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Chapter 4.5. Division of Workers' Compensation
SUBCHAPTER 1. ADMINISTRATIVE DIRECTOR -ADMINISTRATIVE RULES
Article 5.3. Official Medical Fee Schedule -- Services Rendered after January 1, 2004

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§9789.21. Definitions for Inpatient Hospital Fee Schedule.

(a) “Average length of stay” means the geometric mean length of stay for a diagnosis-related group assigned by CMS.

(b) “Capital outlier factor” means fixed loss cost outlier threshold x capital wage index x large urban add-on x (capital cost-to-charge ratio/total cost-to-charge ratio).

(1) The capital wage index, also referred to as the capital geographic factor (GAF), is specified in the Federal Register of October 6, 2003 (correcting the rule published on August 1, 2003) at Vol. 68, page 57736, Table 4A for urban areas, Table 4B on page 57743 for rural areas, and Table 4C on page 57744 for reclassified hospitals, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.

(2) The “large urban add-on” is indicated by the post-reclassification urban/rural location published in the Payment Impact File at positions 229-235. As stated in Title 42, Code of Federal Regulations, Section 412.316(b), as it is in effect on November 11, 2003, the “large urban add-on” is an additional 3% of what would otherwise be payable to the health facility.

(3) “Fixed loss cost outlier threshold” means the Medicare fixed loss cost outlier threshold for inpatient admissions. The fixed loss cost outlier threshold for FY 2004 is $31,000 as published in the Federal Register of August 1, 2003 at volume 68, number 148 at page 45477.

(c) “CMS” means the Centers for Medicare & Medicaid Services of the United States Department of Health and Human Services.

(d) “Composite factor” means the factor calculated by the administrative director for a health facility by adding the prospective operating costs and the prospective capital costs for the health facility, excluding the DRG weight and any applicable outlier and new technology payment, as determined by the federal Centers for Medicare & Medicaid Services (CMS) for the purpose of determining payment under Medicare.

(1) Prospective capital costs are determined by the following formula:

(A) Capital standard federal payment rate x capital geographic adjustment factor x large urban add-on x [1 + capital disproportionate share adjustment factor + capital indirect medical education adjustment factor]

(B) The “capital standard federal payment rate” is $414.18 as published by CMS in the Federal Register of October 6, 2003 (correcting the publication of August 1, 2003), at Vol. 68, page 57735, Table 1D, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.

(C) The “capital geographic adjustment factor” is published in the Payment Impact File at positions 243-252.

(D) The “large urban add-on” is indicated by the post-reclassification urban/rural location published in the Payment Impact File at positions 229-235. As stated in Title 42, Code of Federal Regulations, Section 412.316(b), effective November 11, 2003, the “large urban add-on” is an additional 3% of what would otherwise be payable to the health facility.

(E) The “capital disproportionate share adjustment factor” is published in the Payment Impact File at positions 117-126.

(F) The “capital indirect medical education adjustment factor” (capital IME adjustment) is published in Payment Impact File at positions 202-211.

(2) Prospective operating costs are determined by the following formula:

(A) [(Labor-related national standardized amount x operating wage index) + nonlabor-related national standardized amount] x [1 + operating disproportionate share adjustment factor + operating indirect medical education adjustment]

(B) The “labor-related national standardized amount” is $3,136.39, as published by the federal Centers for Medicare & Medicaid Services in the Federal Register of October 6, 2003 (correcting the publication of August 1, 2003), at Vol. 68 page 57735, Table 1A, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director and as modified by Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173, §401, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.

(C) The “operating wage index” is published in the Payment Impact File at positions 253-262.

(D) The “nonlabor-related national standardized amount” is $1,274.85, as published by CMS in the Federal Register of October 6, 2003 (correcting the publication of August 1, 2003), at Vol. 68, page 57735, Table 1A, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director and as modified by Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173, §401, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.

(E) The “operating disproportionate share adjustment factor” is published in the Payment Impact File at positions 127-136 and as modified by Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173, §402, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.

(F) The “operating indirect medical education adjustment” is published in the Payment Impact File at positions 212-221 and as modified by Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173, §502, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.

(G) For sole community hospitals, the operating component of the composite rate shall be the higher of the prospective operating costs determined using the formula in (2) or the hospital-specific rate published in the Payment Impact File at positions 137-145.

(3) A table of composite factors for each health facility in California is contained in Section 9789.23. The sole community hospital composite factors that incorporate the operating component specified in subdivision (d)(2)(G) are listed in italics in the column headed “Composite” set forth in Section 9789.23.

(e) “Costs” means the total billed charges for an admission, excluding non-medical charges such as television and telephone charges, charges for Durable Medical Equipment for in home use, charges for implantable medical devices, hardware, and/or instrumentation reimbursed under subdivision (f) of Section 9789.22, multiplied by the hospital's total cost-to-charge ratio.

(f) “Cost-to-charge ratio” means the sum of the hospital specific operating cost-to-charge ratio and the hospital specific capital cost-to-charge ratio. The operating cost-to-charge ratio for each hospital is published in the Payment Impact File at positions 161-168. The capital cost-to-charge ratio for each hospital is published in the Payment Impact File at positions 99-106.

(g) “Cost outlier case” means a hospitalization for which the hospital's costs, as defined in subdivision (e) above, exceeds the cost outlier threshold.

(h) “Cost outlier threshold” means the sum of the Inpatient Hospital Fee Schedule payment amount, the payment for new medical services and technologies reimbursed under subdivision (g) of Section 9789.22, and the hospital specific outlier factor.

(i) “Diagnosis Related Group (DRG)” means the inpatient classification scheme used by CMS for hospital inpatient reimbursement. The DRG system classifies patients based on principal diagnosis, surgical procedure, age, presence of comorbidities and complications and other pertinent data.

(j) “DRG weight” means the weighting factor for a diagnosis-related group assigned by CMS for the purpose of determining payment under Medicare. Section 9789.24 lists the DRG weights and geometric mean lengths of stay as assigned by CMS.

(k) “FY” means the CMS fiscal year October 1 through September 30.

(l) “Health facility” means any facility as defined in Section 1250 of the Health and Safety Code.

(m) “Inpatient” means a person who has been admitted to a health facility for the purpose of receiving inpatient services. A person is considered an inpatient when he or she is formally admitted as an inpatient with the expectation that he or she will remain at least overnight and occupy a bed, even if it later develops that such person can be discharged or is transferred to another facility and does not actually remain overnight.

(n) “Inpatient Hospital Fee Schedule maximum payment amount” is that amount determined by multiplying the DRG weight x hospital composite factor x 1.20.

(o) “Labor-related portion” is that portion of operating costs attributable to labor costs, as specified in the Federal Register of October 6, 2003 (correcting the publication of August 1, 2003), at Vol. 68, page 57735, Table 1A, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.

(p) “Medical services” means those goods and services provided pursuant to Article 2 (commencing with Section 4600) of Chapter 2 of Part 2 of Division 4 of the Labor Code.

(q) “Operating outlier factor” means ((fixed loss cost outlier threshold x ((labor-related portion x wage index) + nonlabor-related portion)) x (operating cost-to-charge ratio/ total cost-to-charge ratio)).

(1) The wage index, also referred to as operating wage index in the Payment Impact File at positions 253-262, is specified as the wage index at Federal Register of October 6, 2003 (correcting rule published on August 1, 2003) at Vol. 68, page 57736, Table 4A for urban areas; Table 4B on page 57743 for rural areas, and Table 4C on page 57744 for reclassified hospitals, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.

(2) The nonlabor-related portion is that portion of operating costs attributable to nonlabor costs as defined in the Federal Register of October 6, 2003 (correcting the publication of August 1, 2003), at Vol. 68, page 57735, Table 1A, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.

(r) “Outlier factor” means the sum of the capital outlier factor and the operating outlier factor. A table of hospital specific outlier factors for each health facility in California is contained in Section 9789.23.

(s) “Payment Impact File” means the FY 2004 Prospective Payment System Payment Impact File (October 2003 Update) (IMPFILE04) published by the federal Centers for Medicare & Medicaid Services (CMS), which document is hereby incorporated by reference. The description of the file is found at http://cms.hhs.gov/providers/hipps/impact_rcd_lay.pdf . The file is accessible through http://cms.hhs.gov/providers/hipps/ippspufs.asp. A paper copy of the Payment Impact File, with explanatory material, is available from the Administrative Director upon request. An electronic copy is available from the Administrative Director at http://www.dir.ca.gov/DWC/dwc_home_page.htm .

(t) “Professional Component” means the charges associated with a professional service provided to a patient by a hospital based physician. This component is billed separately from the inpatient charges.

NOTE

Authority cited: Sections 133, 4603.5, 5307.1 and 5307.3, Labor Code. Reference: Sections 4600, 4603.2, 5307.1 and 5318, Labor Code.

HISTORY

1. New section filed 1-2-2004 as an emergency; operative 1-2-2004 (Register 2004, No. 2). A Certificate of Compliance must be transmitted to OAL by 5-3-2004 or emergency language will be repealed by operation of law on the following day.

2. Certificate of Compliance as to 1-2-2004 order, including amendment of section, transmitted to OAL 4-30-2004 and filed 6-15-2004 (Register 2004, No. 25).

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