Md. Code Regs. 10.37.10.04-1

Current through Register Vol. 51, No. 25, December 13, 2024

Section 10.37.10.04-1 - Rate Efficiency Methodology

A. In evaluating the reasonableness of a hospital's permanent rate structure, the Commission shall use an Inter-hospital Cost Comparison (ICC) methodology Thus, the results of an ICC analysis do not constitute an absolute rule, and the Commission shall consider the individual circumstances of the subject hospital in determining the appropriate rate structure. The ICC methodology begins by establishing costs for the target hospital and its peer group. Under the methodology, costs are determined by calculating the hospitals' charges and then removing markup and profits. The methodology then compares the subject hospital's costs to the average costs of its peer group after adjusting for factors for which the hospital is not held accountable. These factors include, but need not be limited to, case mix, labor market cost differences, reasonable medical education costs, and special grants awarded by the Commission, which compares the costs of the hospital to those costs, including adjustments for reasonableness and efficiency, of its peer hospitals, with appropriate adjustments to reflect changes in the hospital's volume since the beginning of the new All-Payer Model Agreement and the inception of the hospital's revenue agreement, as the foundation of its review of the full rate application. The staff shall make modifications to the ICC which are needed to properly reflect any additional factors that are relevant to the determination of a reasonable cost level that should be reflected in the hospital's approved regulated revenue. The ICC analysis does not constitute a strict, unalterable or absolute methodology. It shall be modified as needed to give proper attention to the particular circumstances of the hospital, and the staff shall give due consideration to information provided by the hospital in determining the appropriate rate levels and rate structure for the hospital. The ICC shall take into account, in the establishment of appropriate rate levels, those factors for which the hospital will not be held accountable such as special grants from the Commission, assessments, uncompensated care levels, and characteristics of the population in the hospital's primary service area.

B. Factors considered in the ICC methodology may evolve during the course of full rate reviews. The Commission shall take into account the specific circumstances of the applicant hospital, and staff shall make the key contents, analytic steps, and findings of such reviews available to all hospitals and the public.

C. When reviewing a full rate application filed by a hospital that is owned or controlled by a hospital system that also owns other hospitals located in Maryland, the Commission may take into account the financial situation of the other hospitals in the system including their profitability and any shifts of services, volume, revenues or assets between the hospital and the other hospitals or related organizations of the system.

D. The final rates that are approved by the Commission for a nonprofit hospital's permanent rate structure shall allow the hospital to charge reasonable rates that will permit it to provide, on a solvent basis, effective and efficient service that is in the public interest.

E. The final rates that are approved by the Commission for a proprietary profit-making hospital's permanent rate structure shall allow the hospital to charge reasonable rates that will permit it to provide effective and efficient service that is in the public interest and include enough allowance for and provide a fair return to the owner of the hospital.

F. The Commission shall set rates for the applicant hospital consistent with the All-Payer Model approved by the federal Center for Medicare and Medicaid Innovation.

Md. Code Regs. 10.37.10.04-1

Regulation .04-1 adopted as an emergency provision effective October 8, 1998 (25:22 Md. R. 1650); adopted permanently effective February 8, 1999 (26:3 Md. R. 175)
Regulation .04-1 amended as an emergency provision effective May 21, 2001 (28:13 Md. R. 1214); amended permanently effective September 3, 2001 (28:17 Md. R. 1557); amended effective 45:1 Md. R. 14, eff. 1/15/2018