New York State Health Care Reform Act (HCRA)

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Overview of Payor Obligations: Indigent Care and Health Care Initiatives Pools

The indigent care and health care initiatives pools are funded by all non-Medicare payors through surcharges added to their payments for the services listed below. The surcharge level varies by payor class and, for certain payors, is 24 percentage points lower if they submit these payments directly to the Department's pool administrator on behalf of providers. Attachment #3 is a list of the providers which offer services subject to these surcharges. Attachment #4 details surcharge levels by payor type and whether the payor elects to make direct payments to the Department's pool administrator.

  • Services of general hospitals including: inpatient services, outpatient services (including referred ambulatory services), emergency services, ambulatory surgical services, and other hospital and health-related services. Excluded from surcharge requirements are payments for residential health care facility services, adult day care services, hospice services, home care services, physician practice or faculty practice plan discrete billings for private practicing physician services, and services provided to Medicare beneficiaries.
  • All services of diagnostic and treatment centers providing a comprehensive range of primary health care services and all ambulatory surgical services of diagnostic and treatment centers providing ambulatory surgical services. Excluded from surcharge requirements are physician practice or faculty practice plan discrete billings for private practicing physician services, services provided to subscribers of a health maintenance organization (HMO) operating in accordance with Article 43 of the Insurance Law or Article 44 of the Public Health Law in situations where such HMO operates the clinic providing the service, and services provided to Medicare beneficiaries.
  • Services of free-standing clinical laboratories issued a permit pursuant to Title V of Article 5 of the Public Health Law, excluding services provided to subscribers of an HMO operating in accordance with Article 43 of the Insurance Law or Article 44 of the Public Health Law in situations where such HMO operates the laboratory providing the service and services provided to Medicare beneficiaries.

Laboratory services performed by all these providers are excluded from surcharge obligations when the testing is performed on samples drawn or collected outside New York State.

Surcharges apply to all monies paid, less refunds, for or on account of the above services, for discharges occurring, visits made and services performed on or after January 1, 1997. When a discharge is made on or after January 1, 1997, for an inpatient service that would have been reimbursed by the payor under the expiring NYPHRM system on a per-diem basis, the HCRA surcharges apply only to days occurring on or after January 1, 1997. Also included for surcharge obligations are capitation payments allocable to the above services for contracted service obligations for periods on or after January 1, 1997.

Payors eligible for and electing to make surcharge payments directly to the Department's pool administrator must agree to:

  • remit all applicable pool surcharges for all affected services on a monthly basis on or before the 30th day following the end of a calendar month for which monies have been paid to providers;

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  • meet their funding obligations for the professional education pool, if applicable, through direct payment of covered lives assessments to the Department's pool administrator by the 30th day following each affected calendar month, rather than through per-unit of payment surcharges submitted to providers (as discussed in the following section). Pursuant to section 2807-t(9) of the Public Health Law, specified third party payors wishing to make direct payment for any of their public goods pool
  • provide the Department with monthly certified reports of patient service expenditures by provider classifications necessary for the Department to meet reporting requirements of the Federal Health Care Financing Administration (HCFA) regarding health care assessments;
  • provide the Department with certification of data and access to allowance expenditure data upon request for audit verification purposes; and,
  • the jurisdiction of the State to maintain an action in the courts of the State of New York to enforce any provision of section -j of the Public Health Law related to payment of the surcharges.

Please note that insurers not licensed or organized under New York State statute are eligible to elect to make surcharge payments directly to the Department's pool administrator.

Overview of Payor Obligations: Professional Education Pool

A professional education pool is funded under HCRA by "specified third party payors" which shall 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 administrators acting on behalf of self-insured funds, and commercial insurers licensed to do business in New York State and authorized to write accident and health insurance and whose policy provides inpatient coverage on an expense incurred basis. Please note that all self-insured funds and third party administrators of such funds, whether domiciled in New York State or out-of-state, are subject to the surcharge required by section 2807-s of the Public Health Law. All other payors not licensed or organized under New York state statutes have no obligation regarding this surcharge.

Among other purposes, the professional education pool guarantees a level of hospital GME funding to supplement any amounts that may be provided by these specified third party payors through their negotiated reimbursement arrangements. Professional education pool funding is provided by these specified third party payors through either:

  • mandatory surcharges added to all payments for general hospital inpatient services, other than those made on behalf of Medicaid HMO enrollees. The surcharge percentage will vary depending upon the regional location of the hospital receiving the payment. (See Attachment #3 for the list of general hospital inpatient providers by region and Attachment #5 to ascertain surcharge levels by region); or,
  • a voluntary election to pay assessments on covered lives directly to the Department's pool administrator. The assessment amount will vary regionally by the residence of the insured.

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  • (See Attachment #5 to ascertain individual and family unit covered lives annual assessment amounts by region for calendar year 1997). Specified third party payors electing the covered lives approach to fund the professional education pool must agree to:
    • remit to the Department's pool administrator within 30 days after the end of each month one-twelfth of both the individual and family unit annual assessment amounts for each of the individuals and family units residing in this State which were included on the specified third party payor's membership rolls for all or a portion of the prior month and for which the specified third party payor covered general hospital inpatient care;
    • make their required surcharge payments for indigent care and health care initiatives pools directly to the Department's pool administrator rather than as payments submitted to providers (as explained in the preceding section). Pursuant to section 2807-t(9) of the Public Health Law, specified third party payors wishing to make direct payment for any of their public goods pool obligations must do so for all such obligations;
    • report and certify to the Department the number of individual and family units for which they provided coverage of inpatient hospital care, by region of the State, for any representative month during the calendar year preceding the assessment period. This information must accompany the specified third party payor's election;
    • provide the Department with certification of data and access to individual and family unit data, upon request, for audit verification purposes;
    • agree to the jurisdiction of the State to maintain an action in the courts of the State of New York to enforce any provision of section 2807-t of the Public Health Law related to payment of the assessments.

It is important for both payors and hospitals to note that these surcharges and assessments will be utilized to pay for a significant portion of the amount of GME currently being paid directly to hospitals by private payors through rates calculated under the NYPHRM reimbursement system. The difference between the GME amount included in the NYPHRM case-based or per diem rates and the amount of GME which will be received by hospitals from the professional education pool commencing January 1, 1997, can serve as a basis for the amount of GME which may be negotiated between hospitals and payors. Since insurers will be paying directly into the pool for a significant portion of GME rather than paying it directly to the hospitals, the Department expects that rates that are effective after January 1, 1997 will not contain the amount distributed from the GME pool, thereby avoiding duplicate payment where applicable. The Department of Health and State Insurance Department see no basis for premiums to increase in the aggregate as a result of this obligation as the amount of GME costs included in the NYPHRM case-based or per diem rates has been reduced by $465 million under HCRA.

In a letter to all hospitals and insurers dated October 21, 1996, the Department provided preliminary calculations of the projected hospital specific graduate medical education (GME) distributions from the newly created professional education pool, pursuant to Chapter 630 of the Laws of 1996, the New York Health Care Reform Act (HCRA). In that letter the Department also provided an estimate of the current hospital specific case mix neutral 1996 payments for


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GME by private payors under the case-based and per diem payment provisions of New York's Prospective Hospital Reimbursement Methodology (NYPHRM). It has been determined that the case-based payment amounts were incorrectly provided in the attachments to the October 21, 1996 letter for University Hospital at Stony Brook, Jamaica Hospital, and Long Island Jewish Medical Center. Attachment #10 provides the corrected schedule.

Covered Lives

A specified third party payor's calculation of the number of individual and family unit covered lives for a period should reflect the following:

  • "Individuals", i.e. countable persons, are New York State residents for whom the specified third party payor has agreed to provide reimbursement for inpatient hospital services on an expense incurred basis. Countable persons do not include persons: eligible for payments as a beneficiary under Title XVIII of the Federal Social Security Act (Medicare) or other governmental agencies, including Medicaid beneficiaries and Medicaid managed care enrollees; for whom the specified third party payor has agreed to provide coverage for hospital confinement on other than an expense incurred basis; for whom the specified third party payor has agreed to provide reimbursement for inpatient hospital services pursuant solely to the workers' compensation law, the volunteer firefighters' benefit law, the volunteer ambulance workers' benefit law or the comprehensive motor vehicle insurance reparations act; or included as part of a "family unit" defined below.
  • "Family units" reflect two or more countable persons, one for whom the specified third party payor has agreed to provide reimbursement for inpatient hospital services together with one or more additional persons for whom the specified third party payor has agreed to provide reimbursement for inpatient hospital services contingent upon such person's relationship to said person as a spouse, child, step-child, adopted child, family member, or dependent (as defined by the specified third-party payor). Other similar contingent relationships may exist as defined by the specified third party payor. This definition does not include: any family unit where the specified third party payor has agreed to provide coverage for hospital confinement on other than an expense incurred basis; or reimbursement for inpatient hospital services pursuant to the workers' compensation law, the volunteer firefighters' benefit law, the volunteer ambulance workers' benefit laws or the comprehensive motor vehicle insurance reparations act.
  • A family unit of two persons eligible for Medicare shall not be considered a "family unit" or "individual" for purposes of this assessment.
  • A family unit of two persons, one of whom is eligible for Medicare, shall be deemed an "individual" for purposes of this assessment.
  • Situations involving family units of three or more persons where one or more are eligible for Medicare are addressed in Attachment #8.

Of note, HCRA includes a provision which permits a specified third party payor's covered lives assessment liability to be apportioned between payors in cases where two or more specified third party payors cover a single contract holder for separate components of the contract holder's inpatient hospital coverage. For example, one payor may provide coverage for mental health inpatient hospitalization while another provides coverage for medical/surgical inpatient


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hospitalization. Another applicable circumstance may be when a self-insured fund provides coverage for any inpatient hospital expenses which exceed the basic benefit package it has purchased from another payor on behalf of a beneficiary.

To take advantage of the apportionment provision, the Department requires affected specified third party payors to include a copy of their mutual apportionment agreement with the election form. Apportionment can occur only where both insurers elect to pay the Department's pool administrator directly and where it has been demonstrated through both specified third party payors' elections that the apportionment of covered lives costs equals 100 percent of the individual or family unit assessment.

The number of covered lives which will likely be apportioned during the HCRA period must be reported by region of the State on the election form based on the payors' membership rolls for a representative month in the calendar year preceding the assessment period. An apportionment must be submitted by December 2, 1996 or will not be effective for the period commencing January 1, 1997. In this case, each payor will be required to pay 100 percent of the individual or family unit assessment. Apportionment agreements may be submitted subsequent to December 2, 1996 and will be effective under the rules established for mid-year elections, as explained below.

Note that as explained previously, covered lives data must be reported by region, comprised of counties as shown on Attachment #5, and is based on the county of residence of the subscriber or plan participant. We understand that in many instances, although subscriber or plan participant files contain zip code data, county of residence is not a data element normally included. In an effort to provide some general guidance to payors, for purposes only of completing the election form information, Attachment #9 relates zip code information to region. The first part of such listing details zip codes that do not cross regions along with the corresponding region for the zip code. The second part of such listing shows zip codes that do cross regions, along with the corresponding regions.

Payors are reminded that it is their responsibility to report information based on the county of residence of their subscribers or plan participants. Zip code/county references may not be an accurate determinant of county of residence because it is based on the county location of the postal station servicing a zip code, rather than the county of residence of a subscriber or plan participant residing within the zip code served by such postal station.

Payors should take immediate steps to gather county of residence information for their subscribers or plan participants so that these data sets are in place in time to accomplish the first reporting and paying of covered lives assessments which must be based on county of residence.

Third Party Administrators

Third party administrators (TPAs) acting in an administrative services capacity for claims processing and payment on behalf of a payor organization which elects to make direct payments of public goods funding to the Department's pool administrator must submit a full set of election forms completed by the represented payor organization. In addition, to the extent the TPA represents more than one organization, the TPA must provide the Department notification of whether all its organizations have elected to pay the pool directly. If only some have elected, the TPA must provide identifying information on those payors that will be making surcharge payments to providers, including their names and addresses. TPAs must also inform the


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Department as to how they will meet the State Insurance Department's guidelines to separately identify these non-direct paying organizations when patients present themselves at the point of service or when laboratory samples are submitted for testing. Payors utilizing TPAs for claims processing and payment which elect to make direct pool payments are instructed to ensure their TPAs submit the required election forms on their behalf postmarked no later than December 2, 1996. Payors utilizing TPAs are requested not to submit election forms to the Department separate from those provided on their behalf by their TPAs.

Payor Election

A payor's election to make direct payments to the Department's pool administrator for a calendar year must be received postmarked no later than December 1 of the preceding year. Payors that have not elected by December 2, 1996 to make direct payments to the Department's pool administrator effective January 1, 1997 may elect to commence direct payments effective April 1, 1997 , July 1, 1997, or October 1, 1997 provided an election form is submitted to the Department postmarked no later than thirty days prior to these dates. Payors that have not elected before December 1, 1997 or December 1, 1998, to pay the Department's pool administrator directly must forgo the opportunity for assessment years 1998 and 1999, respectively.

Once an election is made, it remains in effect until June 30, 2003 unless revoked or rescinded. A payor may revoke its election for an upcoming calendar year if notification is provided by the payor to the Department's pool administrator in writing postmarked no later than December 1 of the preceding year. A payor's election may also be rescinded by the Department based on repeated late payments, failure to remit correct amounts or failure to provide adequate verification of the accuracy of payments.

A payor that becomes newly licensed pursuant to the Insurance Law or certified pursuant to Article 44 of the Public Health Law or a self-funded plan that had not previously provided third-party coverage, may elect direct payments to begin April 1st, July 1st, or October 1st of any year provided the completed election form is received by the Department postmarked no later than thirty days prior to these dates.

Please note, payor election covers all product lines offered by an incorporated entity.

Overview of Provider Obligations Regarding Indigent Care and Health Care Initiatives Pool Collections

General hospitals, diagnostic and treatment centers and laboratories listed on Attachment #3 are responsible for remitting to the Department's pool administrator on or before the 30th day of each month following the calendar month to which a surchargeable payment applies, an amount calculated by applying payor specific surcharge percentages to revenue received from such payors for patient care services, including revenue received from health maintenance organizations and other managed care providers on behalf of Medicaid patients. Excluded from the calculation is revenue: received from payors electing to make public goods payments directly to the pool administrator; received on behalf of a Medicare patient; or attributable to Medicaid


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fee-for-service care, including copayments. For Medicaid fee-for-service revenue, the provider must remit the obligated amount to the Department's pool administrator within five days of receipt unless the provider has authorized the State in writing (See Attachment #6) to withhold such Medicaid surcharge payments and submit them directly to the pool. Also excluded from the calculations are:

  • for general hospitals, revenue received from residential health care services; adult day care services; hospice services; home care services; physician practice or faculty practice plan discrete billings for private practicing physician services; surcharges; bad debt and charity care and indigent care rate adjustments and pool distributions; health care services pool distributions; health care initiatives pool distributions; professional education pool distributions; public hospitals pursuant to an affiliation agreement contract for the delivery of health care services to such public hospital; and governmental deficit financing.
  • for diagnostic and treatment centers, revenue received from physician practice or faculty practice plan discrete billings for private practicing physician services; surcharges; bad debt and charity care rate adjustments; health care services pool distributions; health care initiatives pool distributions; professional education pool distributions; governmental deficit financing; and services provided to subscribers of a health maintenance organization operating in accordance with Article 43 of the Insurance Law or Article 44 of the Public Health Law in situations where such HMO operates the clinic providing the service.
  • for laboratories, revenue received from surcharges; services provided to subscribers of a health maintenance organization (HMO) operating in accordance with Article 43 of the Insurance Law or Article 44 of the Public Health Law in situations where such HMO operates the laboratory providing the service; and governmental deficit financing.
  • for all these providers, revenue received from laboratory testing on samples drawn or collected outside New York State; payments received from other providers subjected to the surcharge; and health care initiatives pool distributions to laboratories.

This calculated amount applies to all monies received from a payor, less refunds, for or on account of discharges occurring, visits made and services performed on or after January 1, 1997, as well as revenue received from capitation payments allocable to the above services for contracted service obligations for periods on or after January 1, 1997. Of note, when a discharge is made on or after January 1, 1997 for an inpatient service that would have been reimbursed by the payor under the expiring NYPHRM system on a per-diem basis, the HCRA surcharges apply only to days occurring on or after January 1, 1997. (For further details please refer to Attachment #8).

Pursuant to section 2807-j(5-a)(a), payments due by providers of services on account of payors shall be reduced by two percentage points in instances where the payor is responsible for making an additional 24 percent surcharge payment to the provider. In this case, the provider submits 22 percent of the 24 percent and the remainder is retained by the provider to compensate for the administrative costs involved in public goods pool collection and remittance.


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Overview of Provider Obligations Regarding Professional Education Pool Collections

General hospital inpatient services providers listed on Attachment #3 are responsible for remitting to the Department's pool administrator on or before the end of each month following the calendar month to which an inpatient payment is received, an amount calculated by applying its region's professional education pool surcharge percentage against revenue received from a specified third party payor for inpatient care services. The list of affected payors is delineated in the previous section titled "Overview of Payor Obligations: Professional Education Pool". Excluded from this calculation is revenue: received from a specified third party payor which elected to make public goods payments directly to the pool administrator; received on behalf of a Medicaid HMO enrollee; received from this and other public goods surcharges; or attributable to physician practice or faculty practice plan discrete billings for private practicing physician services.

This requirement applies to all monies received from specified third party payors, less refunds, for or on account of discharges occurring, visits made and services performed on or after January 1, 1997, as well as revenue received from capitation payments allocable to the above services for contracted service obligations for periods on or after January 1, 1997. When a discharge is made on or after January 1, 1997 for an inpatient service that would have been reimbursed by the payor under the expiring NYPHRM system on a per-diem basis, the HCRA surcharges apply only to days occurring on or after January 1, 1997. (For further details please refer to Attachment #8).

Enforcement of Payor and Provider Obligations

HCRA establishes a detailed process by which the Department may impose interest and/or penalty payments on providers or payors whose payments to the pool are untimely or deficient. Further, the Department is authorized to withhold and/or intercept Medicaid and other payments to providers in satisfaction of their public goods financing obligations. Additionally, in the case of payor delinquencies, the Department is further authorized to rescind a payor's election to make payments directly to the pool administrator.