Section 7 AAC 150.250 - Inpatient prospective payment based on Diagnosis Related Groups (DRG)(a) For discharges on or after January 1, 2024, the department will reimburse inpatient hospital services provided by general acute care hospitals on a per-stay basis using a Diagnosis Related Groups (DRG) payment methodology. The department will apply the DRG payment methodology to in-state general acute care hospitals, except hospitals listed in (b) of this section, and to all out-of-state hospitals. The department will designate certain out-of-state hospitals with a high volume of Medicaid claims for this state as border hospitals for reimbursement purposes. Components of the DRG payment methodology are as follows: (1) the department will determine and assign hospital-specific DRG base rates to in-state general acute care hospitals subject to the DRG payment methodology and to designated border hospitals; the department will determine and assign a single DRG base rate to all other out-of-state hospitals;(2) the DRG grouper used to assign inpatient stays to a DRG is an All Patient Refined Diagnosis Related Groups (APR DRG) grouper; the APR DRG system classifies each inpatient stay based on information contained in the Medicaid inpatient claim, including diagnosis codes, procedure codes, discharge status codes, and patient characteristics;(3) DRG relative weights are derived from an APR DRG national hospital-specific relative value (HSRV) weight set for the version of the grouper that is in place; the department may scale the DRG relative weight values to represent Medicaid claims experience for this state to achieve a case mix index of 1.0;(4) average lengths of stay are derived from an APR DRG national weight set for the version of the grouper that is in place;(5) a Healthcare Acquired Conditions (HAC) utility is used to remove HACs from consideration in an APR DRG assignment;(6) the department may multiply DRG relative weights by policy adjustors based on patient age or the patient's APR DRG assignment to increase or decrease reimbursement; each APR DRG is assigned to a service category determined by the department;(7) the DRG base payment before the application of other payment adjustments is calculated as follows: DRG base rate * APR DRG relative weight * policy adjuster = DRG base payment;
(8) transfer adjustments that are based on uniform billing discharge status codes, as set out in the American Hospital Association's Official UB-04 Data Specification Manual, 2024 edition, adopted by reference in 7 AAC 160.900(a), and that are based on length of stay, prorate payments as follows: (A) transfer adjustments apply in cases where a patient is transferred to another hospital before completing the expected full course of treatment as determined by the national length of stay for the APR DRG assigned to a case;(B) the transfer payment policy applies to the hospital making the transfer; the hospital receiving the patient is not subject to the transfer payment policy;(C) APR DRGs that are specifically described to apply to transferred patients are exempt from transfer payment adjustments;(D) in the transfer adjustment calculation, one day is added to the actual length of stay to reflect the higher costs of care that typically occur on the first day of an inpatient stay;(E) the discharge status codes triggering a transfer payment are discharge status codes 02, 05, 62, 63, 65, 66, 82, 85, 90, 91, 93, and 94;(F) if the actual length of stay plus one is less than the national average length of stay and the discharge status code on the claim is one specified by the department to trigger the transfer adjustment, the transfer adjustment calculation is as follows: (DRG base payment / national average length of stay) * (actual length of stay + 1) = transfer-adjusted allowed amount;
(9) the department will make outlier payments for high-cost cases; in order to receive an outlier payment, the estimated financial loss to a hospital must exceed a threshold, calculated by the department, that aims to result in outlier payments between five percent and 15 percent of total payments; the department will multiply amounts in excess of that threshold by a marginal cost percentage, as follows, to calculate outlier payments: (A) estimated cost is calculated as: charges * cost-to-charge ratio = estimated cost;(B) estimated gain or loss is calculated as: DRG base payment (or transfer-adjusted allowed amount if applicable) - estimated cost = estimated gain or loss;(C) if estimated loss is greater than the cost outlier threshold, the claim qualifies for an outlier payment; the department will publish the cost outlier threshold value on the department's website;(D) the outlier payment is calculated as: (estimated loss - cost outlier threshold) * outlier payment percentage = cost outlier payment;(E) outlier payments are added to the DRG base payment, or transfer-adjusted allowed amount if applicable;(10) the department will utilize a cost-to-charge ratio in the calculation of outlier payments; the department will assign a hospital-specific cost-to-charge ratio to in-state general acute care hospitals and designated border hospitals; the department will assign the in-state average cost-to-charge ratio to all other out-of-state hospitals;(11) the department will adjust the DRG base rate for an in-state teaching hospital for direct medical education costs reported on the Medicare hospital cost report; the specific criteria and methodology for teaching hospital base rate adjustments are described in the Alaska Provider Billing Manual, adopted by reference in 7 AAC 160.900;(12) the APR DRG base payment is calculated by multiplying the hospital's base rate by the relative weight and each policy adjustor; transfer adjustments and outlier payment calculations follow this initial calculation;(13) the department will reimburse all services, supplies, and devices provided during an inpatient stay through the DRG payment; however, the department may make a payment in addition to the DRG payment for(A) a quality incentive program; or(B) another initiative adopted by regulation under the Administrative Procedure Act (AS 44.62).(b) The DRG payment methodology does not apply to critical access hospitals, psychiatric hospitals, rehabilitation hospitals, and long-term acute care hospitals. Tribally owned and operated general acute care hospitals not being paid under the state payment methodology are exempted from the DRG payment methodology. Tribally owned and operated general acute care hospitals may opt in to the DRG payment methodology upon notification to the department.(c) The department will assign a new in-state general acute care hospital or designated border hospital the in-state average base rate and cost-to-charge ratio until a hospital-specific base rate and cost-to-charge ratio can be determined during the next biennial or triennial DRG rate update.(d) The department will periodically update base rates and other DRG system parameters. The department will make updates on a biennial or triennial basis as determined by the department. If base rates are updated triennially, the department will adjust base rates between years two and three using the most recent quarterly publication of the IHS Markit Healthcare Cost Review, Hospital Market Basket inflationary index, available 60 days before the beginning of a facility's fiscal year. The department will determine classification as a border hospital during the DRG update process.Eff. 1/1/2024, Register 248, January 2024Authority:AS 47.05.010
AS 47.07.070
AS 47.07.073