[Federal Register Volume 71, Number 194 (Friday, October 6, 2006)]
[Notices]
[Pages 59116-59117]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-16600]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES (HHS)

Centers for Medicare & Medicaid Services


Notice of Hearing: Reconsideration of Disapproval of Oregon State 
Plan Amendment 05-003

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Notice of hearing.

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SUMMARY: This notice announces an administrative hearing to be held on 
December 8, 2006, at 2201 6th Street, Suite 1101, Seattle, Washington 
98121, to reconsider CMS' decision to disapprove Oregon State plan 
amendment 05-003.
    Closing Date: Requests to participate in the hearing as a party 
must be received by the presiding officer by October 23, 2006.

FOR FURTHER INFORMATION CONTACT: Kathleen Scully-Hayes, Presiding 
Officer, CMS, Lord Baltimore Drive, Mail Stop LB-23-20, Baltimore, 
Maryland 21244, Telephone: (410) 786-2055.

SUPPLEMENTARY INFORMATION: This notice announces an administrative 
hearing to reconsider CMS' decision to disapprove Oregon State plan 
amendment (SPA) 05-003 which was resubmitted on April 11, 2006. This 
SPA was disapproved on July 10, 2006. Under SPA 05-003, Oregon proposed 
to modify the State's methodology for calculating supplemental payments 
that are tied to the regulatory upper payment limit (UPL) for inpatient 
hospital services.
    This amendment was disapproved because it did not comport with the 
general requirements of section 1902(a) and the specific requirements 
of 1902(a)(30)(A) of the Social Security Act (the Act).
    At issue in this reconsideration is whether the State has 
demonstrated that the proposed supplemental payments, in conjunction 
with regular payments, would result in rates that are consistent with 
the regulatory UPL established at 42 CFR 447.272 under the authority of 
section 1902(a)(30)(A) of the Act, which requires that provider payment 
rates be ``consistent with efficiency, economy, and quality of care.'' 
Under that regulatory UPL, rates must be based on a reasonable estimate 
of what would be paid under Medicare payment principles for the same 
services. Also at issue is whether, in the absence of such a showing, 
the State plan can be a sound basis for Federal financial participation 
(FFP).
    In a formal request for additional information and several 
subsequent discussions, CMS requested that the State demonstrate that 
its calculation of the UPL for inpatient hospital services would be a 
reasonable estimate of what would be paid under Medicare payment 
principles for the same services, which is the standard set forth in 
the Federal regulations at 42 CFR 447.272(b)(1). Oregon currently uses 
a case-mix index model to determine the UPL as specified in the 
approved Medicaid State plan, but proposed in SPA 05-003 to change to a 
length of stay (LOS) model. Case mix acuity appears to be a more 
accurate adjuster for Medicaid acuity than the LOS model because it 
reflects increases in services furnished, as opposed to just being 
based on the amount of time that patients spend in the hospital. 
Applying a case-mix index model to services furnished by the Oregon 
Health and Science University to adjust for Medicaid acuity reduced the 
UPL for inpatient hospital services for all non-State governmentally 
owned or operated hospitals by about 25 percent compared to the LOS 
model. (The difference between the two adjustments is an indication 
that, while Medicaid patients may have longer lengths of stay, the 
length of stay does

[[Page 59117]]

not reflect greater service needs.) In other words, Oregon proposed to 
use the LOS adjustment instead of the case-mix adjustment, but did not 
provide CMS any additional information in order to demonstrate that use 
of the LOS adjustment would accurately reflect UPL requirements, or 
would otherwise result in rates that were consistent with efficiency, 
economy, and quality of care pursuant to section 1902(a)(30)(A) of the 
Act.
    Furthermore, under Federal regulations at 42 CFR 430.10, 
implementing the requirements for State plans in section 1902(a) 
generally, the State plan must demonstrate to CMS that the plan can 
serve as a basis for FFP available under section 1903(a)(1) of the Act. 
Absent information that the proposed rates would be consistent with the 
applicable UPL, we could not conclude that the proposed rates could be 
a basis for FFP.
    Section 1116 of the Act and Federal regulations at 42 CFR part 430, 
establish Department procedures that provide an administrative hearing 
for reconsideration of a disapproval of a State plan or plan amendment. 
CMS is required to publish a copy of the notice to a State Medicaid 
agency that informs the agency of the time and place of the hearing, 
and the issues to be considered. If we subsequently notify the agency 
of additional issues that will be considered at the hearing, we will 
also publish that notice.
    Any individual or group that wants to participate in the hearing as 
a party must petition the presiding officer within 15 days after 
publication of this notice, in accordance with the requirements 
contained at 42 CFR 430.76(b)(2). Any interested person or organization 
that wants to participate as amicus curiae must petition the presiding 
officer before the hearing begins in accordance with the requirements 
contained at 42CFR 430.76(c). If the hearing is later rescheduled, the 
presiding officer will notify all participants.
    The notice to Oregon announcing an administrative hearing to 
reconsider the disapproval of its SPA reads as follows:

    Allen Douma, M.D., Administrator, Department of Human Services, 
Health Services, Office of Medical Assistance Programs, 500 Summer 
Street, NE., E49, Salem, OR 97301-1079.
    Dear Dr. Douma:
    I am responding to your request for reconsideration of the 
decision to disapprove the Oregon State plan amendment (SPA) 05-003, 
which was resubmitted on April 11, 2006, and disapproved on July 10, 
2006.
    Under SPA 05-003, Oregon was proposing to modify the State's 
methodology for calculating supplemental payments that are tied to 
the regulatory upper payment limit (UPL) for inpatient hospital 
services.
    This amendment was disapproved because it did not comport with 
the general requirements of section 1902(a) and the specific 
requirements of 1902(a)(30)(A) of the Social Security Act (the Act).
    At issue in this reconsideration is whether the State has 
demonstrated that the proposed supplemental payments, in conjunction 
with regular payments, would result in rates that are consistent 
with the regulatory UPL established at 42 CFR 447.272 under the 
authority of section 1902(a)(30)(A) of the Act, which requires that 
provider payment rates be ``consistent with efficiency, economy, and 
quality of care.'' Under that regulatory UPL, rates must be based on 
a reasonable estimate of what would be paid under Medicare payment 
principles for the same services. Also at issue is whether, in the 
absence of such a showing, the State plan can be a sound basis for 
Federal financial participation (FFP).
    In a formal request for additional information and several 
subsequent discussions, the Centers for Medicare & Medicaid Services 
(CMS) requested that the State demonstrate that its calculation of 
the UPL for inpatient hospital services would be a reasonable 
estimate of what would be paid under Medicare payment principles for 
the same services, which is the standard set forth in the Federal 
regulations at 42 CFR 447.272(b)(1). Oregon currently uses a case-
mix index model to determine the UPL as specified in the approved 
Medicaid State plan, but proposed in SPA 05-003 to change to a 
length of stay (LOS) model. Case mix acuity appears to be a more 
accurate adjuster for Medicaid acuity than the LOS model because it 
reflects increases in services furnished, as opposed to just being 
based on the amount of time that patients spend in the hospital. 
Applying a case-mix index model to services furnished by the Oregon 
Health and Science University to adjust for Medicaid acuity reduced 
the UPL for inpatient hospital services for all non-State 
governmentally owned or operated hospitals by about 25 percent 
compared to the LOS model. (The difference between the two 
adjustments is an indication that, while Medicaid patients may have 
longer lengths of stay, the length of stay does not reflect greater 
service needs.) In other words, Oregon proposed to use the LOS 
adjustment instead of the case-mix adjustment, but did not provide 
CMS any additional information in order to demonstrate that use of 
the LOS adjustment would accurately reflect UPL requirements, or 
would otherwise result in rates that were consistent with 
efficiency, economy, and quality of care pursuant to section 
1902(a)(30)(A) of the Act.
    Furthermore, under Federal regulations at 42 CFR 430.10, 
implementing the requirements for State plans in section 1902(a) 
generally, the State plan must demonstrate to CMS that the plan can 
serve as a basis for FFP available under section 1903(a)(1) of the 
Act. Absent information that the proposed rates would be consistent 
with the applicable UPL, we could not conclude that the proposed 
rates could be a basis for FFP.
    I am scheduling a hearing on your request for reconsideration to 
be held on December 8, 2006, at 2201 6th Avenue, Suite 1101, 
Seattle, Washington 98121, to reconsider the decision to disapprove 
SPA 05-003. If this date is not acceptable, we would be glad to set 
another date that is mutually agreeable to the parties. The hearing 
will be governed by the procedures prescribed at 42 CFR Part 430.
    I am designating Ms. Kathleen Scully-Hayes as the presiding 
officer. If these arrangements present any problems, please contact 
the presiding officer at (410) 786-2055. In order to facilitate any 
communication which may be necessary between the parties to the 
hearing, please notify the presiding officer to indicate 
acceptability of the hearing date that has been scheduled and 
provide names of the individuals who will represent the State at the 
hearing.
    Sincerely, Mark B. McClellan, M.D., PhD.

    Section 1116 of the Social Security Act (42 U.S.C. 1316); 42 CFR 
430.18).

    (Catalog of Federal Domestic Assistance program No. 13.714, 
Medicaid Assistance Program.)

    Dated: September 29, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
 [FR Doc. E6-16600 Filed 10-5-06; 8:45 am]
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