Navigant Meeting61906

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         J                  June 19, 2006

                            Jim Pettersson
                            Navigant Consulting, Inc.
                            1201 Third Avenue, Suite 3320
                            Seattle, WA 98101

                            Re: Washington Medicaid Inpatient Payment Study Stakeholder Meeting

                            Dear Jim,

                            The Washington State Hospital Association (WSHA) appreciates the value of these
                            stakeholder discussions and the avenue for feedback. These discussions should aid in
                            the formation of a sound funding mechanism for distributing Medicaid inpatient
                            payments in an equitable fashion. The following is a list of the concerns brought up
                            during the June 19th discussion and the follow-up promised by you and your staff:

                            Costs associated with outpatient clinics were excluded from the calculation of relative
                            weights. Navigant excluded these costs because they are non-allowable expenses on
                            the Medicare cost report. However, when the patient is admitted to a hospital from
                            the outpatient clinic, their expenses are allowable and therefore should be included.
                            (In these situations, CMS and HRSA billing rules deny payment on outpatient serves
                            and require bundling them into the inpatient bill).

                            Jim Pettersson, Navigant Consulting.

                            Blood coagulant services are not included in lines 46 and 47. So the costs associated
                            with these services are not being captured in rebasing.

                            Mike Vanderlinde, Harborview Medical Center, will follow-up with Navigant
300 Elliott Avenue West
                Suite 300   Concern
 Seattle, WA 98119-4118     Revenue code 168, Chemical Using Pregnant (CUP) program was excluded from the
    Phone 206-281-7211      rebasing. The program’s costs are Medicaid’s expenses and should be included in the
        Fax 206-283-6122    rebasing. (Swedish Medical Center, has 16 beds assigned to the CUP program and is
      usually at full capacity).
Follow –up
Jim Pettersson, Navigant Consulting.

The exclusion of revenue code 820, hemotology / dialysis is a concern. Generally the services
are administered in outpatient, home health settings. However, during the course of dialysis
treatment the patients are commonly admitted to a hospital as acute-inpatients, and the
inpatient services may be billed under this revenue code.

Jim Pettersson, Navigant Consulting.

The exclusion of claims for patients who are transferred out, back to the originating hospital, is
a concern. WSHA and the task force would like to evaluate the result of including Transfers
Out claims in the rebasing. Eliminating expensive cases, in some DRGs where patients are
transferred back to the local community hospital for more minor level care, is a concern.

Jim Pettersson, Navigant Consulting will group the Transfers Out claims and share the results
with WSHA and the task force during the next stakeholder meeting to determine if there are
selected DRGs with high cost cases.

The exclusion of out-of-state claims is a concern. WSHA and the task force would like to
evaluate the boarder area hospitals’ out-of-state claims to consider if they would provide for a
more stable weight analysis. On the other hand, the state does not have a data set on out-of-
state Healthy Options patients.

Jim Pettersson, Navigant Consulting will evaluate this concern and its impact on potential DRG

The alignment of revenue codes 172 and 173, newborn levels II and III, to nursery (cost category
AC05) is incorrect. Instead, these two codes should be aligned with the neo-natal intensive care
unit (cost catergory AC06).

Jim Pettersson, Navigant Consulting.

The cost based weights should carve out the costs associated with wage differences and
teaching (direct and indirect). These cost differences are not due to acuity differences among
Jim Pettersson, Navigant Consulting will evaluate the effect of carving out wage area
differences and teaching.

WSHA and the task force would like a list of unstable weights by DRG and by hospital.

Jim Pettersson, Navigant Consulting.

Thaivan Nguyen will provide to WSHA an electronic version of the “Comparison of
Preliminary Relative Weight Calculation Approaches” in one week for distribution to the group
and to the remaining Washington State hospitals not participating on the task force.

Thaivan Nguyen, HRSA.

Again, WSHA appreciates the continued collaboration of efforts and inclusion in this process
and we look forward to future discussions. Please contact me at (206) 216-2533 or by e-mail at, if any of the concerns are inconsistent with your expectations of the future


Will Callicoat
Director, Financial Policy
Washington State Hospital Association

Children’s Hospital & Regional Medical Center      Southwest Washington Medical Center
  Grant Baumgartner, Jerry Kinzig                    Andrew Kaser, Eugene Johnson
Empire Health Systems                              Swedish Medical Center
  Kim Carroll                                        Carolyn Sonstegard, Scott Strandjord
Franciscan Health System                           UWMC
  Sandy Roggenbach                                   Jeff Uyyek
Good Samaritan Hospital                            Valley Medical Center
  Allison Bailey                                     Elaine Tam, Judy Veazie
Harborview Medical Center                          WSHA
  Mike Vanderlinde                                   Claudia Sanders
HRSA                                               Yakima Valley Memorial Hospital
  Lillian Erola, Larry Linn,                         Scott Olander
  Susan Lucas, Thaivan Nguyen
Multicare Health System
  Vince Schmitz
Navigant Consulting Inc.
  Benjamin Mori, Paula Douglas
Sacred Heart Medical Center
  Jarod Crooks

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