907 KAR 1:055. Payments for primary care center, federally-qualified health center, and rural health clinic services.

907 KAR 1:055. Payments for primary care center, federally-qualified health center, and rural health clinic services.

RELATES TO: KRS 205.560, 216B.010, 216B.105, 216B.130, 216B.990, 42 C.F.R. 413, 491, Subpart A, 440.130, 440.230, 447.3251, 45 C.F.R. 74.27, 48 C.F.R. Part 31, 42 U.S.C. 1396a, b, d

STATUTORY AUTHORITY: KRS 194A.030(2), 194A.050(1), 205.520(3), 205.560(1), 216B.042, 42 U.S.C. 1396a, EO 2004-726

NECESSITY, FUNCTION, AND CONFORMITY: EO 2004-726, effective July 9, 2004, reorganized the Cabinet for Health Services and placed the Department for Medicaid Services and the Medicaid Program under the Cabinet for Health and Family Services. The Cabinet for Health and Family Services, Department for Medicaid Services has responsibility to administer the Medicaid Program. KRS 205.520(3) authorizes the cabinet, by administrative regulation, to comply with any requirement that may be imposed, or opportunity presented, by federal law for the provision of medical assistance to Kentucky's indigent citizenry. 42 U.S.C. 1396a(aa) establishes requirements for federally-qualified health centers and rural health clinics. This administrative regulation establishes the provisions for reimbursement for primary care center, federally-qualified health center, and rural health clinic services.

Section 1. Definitions. (1) "Allowable costs" means costs that are incurred by a center or clinic that are reasonable in amount and proper and necessary for the efficient delivery of services.

(2) "Audit" means an examination, which may be full or limited in scope, of a clinic’s or center’s financial transactions, accounts, and reports as well as its compliance with applicable Medicare and Medicaid regulations, manual instructions, and directives.

(3) "Center" means a federally-qualified health center or a primary care center.

(4) "Change in scope of service" means a change in the type, intensity, duration, or amount of service.

(5) "Clinic" means a rural health clinic.

(6) "Department" means the Department for Medicaid Services or its designated agent.

(7) "Federally-qualified health center" or "FQHC" is defined in 42 C.F.R. 405.2401.

(8) "Health care provider" means:

(a) A licensed physician;

(b) A licensed osteopathic physician;

(d) A licensed optometrist;

(e) A licensed and certified advanced registered nurse practitioner;

(f) A licensed dentist or oral surgeon;

(g) A certified physician assistant; or

(h) For an FQHC:

1. A licensed clinical social worker; or

2. A licensed clinical psychologist.

(9) "Interim rate" means a reimbursement fee established by the department to pay a FQHC, RHC, or primary care center for covered services prior to the establishment of a PPS rate.

(10) "Medically necessary" or "medical necessity" means that a covered benefit is determined to be needed in accordance with 907 KAR 3:130.

(11) "Medicare Economic Index" or "MEI" means the economic index referred to in 42 U.S.C. 1395u(b)(3)(L).

(12) "PCC" or "primary care center" means an entity that has met the licensure requirements established in 902 KAR 20:058.

(13) "Percentage increase in the MEI" is defined in 42 U.S.C. 1395u(i)(3).

(14) "PPS" means prospective payment system.

(15) "Rate year" means the twelve (12) month period beginning July 1 of each year for which a rate is established for a center or clinic under the prospective payment system.

(16) "Reasonable cost" means a cost as determined by the applicable Medicare cost reimbursement principles set forth in 42 C.F.R. Part 413, 45 C.F.R. 74.27, and 48 C.F.R. Part 31.

(17) "RHC" or "rural health clinic" is defined in 42 C.F.R. 405.2401(b).

(18) "Visit" means a face-to-face encounter between a patient and a health care provider during which a FQHC, RHC, or PCC service is delivered.

Section 2. Provider Participation Requirements. (1) A participating center or clinic shall be enrolled in the Kentucky Medicaid Program.

(2) An FQHC shall be enrolled as a primary care center.

(3) A participating center or clinic and staff shall comply with all applicable federal, state, and local regulations concerning the administration and operation of a PCC, FQHC, or an RHC.

(4) A center or clinic performing laboratory services shall meet the requirements established in 907 KAR 1:028 and 907 KAR 1:575.

Section 3. Reimbursement. (1) For services provided on and after July 1, 2001, the department shall reimburse a PCC, FQHC, or RHC an all-inclusive encounter rate per patient visit in accordance with a prospective payment system (PPS) as required by 42 U.S.C. 1396a(aa).

(2) The department shall calculate a PPS base rate for:

(a) An existing center or clinic in accordance with Section 4 of this administrative regulation; or

(b) A new center or clinic in accordance with Section 5 of this administrative regulation.

(3) The department shall adjust a PPS rate per visit:

(a) By fifty (50) percent of the percentage increase in the MEI applicable to primary care services on January 1, 2002;

(b) By the percentage increase in the MEI applicable to primary care services on July 1 of each year, beginning July 1, 2002; and

1. Upon request and documentation by a center or clinic that there has been a change in scope of services; or

2. Upon review and determination by the department that there has been a change in scope of services.

(4) A rate established in accordance with this administrative regulation shall not be subject to an end of the year cost settlement.

Section 4. Establishment of a PPS Base Rate for an Existing Provider. (1) The department shall establish a PPS base rate to reimburse an existing PCC, FQHC, and RHC 100 percent of its average allowable cost of providing Medicaid-covered services during a center’s or clinic’s fiscal years 1999 and 2000. A center’s or clinic’s fiscal year that ends on January 31 shall be considered ending the prior year.

(2) A center or clinic shall complete MAP 100601 annually and submit it to the department by the last calendar day of the third month following the center's or clinic's fiscal year end.

(3) The department shall:

(a) Use a center’s or clinic’s desk reviewed or audited cost reports for fiscal years ending February 1999 through January 2000 and February 2000 through January 2001;

(b) Trend the cost from the second base year forward to July 1, 2001 by the percentage of increase as measured by the HCFA hospital market basket index; and

(c) Calculate the average cost by dividing the total cost associated with FQHC, PCC, and RHC services by the total visits associated with the FQHC, PCC, and RHC services.

(4) If a center or clinic has only one (1) full year of cost report data, the department shall calculate a PPS base rate using a single-audited cost report.

(5) The department shall adjust a PPS base rate determined in accordance with this section to account for an increase or decrease in the scope of services provided during fiscal year 2001 in accordance with Section 6 of this administrative regulation.

(6) Until the establishment of a PPS base rate by the department, a center or clinic shall be paid for services at an interim rate.

(7) Except for a center that has been receiving an incentive payment, the interim rate shall be the rate on file on June 30, 2001.

(8) A center that has been receiving an incentive payment shall have an interim rate based upon the average costs of providing services for fiscal years 1999 and 2000. The average shall be calculated in accordance with this section using unaudited cost report data.

(9) A center shall not be eligible for an incentive payment for services provided on and after July 1, 2001.

(10)(a) A center or clinic shall have thirty (30) days from the date of notice by the department of its PPS rate to request an adjustment based on a change in scope of services; and

(b) The department shall have thirty (30) days to review the request prior to establishing a final PPS rate that shall be subject to appeal in accordance with Section 9 of this administrative regulation.

Section 5. Establishment of a PPS Base Rate for a New Provider. (1) The department shall establish a PPS base rate to reimburse a new PCC, FQHC, and RHC 100 percent of its reasonable cost of providing Medicaid covered services during a center’s or clinic’s base year.

(2) Reasonable costs shall be determined by the department based on a center’s or clinic’s cost report used by the department to establish the PPS rate.

(3) Until a center or clinic submits a Medicaid cost report containing twelve (12) full months of operating data for a fiscal year, the department shall make payments to the center or clinic based on an interim rate.

(4) A new center or clinic shall submit a budget that sets forth:

(a) Estimates of Medicaid allowable costs to be incurred by the center or clinic during the initial reporting period of at least twelve (12) months; and

(b) The number of Medicaid visits a center or clinic expects to provide during the reporting period.

(5) An interim payment shall be based on an annual budgeted or projected average cost per visit that shall be subject to reconciliation after a Medicaid cost report with twelve (12) months of actual operating data has been received.

Section 6. Adjustments to a PPS Rate. (1) If a center or clinic changes its scope of services after the base year, the department shall adjust a center’s or clinic’s PPS rate by dividing a center’s or clinic’s total Medicaid costs by total Medicaid visits. A provider shall submit MAP 100501 to request a rate adjustment after a change in service.

(2) Total Medicaid costs shall be determined in accordance with the following:

(a) The Medicaid costs of existing services shall be determined by multiplying a center’s or clinic’s current Medicaid PPS rate by the number of Medicaid visits used to calculate the base Medicaid PPS rate; and

(b) The Medicaid costs of a new service shall be determined by:

1. Adding:

a. The projected annual direct cost of a new service as determined from a center’s or clinic’s budgeted report; and

b. The administrative cost of a new service which shall be equal to the ratio of administrative costs to direct costs determined from the base-year cost reports multiplied by a center’s or clinic’s projected direct cost of a new service; and

2. Multiplying the sum derived in subparagraph 1 of this paragraph by a center’s or clinic’s projected Medicaid utilization percentage for the change in service.

(3) The amount determined in subsection (2)(a) of this section shall be added to the amount determined in subsection (2)(b) of this section.

(4) The amount determined in subsection (3) of this section shall be divided by total visits to derive a center’s or clinic’s new PPS rate.

(5) Total Medicaid visits shall include:

(a) The annual number of Medicaid visits used in the calculation of the PPS base rate; and

(b) The projected annual number of Medicaid visits for a new service.

(6) The department shall adjust the PPS rate determined under this section to a final rate upon completion of:

(a) A Medicaid comprehensive desk review of a center’s or clinic’s cost report;

(b) A Medicaid audit of a center’s or clinic’s cost report in accordance with 45 C.F.R. 74.27 and 48 C.F.R. Part 31; or

Section 7. Limitations. (1) Except for a case in which a patient, subsequent to the first encounter, suffers an illness or injury requiring additional diagnosis or treatment, an encounter with more than one (1) health care provider and multiple encounters with the same health care provider which take place on the same day and at a single location shall constitute a single visit.

(2) A vaccine available without charge to a FQHC, RHC, or PCC through the Vaccines for Children Program and the administration of the vaccine shall not be reported as a cost to the Medicaid Program.

Section 8. Out-of-State Providers. Reimbursement to an out-of-state FQHC or RHC shall be the rate on file with their state Medicaid agency.

Section 9. Appeal Rights. (1) An appeal of a negative action taken by the department regarding a Medicaid beneficiary shall be in accordance with 907 KAR 1:563.

(2) An appeal of a negative action taken by the department regarding Medicaid eligibility of an individual shall be in accordance with 907 KAR 1:560.

(3) A FQHC, PCC, or RHC may appeal department decisions as to the application of this administrative regulation as it impacts the facility’s reimbursement rate in accordance with 907 KAR 1:671.

Section 10. Incorporation by Reference. (1) The following material is incorporated by reference:

(a) "MAP 100501, Prospective Payment System Rate Adjustment, November, 2001 edition"; and

(b) "MAP 100601, Scope of Services Survey Baseline Documentation, November, 2001 edition".

(2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Department for Medicaid Services, 275 East Main Street, Frankfort, Kentucky 40621, Monday through Friday, 8 a.m. to 4:30 p.m. (Recodified from 904 KAR 1:055, 5-2-86; Am. 13 Ky.R. 389; eff. 9-4-86; 15 Ky.R. 1326; eff. 12-13-88; 1981; eff. 3-15-89; 16 Ky.R. 281; eff. 9-20-89; 2601; eff. 6-27-90; 18 Ky.R. 543; eff. 10-6-91; 29 Ky.R. 824; 1279; eff. 10-16-02.)