New York State Health Care Reform Act (HCRA)

March 15, 2000

Dear Payor/Provider:

The purpose of this letter is to provide a summary of the major statutory changes contained in Chapter 1 of the Laws of 1999, the New York Health Care Reform Act (HCRA) of 2000, which are of importance to payors and providers of health services in regard to their funding of public goods pools. The enclosed provides an overview of such major changes.

HCRA 2000 statutory provisions extend from January 1, 2000 through June 30, 2003. This legislation continues the substantially de-regulated inpatient hospital rate system, which has been in place since January 1, 1997, allowing most payors to negotiate reimbursement rates for inpatient hospital services. Inpatient hospital rates for New York State Medicaid, other New York State Governmental Agencies, New York State´ local county governments for payments related to inmates of local correctional facilities, and for payments made under the New York State workers' compensation law, comprehensive motor vehicle insurance reparations act, volunteer fire-fighters' benefit law and ambulance workers' benefit law continue to be reimbursed under a HCRA statutorily established rate methodology.

HCRA 2000 also continues the subsidization of indigent care and health care initiatives through pooled funds raised by assessments on the net patient service revenues of certain providers which are largely reimbursable through payor surcharges. These surcharge percentages remain unchanged but continue to vary by payor type and, for certain payors, by whether they voluntarily elected to submit surcharge payments directly to the Department´ pool administrator on behalf of providers. Additional funds for this pool are raised through a one percent assessment on the gross inpatient revenues of New York State general hospitals.

Also continued by HCRA 2000 is the requirement that certain payors fund a Professional Education Pool (PEP) through surcharges on payments to New York State general hospitals for inpatient services or through voluntary election to remit covered-lives assessments directly to the Department´ pool administrator.

Finally, additional programs are funded through a new public goods pool, The Tobacco Control and Insurance Initiatives Pool. This pool is funded from monies the State receives as a result of settled tobacco related litigation and an increase in the State tobacco tax. Consequently, payors and providers do not participate in the funding of this pool.

For additional information on requirements imposed by HCRA 2000, please refer to the Department´ website at .http://www.health.state.ny.us/regulations/hcra/index.htm. Questions may also be directed to:

Mr. Richard Pellegrini, Director
Bureau of Financial Management and Information Support
Room 984, Corning Tower
Albany, New York 12237-0719
(518) 473-4653

Sincerely,

Mark H. Van Guysling
Assistant Director
Division of Health Care Financing

Enclosures

OVERVIEW OF CHANGES TO PAYOR AND PROVIDER OBLIGATIONS REGARDING THE INDIGENT CARE AND HEALTH CARE INITIATIVES POOL

Under HCRA 2000 there continues to be an assessment obligation on the net patient service revenues of New York State general hospitals, diagnostic and treatment centers providing comprehensive primary care services or ambulatory surgery services, and free-standing laboratories with permits issued pursuant to Title V of Article 5 of the Public Health Law. These assessment obligations continue to be largely reimbursable through payor surcharges. Surcharge/assessment percentage rates do not change under HCRA 2000. The following are major changes to this system of raising funds for public goods pools.
  • Assessments/Surcharges On Freestanding and Referred Ambulatory Clinical Laboratory Services

HCRA 2000 eliminates assessments/surcharges on the net patient service revenues of freestanding clinical laboratories with Article 5 Title V permits and referred (ordered) ambulatory clinical laboratory services provided by New York State general hospitals and diagnostic and treatment centers. This elimination is effective for services provided on or after October 1, 2000. Provisions of the law would make this exemption null and void if the Federal Health Care Financing Administration (HCFA) makes a determination that the State´ system of assessing revenue is impermissible under the Federal Medicaid Voluntary Contribution and Provider Specific Tax Amendments of 1991. Due to this contingency, payors which voluntarily elect to remit surcharge payments directly to the Department´ pool administrator should maintain a database of payments made for or on account of such clinical laboratory services provided on or after October 1, 2000, segregated by service year and payor classification (i.e., 8.18% or 5.98%). This information, upon request, may be subject to disclosure to the Department.

For general hospitals, referred (ordered) ambulatory care laboratory services are defined as clinical laboratory services provided to non-registered patients upon the order and referral of a qualified physician, physician´ assistant, dentist, or podiatrist to test or diagnose a specimen taken from a patient. For purposes of the specific service being ordered for a specific patient, the specified provider ordering the service may not be employed by or under contract to provide direct patient care for the facility.

General Hospital referred (ordered) ambulatory care laboratory services do not include clinical laboratory services provided to a patient admitted to any of such hospital´ inpatient units; an emergency outpatient defined as one who is admitted to the emergency, accident or equivalent service of a hospital (Title 10, Sect. 441.104); nor clinical laboratory services provided to a clinic outpatient defined as one who is registered with a formally organized hospital service unit known as a clinic for purposes of the specific service being ordered (Title 10, Sect. 441.65).

For diagnostic and treatment centers, referred (ordered) ambulatory care laboratory services are defined as clinical laboratory services provided to non-registered patients of the facility (i.e., persons who are not registered with the comprehensive diagnostic and treatment center or ambulatory surgery center as patients for purposes of the specific clinical services being ordered) upon the order and referral of a qualified physician, physician´ assistant, dentist, or podiatrist to test or diagnose a specimen taken from a patient. For purposes of the specific service being ordered for a specific patient, the specified provider ordering the service may not be employed by or under contract to provide direct patient care for the facility.

It should be noted that "pre-admission" clinical laboratory testing ordered due to impending ambulatory surgery or inpatient treatment and performed by the licensed hospital or diagnostic and treatment center providing such treatment, is not considered referred ambulatory laboratory testing because it is a service delivered in direct conjunction with a surchargeable service. Consequently, revenue associated with such laboratory testing is not an excluded revenue and is surchargeable.

  • Non-Assessable Provider Revenue

Existing statutory provisions provide for the exclusion of certain provider revenue from HCRA public goods pool assessments. HCRA 2000 has created some additional exemptions for revenue received by designated providers from the High Need Indigent Care Adjustment Pool established pursuant to Public Health Law Section 2807-w or directly from the Tobacco Control and Insurance Initiatives Pool established pursuant to Public Health Law Section 2807-v.

OVERVIEW OF CHANGES TO PAYOR AND PROVIDER OBLIGATIONS REGARDING THE PROFESSIONAL EDUCATION POOL

A Professional Education Pool (PEP) continues to be funded under HCRA 2000 through assessments and surcharges applicable to "specified third party payors." Affected payors include corporations organized and operating in accordance with Article 43 of the Insurance Law, organizations operating in accordance with the provisions of Article 44 of the Public Health Law, self-insured funds, and commercial insurers licensed to do business in New York State which are authorized to write accident and health insurance and whose policy provides inpatient coverage on an expense incurred basis. All self-insured funds which provide inpatient coverage to plan participants, whether domiciled in New York State or out-of-state, are subject to PEP obligations. Payors not specifically mentioned above have no obligation regarding the Professional Education Pool.

PEP funding is derived from the above referenced third party payors either through regionally varying surcharges added to their payments for inpatient hospital services or, for payors making a voluntary election to pay the Department directly, regionally varying covered lives assessments applicable to beneficiaries or plan participants who reside in New York State. The following are major changes to PEP funding obligations.

  • Reduction of Overall PEP Funding

Aggregate mandated PEP funding for 2000 is $690 million, the same level required in 1999. Thereafter, mandated reductions in aggregate funding take place annually. In 2001, PEP funding is $670 million, a $20 million reduction compared to 1999 and 2000 levels. In 2002, PEP funding is $650 million, a $40 million reduction compared to 1999 and 2000 levels. For the six month period from January 1, 2003 through June 30, 2003, PEP funding is $315 million, a $30 million reduction compared to the first six months of 1999 and 2000 (or a $60 million reduction if annualized).

  • PEP Covered Lives Assessments

Annual covered lives assessments will be calculated to reflect the above cited PEP savings, which will be distributed proportionate to each region´ targeted contribution to the graduate medical education component of the PEP. It should be noted, however, that other adjustments to each region´ covered lives assessments occur in each annual period to reflect corrections to previous year over-collection or under-collection of funds. The effect of these additional adjustments may further decrease a region´ covered lives assessment in any given year or may mask the effect of the above cited HCRA 2000 PEP savings.

  • PEP Surcharges

PEP surcharges applicable to inpatient hospital payments made by affected non-electing payors are fixed at 1999 levels through June 30, 2003. To ensure proper billing, all New York State general hospitals have been formally notified of this requirement.

PROVISIONS RELATED TO ENFORCEMENT OF PAYOR AND PROVIDER OBLIGATIONS

HCRA of 1996 established a detailed process by which the Department must impose interest and penalty payments on providers and payors whose payments to the pool are untimely or deficient. The Department is also authorized to withhold and/or intercept Medicaid and other payments to providers in satisfaction of their public goods pool financing obligations. In the case of payor delinquencies, the Department is authorized to rescind a payor´ election to make payments directly to the pool administrator which would subject them to higher surcharges. The following are new provisions of HCRA 2000 related to enforcement.

  • Civil Penalties Related to Reporting Requirements

The provisions of PHL Section 2807-j(7)(c) provide that if an electing payor or designated provider fails to file reports required pursuant to PHL Section 2807-j(7)(a), which are due on and after January 1, 2000, within 60 days of the date such reports are due and after notification of such reporting delinquency, the Commissioner may assess a civil penalty of up to ten thousand dollars for each such failure. Such civil penalty shall not be imposed if the payor demonstrates good cause for the failure to timely file such reports.

  • Civil Penalties Related to Data Required by The Department When Conducting Audits

Pursuant to PHL Section 2807-j(5)(d), electing payors or designated providers which, in the course of a Department pool payment audit commenced on or after January 1, 2000, fail to produce data or documentation requested in furtherance of such audit within thirty days of such request, may be assessed a civil penalty by the Commissioner of up to ten thousand dollars for each such failure. Such civil penalty shall not be imposed if the payor or provider demonstrates good cause for the failure to timely produce such data or documentation.

OTHER PROVISIONS

  • Annual Reporting

The provisions of PHL Sections 2807-t(5)(a), 2807-j(5-a)(a) and 2807-j(7)(b) provide that the Commissioner may permit payors to submit public goods pool reports and related surcharge and assessment obligations on an annual basis if it is determined, based on a prior years reported data, that such payors aggregate surcharge and covered lives assessments are not expected to exceed $10,000 annually. Due to the lead-time required to implement numerous procedural and systems modifications, the Department does not anticipate implementing this annual reporting provision until 2001. Correspondingly, all payors must continue to submit reports monthly, even if there is no activity to report. Note that there will not be an application process for annual filing. The Department will determine which payors are eligible and send them written notification prior to the effected annual filing period. Keep in mind that one of the eligibility criteria will be that payors may not have any reporting delinquencies. Therefore, potentially eligible payors are encouraged to be current in the filing of their monthly reports and pool payment obligations.

  • The Election Process

Unless appropriately revoked or rescinded, all elections in effect on December 1, 1999, are automatically extended through June 30, 2003. HCRA 2000 did not amend the election application provisions of the law. It did however, amend the revocation provisions of PHL Section 2807-j(5)(a)(ii) to authorize quarterly revocations. Commencing January 1, 2000, a payor may revoke its direct payment election application effective January 1, April 1, July 1, or October 1, provided a completed Attachment #7 (DOH-4100, Request to Rescind Election Status) is received by the Pool Administrator postmarked no later than thirty days prior to the quarterly revocation effective date.

  • Audits

The law provides an allocation to fund HCRA Pool Payment Compliance Audits. All electing payors and affected providers are subject to such audits at the Department´ discretion.

The commencement of audits are expected to begin sometime during 2000.

  • Reporting by Third Party Administrators (TPAs)

HCRA 2000 officially eliminates the requirement that electing TPAs provide the Department with a list of their clients to which the election does not apply.