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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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§9789.22. Payment of Inpatient Hospital Services.

(a) Unless otherwise provided by applicable provisions of this fee schedule, the maximum payment for inpatient medical services shall be determined by multiplying 1.20 by the product of the hospital's composite factor and the applicable DRG weight and by making any adjustments required by this fee schedule. The fee determined under this subdivision shall be a global fee, constituting the maximum reimbursement to a hospital for inpatient medical services not exempted under this section. However, preadmission services rendered by a hospital more than 24 hours before admission are separately reimbursable.
(b) The maximum payment for inpatient medical services includes reimbursement for all of the inpatient operating costs specified in Title 42, Code of Federal Regulations, Section 412.2(c), which is incorporated by reference and will be made available upon request to the Administrative Director, and the inpatient capital-related costs specified in Title 42, Code of Federal Regulations, Section 412.2(d), which is incorporated by reference and will be made available upon request to the Administrative Director. See Section 9789.25(a) for the Code of Federal Regulations reference for the effective date, revisions, and amendments by date of discharge.
(c) The maximum payment shall include the cost items specified in Title 42, Code of Federal Regulations, Section 412.2(e)(1), (2), (3), and (5), which in incorporated by reference and will be made available upon request to the Administrative Director. The maximum allowable fees for cost item set forth at 42 C.F.R. Section 412.2(e)(4), “the acquisition costs of hearts, kidneys, livers, lungs, pancreas, and intestines (or multivisceral organ) incurred by approved transplantation centers,” shall be based on the documented paid cost of procuring the organ or tissue. See Section 9789.25(a) for the Code of Federal Regulations reference for the effective date, revisions, and amendments by date of discharge.
(d) The maximum payment shall cover all items and services provided to hospital inpatients other than professional services provided by physicians and other practitioners that are payable under the Official Medical Fee Schedule - physicians fee schedule section in effect at the time the service was rendered (see Section 9789.111(a)). Except for services paid under the physicians fee schedule, all billing for payments shall originate from hospitals and payment may be made only to hospitals for the covered items and services, including any spinal device separately payable under Sections 9789.22(g).
(e) Hospitals billing for fees under this section shall be submitted in accordance with the e-billing regulations beginning with Section 9792.5.0 or the standardized paper billing regulations beginning with Section 9792.5.2.
(f)(1) Cost Outlier cases.
(A) Unless otherwise provided, except for inpatient services provided by a hospital transferring an inpatient to another hospital or post-acute care provider in accordance with section 9789.22(j), inpatient services for cost outlier cases, shall be reimbursed as follows:
Step 1: Determine the Inpatient Hospital Fee Schedule maximum payment amount (DRG weight x 1.2 x hospital specific composite factor).
Step 2: Determine costs according to section 9789.21(f).
Step 3: Determine outlier threshold. Outlier threshold = (Inpatient Hospital Fee Schedule payment amount + hospital specific outlier factor + any new technology pass-through payment determined under Section 9789.22(h) + any additional allowance for spinal devices under Section 9789.22(g)(2)).
(B) Inpatient services provided by a hospital transferring an inpatient to another hospital subject to section 9789.22(j)(1) for cost outlier cases, shall be reimbursed as follows:
Step 1: Determine the Inpatient Hospital Fee Schedule maximum payment amount according to section 9789.22(j)(1).
Step 2: Determine costs according to section 9789.21(f).
Step 3: Determine outlier threshold. Outlier threshold = ((Inpatient Hospital Fee Schedule payment amount + hospital specific outlier factor) ÷ geometric length of stay for the DRG x (the actual length of stay for the case + one day)) + any new technology pass-through payment + any additional allowance for spinal devices under Section 9789.22(g)(2). The outlier threshold determined under this subdivision shall not exceed the amount determined under subdivision (A) of this section.
Inpatient services provided by the receiving hospital (final discharging hospital) subject to section 9789.22(j)(1) for cost outlier cases shall be reimbursed according to subdivision (A) of this section.
(C) Inpatient services provided by a hospital transferring an inpatient to a post-acute care provider subject to section 9789.22(j)(2)(A) for cost outlier cases, shall be reimbursed according to subdivision (B).
(D) Inpatient service discharges assigned to a special pay DRG provided by a hospital transferring an inpatient to a post-acute care provider subject to section 9789.22(j)(2)(B) for cost outlier cases, shall be reimbursed as follows:
Step 1: Determine the Inpatient Hospital Fee Schedule maximum payment amount according to section 9789.22(j)(2)(B).
Step 2: Determine costs according to section 9789.21(f).
Step 3: Determine outlier threshold. Outlier threshold = (Inpatient Hospital Fee Schedule payment amount + hospital specific outlier factor) x 0.5 + ((Inpatient Hospital Fee Schedule payment amount + hospital specific outlier factor) x 0.5 + the geometric mean length of stay x the actual length of stay plus one day) + any new technology pass-through payment determined under Section 9789.22(h) + any additional allowance for spinal devices under Section 9789.22(g)(2). The outlier threshold determined under this subdivision shall not exceed the amount determined under subdivision (A) of this section.
(2) If costs exceed the outlier threshold, the case is a cost outlier case. The additional allowance for the outlier case equals 0.8 x (costs - cost outlier threshold).
(3) For discharges before January 1, 2013, for purposes of determining whether a case qualifies as a cost outlier case under this subdivision, charges for implantable spinal device and/or instrumentation reimbursed under subsection (g)(1) is excluded from the calculation of costs. If an admission for a complex spinal surgery DRG qualifies as a cost outlier case, any implantable spinal device and/or instrumentation shall be separately reimbursed under subsection (g)(1).
(g) Additional allowance for spinal devices used in complex spinal surgery:
(1) For discharges occurring before January 1, 2013, costs for spinal devices used during complex spinal surgery DRGs shall be separately reimbursed at the hospital's documented paid cost, plus an additional 10% of the hospital's documented paid cost, net of discounts and rebates, not to exceed a maximum of $250.00, plus any sales tax and/or shipping and handling charges actually paid.
(2) For discharges occurring on or after January 1, 2013 but before January 1, 2014, an additional allowance of $9,140 shall be made for spinal devices used during complex spinal surgery MS-DRGs 453, 454, and 455; an additional allowance of $3,170 shall be made for spinal devices used during complex spinal surgery MS-DRG 456; and an additional allowance of $670 shall be made for spinal devices used during complex spinal surgery MS-DRGs 028, 029, and 030.
(3) For discharges occurring on or after January 1, 2014, complex spinal surgery DRGs shall not receive any additional or separate reimbursement for spinal devices, unless the Administrative Director extends section 9789.22(g)(2) to discharges occurring on or after January 1, 2014, in accordance with Labor Code Section 5307.1(m) through a later enacted regulation.
(h) “New technology pass-through”: Additional payments will be allowed for new medical services and technologies as provided by CMS and set forth in Title 42, Code of Federal Regulations Section 412.87 and Section 412.88 which document is hereby incorporated by reference and will be made available upon request to the Administrative Director. See Section 9789.25(a) for the Code of Federal Regulations reference for the effective date, revisions, and amendments by date of discharge.
(i) Sole Community Hospitals: If a hospital meets the criteria for sole community hospitals, under Title 42, Code of Federal Regulations § 412.92(a), and has been classified by CMS as a sole community hospital, its payment rates are determined under Title 42, Code of Federal Regulations § 412.92(d), which document is hereby incorporated by reference and will be made available upon request to the Administrative Director. See Section 9789.25(a) for the Code of Federal Regulations reference for the effective date, revisions, and amendments by date of discharge.
(j) Transfers
(1) Inpatient services provided by a hospital transferring an inpatient to another hospital are exempt from the maximum reimbursement formula set forth in Section 9789.22(a). Maximum reimbursement for inpatient medical services of a hospital transferring an inpatient to another hospital shall be a per diem rate for each day of the patient's stay in that hospital, not to exceed the amount that would have been paid under Section 9789.22(a). However, the first day of the stay in the transferring hospital shall be reimbursed at twice the per diem amount and the hospital shall receive the additional allowances under Sections 9789.22(g) and (h) when applicable. The per diem rate is determined by dividing the maximum reimbursement as determined under Section 9789.22(a) by the average length of stay (as defined in Section 9789.21(a)) for that specific DRG. However, if an admission to a hospital transferring a patient is exempt from the maximum reimbursement formula set forth in Section 9789.22(a) because it satisfies one or more of the requirements of Section 9789.22(k), this subdivision shall not apply. Inpatient services provided by the hospital receiving the patient shall be reimbursed under the provisions of Section 9789.22(a).
(2) Post-acute care transfers exempt from the maximum reimbursement set forth in Section 9789.22(a).
(A) When an acute care patient is discharged to a post-acute care provider which is a rehabilitation hospital or distinct part rehabilitation unit of an acute care hospital or a long-term hospital, and the patient's discharge is assigned to one of the qualifying DRGs as specified in the Federal Register, payment to the transferring hospital shall be made as set forth in Section 9789.22(j)(1). See Section 9789.25(b) for the Federal Register reference that contains the qualifying DRGs for a given discharge.
(B) When an acute care patient is discharged to a post-acute care provider and the patient's discharge is assigned to one of the qualifying special pay DRGs as specified in the Federal Register, the payment to the transferring hospital is 50% of the amount paid under Section 9789.22(a), plus 50% of the per diem, set forth in Section 9789.22(j)(1) for each day, up to the full DRG amount. See Section 9789.25(b) for the Federal Register reference that contains the qualifying DRGs for a given discharge.
(k) The following are exempt from the maximum reimbursement formula set forth in Section 9789.22(a) and are paid on a reasonable cost basis.
(1) Critical access hospitals;
(2) Children's hospitals that are engaged in furnishing services to inpatients who are predominantly individuals under the age of 18;
(3) Cancer hospitals as defined by Title 42, Code of Federal Regulations, Section 412.23(f) which document is hereby incorporated by reference and will be made available upon request to the Administrative Director. See Section 9789.25(a) for the Code of Federal Regulations reference for the effective date, revisions, and amendments by date of discharge;
(4) Veterans Administration hospitals;
(5) Long term care hospitals as defined by Title 42, Code of Federal Regulations, Section 412.23(e) which document is hereby incorporated by reference and will be made available upon request to the Administrative Director. See Section 9789.25(a) for the Code of Federal Regulations reference for the effective date, revisions, and amendments by date of discharge;
(6) Rehabilitation hospital or distinct part rehabilitation units of an acute care hospital or a psychiatric hospital or distinct part psychiatric unit of an acute care hospital;
(7) The cost of durable medical equipment provided for use at home is exempt from this Inpatient Hospital Fee Schedule. The cost of durable medical equipment shall be paid pursuant to Section 9789.60; and
(8) Out of state hospitals.
(l) For discharges occurring before January 1, 2013, a hospital that is not listed on the Medicare Cost Report should notify the Administrative Director and provide in writing the following information: OSHPD Licensure number, Medicare provider number, physical location, number of beds, and, if applicable, avearage FTE residents in approved training programs. If a hospital has been in operation for more than one year, information should also be provided on the precentage of inpatient days attributable to Medicaid patients.
For discharges occurring on or after January 1, 2013, a hospital that is not listed in Section 9789.23, may notify the Administrative Director and provide in writing the following Medicare information: Medicare provider number, physical location, county code, hospital specific operating and capital CCRs, and DSH and/or IME adjustments, if applicable.
(m) Any hospital that believes its composite factor or hospital specific outlier factor was erroneously determined because of an error in tabulating data may request the Administrative Director for a re-determination of its composite factor or hospital specific outlier factor. Such requests shall be in writing, shall state the alleged error, and shall be supported by written documentation. Within 30 days after receiving a complete written request, the Administrative Director shall make a redetermination of the composite factor or hospital specific outlier factor or reaffirm the published factor.
Note: Authority cited: Sections 133, 4603.5, 5307.1, 5307.3 and 5318, 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).
3. Amendment filed 12-27-2012; operative 1-1-2013 as a file and print only pursuant to Government Code section 11340.9(g) (Register 2012, No. 52).
4. Amendment of subsection (d), redesignation and amendment of portion of subsection (f)(1) as new subsection (f)(1)(A), new subsection (f)(1)(B), amendment of subsection (f)(3), repealer of subsection (g)(4) and amendment of subsection (j)(1) filed 2-4-2015; operative 3-5-2015. Submitted to OAL for printing only pursuant to Government Code section 11340.9 (Register 2015, No. 6).

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