediatric teaching hospital or as a psychiatric access hospital, no add-on shall be applied to the paid claims for the services for which that hospital also receives supplemental payments pursuant to state plan methodologies and managed care contracts in effect on January 1, 2019.
(5) Each qualifying hospital shall receive four (4) quarterly supplemental payments in the program year, as determined under subsection (3) of this section.
(6) Medicaid managed care organizations shall pay the supplemental payments to qualifying hospitals within five (5) business days of receiving the supplemental
capitation payment from the department.
(7) A qualifying hospital shall pay its quarterly assessment no later than fifteen (15) days from the date the qualifying hospital is notified of the assessment from the department. A non-state government-owned hospital may make payment of its assessment through an intergovernmental transfer. The department may delay or withhold a portion of the supplemental payment if a hospital is delinquent in its payment of a quarterly assessment.
(8) The department shall complete the actions required under subsection (3) of this section expeditiously and within the same quarter as all required information is received.
(9) Qualifying hospitals may notify the department of errors in the data used to make a quarterly supplemental payment by providing documentation within thirty (30) days of receipt of a quarterly supplemental payment from a Medicaid managed care organization. If the department agrees that an error occurred in a qualifying hospital’s quarterly supplemental payment, the department shall reconcile the payment error through an adjustment in the qualifying hospital’s next quarterly supplemental payment.
(10) The programs in this section shall not be implemented if federal financial participation is not available or if the provider tax waiver is not approved. A qualifying hospital shall have no obligation to pay an assessment if any federal agency determines that federal financial participation is not available for any assessment. Any assessments received by the department that cannot be matched with federal funds shall be returned pro rata to the qualified hospitals that paid the assessments.
(11) The department may implement the hospital rate improvement programs only if Medicaid state plan amendments required for federal financial participation are approved by the United States Centers for Medicare and Medicaid Services.
(12) The assessment authorized under KRS § 205.6405 to KRS § 205.6408 shall be restricted for use to accomplish the inpatient and outpatient reimbursement increases established under this section. The Commonwealth shall not maintain or revert funds received under KRS § 205.6405 to KRS § 205.6408 to the state general fund, except that the department may receive two hundred fifty thousand dollars ($250,000) in state funds each program year to administer the programs. The department shall not establish Medicaid fee-for-service rate-setting methodology changes that result in rate reductions from policies in effect as of October 1, 2018, for acute care hospitals and July 1, 2019, for hospitals paid on a per diem basis.
(13) The department shall promulgate administrative regulations to implement the provisions of KRS § 205.6405 to KRS § 205.6408.
(14) If the department submits, and the United States Centers for Medicare and Medicaid Services (CMS) approves, a supplemental payment formula that permits the managed care gap to be calculated based upon a percentage of average commercial rates (ACR) that results in a total annual supplemental payment greater than eighty percent (80%) of ACR for both inpatient and outpatient services, instead of the Medicare upper payment limit, then the hospital rate improvement programs for qualifying hospitals shall be modified as follows:
(a) The amount of funds the department may receive to administer the programs as stated in subsection (12) of this section shall be replaced by an administrative fee that shall be calculated to be an amount equal to four percent (4%) of the assessment collected under this section. The administrative fee payable under this paragraph shall accrue only for supplemental payments attributable to state fiscal year 2021-2022 and for state fiscal years thereafter so long as CMS approves the supplemental payment formula in accordance with this subsection. The administrative fee shall be paid within thirty (30) days after supplemental payments for inpatient and outpatient services are issued to qualifying hospitals; and
(b) The department shall not be required under KRS § 205.6408 to transfer any excess disproportionate share taxes to the hospital Medicaid assessment fund for use as state matching dollars for the payments made under this section.
(15) To the extent federal matching funds are available, the department may create a program to increase outpatient reimbursement to qualifying hospitals within the Medicaid fee-for-service program in an aggregate amount equivalent to the UPL gap.
Effective: March 20, 2023
History: Amended 2023 Ky. Acts ch. 21, sec. 2, effective March 20, 2023. — Amended
2021 Ky. Acts ch. 60, sec. 2, effective March 22, 2021. — Created 2019 Ky. Acts ch.
114, sec. 2, effective June 27, 2019.
Legislative Research Commission Note (3/20/2023). 2023 Ky. Acts ch. 21, sec. 4, provides that the amendments made to this statute in that Act are retroactive to January 1, 2023.
(a) A program to increase inpatient reimbursement to qualifying hospitals within the Medicaid fee-for-service program in an aggregate amount equivalent to the UPL gap;
Terms Used In Kentucky Statutes 205.6406
- Federal: refers to the United States. See Kentucky Statutes 446.010
- Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- State: when applied to a part of the United States, includes territories, outlying possessions, and the District of Columbia. See Kentucky Statutes 446.010
- Statute: A law passed by a legislature.
- Year: means calendar year. See Kentucky Statutes 446.010
(b) A program to increase inpatient reimbursement to qualifying hospitals within the Medicaid managed care program in an aggregate amount equivalent to the managed care gap for inpatient services; and
(c) A program to increase outpatient reimbursement to qualifying hospitals within the Medicaid managed care program in an aggregate amount equivalent to the managed care gap for outpatient services.
(2) On an annual basis prior to the start of each program year, the department shall determine:
(a) The maximum allowable UPL for inpatient services provided in the Kentucky
Medicaid fee-for-service program;
(b) The fee-for-service UPL gap for applicable ownership groups;
(c) A per discharge uniform add-on amount to be applied to Medicaid fee-for- service discharges at qualifying hospitals for that program year, determined by dividing the UPL gap for the applicable ownership group by total fee-for- service hospital inpatient discharges at qualifying hospitals in the data used to calculate the UPL gap. Claims for discharges that already receive an enhanced rate at qualifying hospitals that also are classified as a pediatric teaching hospital or as a psychiatric access hospital shall be excluded from the calculation of the per discharge uniform add-on, unless the department is required to include these claims to obtain federal approval;
(d) The maximum managed care gap for inpatient services;
(e) A per discharge uniform add-on amount to be applied to Medicaid managed care discharges at qualifying hospitals for that program year in an amount that is calculated by dividing the managed care gap for inpatient services by total managed care in-state qualifying hospital inpatient discharges in the data used to calculate the managed care gap. Claims for discharges that already receive an enhanced rate at qualifying hospitals that also are classified as a pediatric teaching hospital or as a psychiatric access hospital shall be excluded from the calculation of the per discharge uniform add-on, unless the department is required to include these claims to obtain federal approval;
(f) The maximum managed care gap for outpatient services; and
(g) A uniform add-on amount to be paid to each qualifying hospital to supplement Medicaid managed care payments for outpatient services performed by the qualifying hospital in a program year. The uniform add-on amount payable to each qualifying hospital shall be:
1. A uniform percentage increase calculated by dividing the managed care gap for outpatient services by the total payments from managed care to in-state qualifying hospitals for outpatient services taken from the data used to calculate the managed care gap for outpatient services unless a different method for calculating the uniform add-on amount is required by the Centers for Medicare and Medicaid Services; and
2. Made as a lump-sum payment to each qualifying hospital on a quarterly basis unless a different method for paying qualifying hospitals the uniform add-on amount is required by the Centers for Medicare and Medicaid Services.
At least thirty (30) days prior to the beginning of each program year, the department shall provide each qualifying hospital the opportunity to verify the base data to be utilized in both the fee-for-service and managed care gap calculations for both inpatient and outpatient services, with data sources and methodologies identified.
(3) On a quarterly basis in the program year, the department shall:
(a) Calculate a fee-for-service quarterly supplemental payment for each qualifying hospital using fee-for-service claims for inpatient discharges paid in the quarter to the qualifying hospital multiplied by the uniform add-on amount determined in subsection (2)(c) of this section;
(b) Calculate a managed care quarterly supplemental payment for each qualifying hospital to be paid by each managed care organization using managed care encounter claims for inpatient discharges received in the quarter multiplied by the uniform add-on amount determined in subsection (2)(e) of this section;
(c) Calculate a managed care quarterly supplemental payment for each qualifying hospital to be paid by each managed care organization as determined in subsection (2)(g) of this section;
(d) Make the quarterly supplemental payment calculated under paragraph (a) of this subsection;
(e) Provide each managed care organization with a listing of the supplemental payments as calculated under paragraphs (b) and (c) of this subsection to be paid by each managed care organization to each qualifying hospital for both inpatient and outpatient services;
(f) Provide each managed care organization with a supplemental capitation payment to cover the managed care organization’s quarterly supplemental payments to be paid to qualifying hospitals for both inpatient and outpatient services in the quarter;
(g) Determine the amount of state funds necessary to obtain federal matching funds that equal the total quarterly supplemental payments to be paid to all qualifying hospitals in both the fee-for-service and the Medicaid managed care programs authorized by this section;
(h) For purposes of the inpatient program authorized by subsection (1)(b) of this section, determine a per discharge hospital inpatient assessment for the quarter for each qualifying hospital, which shall be calculated by first applying towards the state share determined under paragraph (g) of this subsection the qualifying hospital disproportionate share percentage of the excess disproportionate share taxes and then dividing the remaining state share by the total discharges reported by all in-state qualifying hospitals on the Medicare cost report filed by those qualifying hospitals in the calendar year two (2) years prior to the program year;
(i) Determine each qualifying hospital’s quarterly inpatient assessment by multiplying the assessment established in paragraph (h) of this subsection by the hospital’s total discharges from the qualifying hospital’s Medicare cost report filed in the calendar year two (2) years prior to the program year;
(j) For purposes of the outpatient program authorized by subsection (1)(c) of this section, determine each qualifying hospital’s assessment to be contributed to the state’s share of this outpatient program as calculated under paragraph (g) of this subsection. Each qualifying hospital’s outpatient assessment shall be a percentage of the state share calculated as the qualifying hospital’s total outpatient net revenue divided by the total outpatient net revenue of all qualifying hospitals on the Medicare cost reports filed in the calendar year two (2) years prior to the program year;
(k) Determine each qualifying hospital’s quarterly outpatient assessment by multiplying the outpatient portion of the assessment established in paragraph (g) of this subsection by the hospital’s percentage established in paragraph (j) of this subsection; and
(l) Provide each qualifying hospital with a notice sent on the same day as the distribution to managed care organizations of the supplemental capitation payments pursuant to paragraph (f) of this subsection, of the qualifying hospital’s quarterly assessment, that shall state the total amount due from the assessment, the date assessment is due, the total number of inpatient paid claims and total outpatient payments used to calculate the qualifying hospital’s quarterly supplemental distribution, and the amount of quarterly supplemental distribution payments for inpatient and outpatient services due to be received by the qualifying hospital from the department and each Medicaid managed care organization.
(4) In calculating the quarterly supplemental payments under subsection (3)(a), (b), and (c) of this section for qualifying hospitals that are also classified as a pediatric teaching hospital or as a psychiatric access hospital, no add-on shall be applied to the paid claims for the services for which that hospital also receives supplemental payments pursuant to state plan methodologies and managed care contracts in effect on January 1, 2019.
(5) Each qualifying hospital shall receive four (4) quarterly supplemental payments in the program year, as determined under subsection (3) of this section.
(6) Medicaid managed care organizations shall pay the supplemental payments to qualifying hospitals within five (5) business days of receiving the supplemental
capitation payment from the department.
(7) A qualifying hospital shall pay its quarterly assessment no later than fifteen (15) days from the date the qualifying hospital is notified of the assessment from the department. A non-state government-owned hospital may make payment of its assessment through an intergovernmental transfer. The department may delay or withhold a portion of the supplemental payment if a hospital is delinquent in its payment of a quarterly assessment.
(8) The department shall complete the actions required under subsection (3) of this section expeditiously and within the same quarter as all required information is received.
(9) Qualifying hospitals may notify the department of errors in the data used to make a quarterly supplemental payment by providing documentation within thirty (30) days of receipt of a quarterly supplemental payment from a Medicaid managed care organization. If the department agrees that an error occurred in a qualifying hospital’s quarterly supplemental payment, the department shall reconcile the payment error through an adjustment in the qualifying hospital’s next quarterly supplemental payment.
(10) The programs in this section shall not be implemented if federal financial participation is not available or if the provider tax waiver is not approved. A qualifying hospital shall have no obligation to pay an assessment if any federal agency determines that federal financial participation is not available for any assessment. Any assessments received by the department that cannot be matched with federal funds shall be returned pro rata to the qualified hospitals that paid the assessments.
(11) The department may implement the hospital rate improvement programs only if Medicaid state plan amendments required for federal financial participation are approved by the United States Centers for Medicare and Medicaid Services.
(12) The assessment authorized under KRS § 205.6405 to KRS § 205.6408 shall be restricted for use to accomplish the inpatient and outpatient reimbursement increases established under this section. The Commonwealth shall not maintain or revert funds received under KRS § 205.6405 to KRS § 205.6408 to the state general fund, except that the department may receive two hundred fifty thousand dollars ($250,000) in state funds each program year to administer the programs. The department shall not establish Medicaid fee-for-service rate-setting methodology changes that result in rate reductions from policies in effect as of October 1, 2018, for acute care hospitals and July 1, 2019, for hospitals paid on a per diem basis.
(13) The department shall promulgate administrative regulations to implement the provisions of KRS § 205.6405 to KRS § 205.6408.
(14) If the department submits, and the United States Centers for Medicare and Medicaid Services (CMS) approves, a supplemental payment formula that permits the managed care gap to be calculated based upon a percentage of average commercial rates (ACR) that results in a total annual supplemental payment greater than eighty percent (80%) of ACR for both inpatient and outpatient services, instead of the Medicare upper payment limit, then the hospital rate improvement programs for qualifying hospitals shall be modified as follows:
(a) The amount of funds the department may receive to administer the programs as stated in subsection (12) of this section shall be replaced by an administrative fee that shall be calculated to be an amount equal to four percent (4%) of the assessment collected under this section. The administrative fee payable under this paragraph shall accrue only for supplemental payments attributable to state fiscal year 2021-2022 and for state fiscal years thereafter so long as CMS approves the supplemental payment formula in accordance with this subsection. The administrative fee shall be paid within thirty (30) days after supplemental payments for inpatient and outpatient services are issued to qualifying hospitals; and
(b) The department shall not be required under KRS § 205.6408 to transfer any excess disproportionate share taxes to the hospital Medicaid assessment fund for use as state matching dollars for the payments made under this section.
(15) To the extent federal matching funds are available, the department may create a program to increase outpatient reimbursement to qualifying hospitals within the Medicaid fee-for-service program in an aggregate amount equivalent to the UPL gap.
Effective: March 20, 2023
History: Amended 2023 Ky. Acts ch. 21, sec. 2, effective March 20, 2023. — Amended
2021 Ky. Acts ch. 60, sec. 2, effective March 22, 2021. — Created 2019 Ky. Acts ch.
114, sec. 2, effective June 27, 2019.
Legislative Research Commission Note (3/20/2023). 2023 Ky. Acts ch. 21, sec. 4, provides that the amendments made to this statute in that Act are retroactive to January 1, 2023.