4802 CALCULATION OF THE HOSPITAL SPECIFIC COST PER DISCHARGE

4802.1 The hospital-specific cost per discharge shall be equal to each hospital's Medicaid inpatient operating costs standardized for indirect medical education costs and variations in case mix, divided by the number of Medicaid discharges in the base year data set and adjusted for outlier reserve.

4802.2 Medicaid inpatient operating costs for the base year period shall be calculated by applying the hospital-specific operating cost-to-charge ratio to allowed charges from the base year claims data. The cost-to-charge ratio shall be calculated in accordance with 42 C.F.R. § 413.53 (Determination of cost of services to beneficiaries) and 42 C.F.R. §§ 412.1 through 412.125 (Prospective payment systems for inpatient hospital services), and as reported on cost reporting Form HCFA 2552-10, Worksheet C, Part 1 (Computation of ratio of cost to charges), or its successor, except that organ acquisition costs shall be excluded.

4802.3 Cost classifications and allocation methods shall be made in accordance with the Department of Health and Human Services, Health Care Finance Administration Guidelines for Form HCFA 2552-10 and the Medicare Provider Reimbursement Manual 15 or any subsequent guidance issued by the federal Department of Health and Human Services.

4802.4 Medicaid inpatient operating costs calculated pursuant to Subsection 4802.2 shall be standardized for indirect medical education costs by removing indirect medical education costs. Indirect medical education costs shall be removed by dividing Medicaid operating costs by the indirect medical education factor set forth in Subsection 4802.5.

4802.5 The indirect medical education adjustment factor for each hospital shall be the factor calculated by Medicare for each hospital based on the hospital cost report for the base year period as described in Subsection 4801.2.

4802.6 Medicaid inpatient operating costs calculated pursuant to Subsection 4802.2 shall be standardized for variations in case mix by dividing Medicaid operating costs standardized for indirect medical education pursuant to Subsection 4802.4 by the appropriate case mix adjustment factor set forth in Subsection 4802.7.

4802.7 The case mix adjustment factor for each hospital shall be equal to the sum of the relative weights of each discharge in the base year, divided by the number

of discharges in the base year. The case mix adjustment factor calculated pursuant to this section shall be adjusted by two point five percent (2.5%), which accounts for an expected change in case mix related to improved coding of claims.

4802.8 The hospital-specific cost per discharge adjusted for indirect medical education and case mix shall be reduced by a net one percent (1%), which takes into account five percent (5%) of the cost reserved for payment of high-cost claims and four percent (4%) of the cost restored to account for the reduction in payment for low-cost claims.

SOURCE: Final Rulemaking published at 45 DCR 4141, 4145 (June 26, 1998); as amended by Notice of Emergency and Proposed Rulemaking published at 57 DCR 2691 (March 26, 2010) [EXPIRED]; as amended by Notice of Emergency and Proposed Rulemaking published at 57 DCR 6837 (July 10, 2010) [EXPIRED]; as amended by Notice of Final Rulemaking published at 58 DCR 4323, 4326 (May 20, 2011); as amended by Final Rulemaking published at 59 DCR 15078 (December 28, 2012).