CCLME.ORG - DIVISION 1. DEPARTMENT OF INDUSTRIAL RELATIONS CHAPTERS 1 through 6

(continued)
(e) Any document incorporated by reference in Sections 9789.20 through 9789.24 is available from the Division of Workers' Compensation Internet site (http:// www.dir.ca.gov/DWC/dwc_home_page.htm) or upon request to the Administrative Director at:
Division of Workers' Compensation (Attention: OMFS) P.O. Box 420603 San Francisco, CA 94142

Note: Authority cited: Sections 133, 4603.5, 5307.1 and 5307.3, Labor Code. Reference: Sections 4600, 4603.2, 5307.1, and 5318 Labor Code.

s 9789.21. Definitions for Inpatient Hospital Fee Schedule.
(a) "Average length of stay" means the geometric mean length of stay for a diagnosis-related group assigned by CMS.
(b) "Capital outlier factor" means fixed loss cost outlier threshold ycapital wage index ylarge urban add-on y(capital cost-to-charge ratio/total cost-to-charge ratio).
(1) The capital wage index, also referred to as the capital geographic factor (GAF), is specified in the Federal Register of October 6, 2003 (correcting the rule published on August 1, 2003) at Vol. 68, page 57736, Table 4A for urban areas, Table 4B on page 57743 for rural areas, and Table 4C on page 57744 for reclassified hospitals, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(2) The "large urban add-on" is indicated by the post-reclassification urban/rural location published in the Payment Impact File at positions 229-235. As stated in Title 42, Code of Federal Regulations, Section 412.316(b), as it is in effect on November 11, 2003, the "large urban add-on" is an additional 3% of what would otherwise be payable to the health facility.
(3) "Fixed loss cost outlier threshold" means the Medicare fixed loss cost outlier threshold for inpatient admissions. The fixed loss cost outlier threshold for FY 2004 is $31,000 as published in the Federal Register of August 1, 2003 at volume 68, number 148 at page 45477.
(c) "CMS" means the Centers for Medicare & Medicaid Services of the United States Department of Health and Human Services.
(d) "Composite factor" means the factor calculated by the administrative director for a health facility by adding the prospective operating costs and the prospective capital costs for the health facility, excluding the DRG weight and any applicable outlier and new technology payment, as determined by the federal Centers for Medicare & Medicaid Services (CMS) for the purpose of determining payment under Medicare.
(1) Prospective capital costs are determined by the following formula:
(A) Capital standard federal payment rate ycapital geographic adjustment factor ylarge urban add-on y[1 + capital disproportionate share adjustment factor + capital indirect medical education adjustment factor]
(B) The "capital standard federal payment rate" is $414.18 as published by CMS in the Federal Register of October 6, 2003 (correcting the publication of August 1, 2003), at Vol. 68, page 57735, Table 1D, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(C) The "capital geographic adjustment factor" is published in the Payment Impact File at positions 243-252.

(D) The "large urban add-on" is indicated by the post-reclassification urban/rural location published in the Payment Impact File at positions 229-235. As stated in Title 42, Code of Federal Regulations, Section 412.316(b), effective November 11, 2003, the "large urban add-on" is an additional 3% of what would otherwise be payable to the health facility.
(E) The "capital disproportionate share adjustment factor" is published in the Payment Impact File at positions 117-126.
(F) The "capital indirect medical education adjustment factor" (capital IME adjustment) is published in Payment Impact File at positions 202-211.
(2) Prospective operating costs are determined by the following formula:
(A) [(Labor-related national standardized amount yoperating wage index) + nonlabor-related national standardized amount] y[1 + operating disproportionate share adjustment factor + operating indirect medical education adjustment]
(B) The "labor-related national standardized amount" is $3,136.39, as published by the federal Centers for Medicare & Medicaid Services in the Federal Register of October 6, 2003 (correcting the publication of August 1, 2003), at Vol. 68 page 57735, Table 1A, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director and as modified by Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173, s401, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(C) The "operating wage index" is published in the Payment Impact File at positions 253-262.
(D) The "nonlabor-related national standardized amount" is $1,274.85, as published by CMS in the Federal Register of October 6, 2003 (correcting the publication of August 1, 2003), at Vol. 68, page 57735, Table 1A, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director and as modified by Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173, s401, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(E) The "operating disproportionate share adjustment factor" is published in the Payment Impact File at positions 127-136 and as modified by Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108- 173, s402, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(F) The "operating indirect medical education adjustment" is published in the Payment Impact File at positions 212-221 and as modified by Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108- 173, s502, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(G) For sole community hospitals, the operating component of the composite rate shall be the higher of the prospective operating costs determined using the formula in (2) or the hospital-specific rate published in the Payment Impact File at positions 137-145.
(3) A table of composite factors for each health facility in California is contained in Section 9789.23. The sole community hospital composite factors that incorporate the operating component specified in subdivision (d)(2)(G) are listed in italics in the column headed "Composite" set forth in Section 9789.23.
(e) "Costs" means the total billed charges for an admission, excluding non-medical charges such as television and telephone charges, charges for Durable Medical Equipment for in home use, charges for implantable medical devices, hardware, and/or instrumentation reimbursed under subdivision (f) of Section 9789.22, multiplied by the hospital's total cost-to-charge ratio.
(f) "Cost-to-charge ratio" means the sum of the hospital specific operating cost-to-charge ratio and the hospital specific capital cost-to-charge ratio. The operating cost-to-charge ratio for each hospital is published in the Payment Impact File at positions 161-168. The capital cost-to-charge ratio for each hospital is published in the Payment Impact File at positions 99-106.
(g) "Cost outlier case" means a hospitalization for which the hospital's costs, as defined in subdivision (e) above, exceeds the cost outlier threshold.
(h) "Cost outlier threshold" means the sum of the Inpatient Hospital Fee Schedule payment amount, the payment for new medical services and technologies reimbursed under subdivision (g) of Section 9789.22, and the hospital specific outlier factor.
(i) "Diagnosis Related Group (DRG)" means the inpatient classification scheme used by CMS for hospital inpatient reimbursement. The DRG system classifies patients based on principal diagnosis, surgical procedure, age, presence of comorbidities and complications and other pertinent data.
(j) "DRG weight" means the weighting factor for a diagnosis-related group assigned by CMS for the purpose of determining payment under Medicare. Section 9789.24 lists the DRG weights and geometric mean lengths of stay as assigned by CMS.
(k) "FY" means the CMS fiscal year October 1 through September 30.
(l) "Health facility" means any facility as defined in Section 1250 of the Health and Safety Code.
(m) "Inpatient" means a person who has been admitted to a health facility for the purpose of receiving inpatient services. A person is considered an inpatient when he or she is formally admitted as an inpatient with the expectation that he or she will remain at least overnight and occupy a bed, even if it later develops that such person can be discharged or is transferred to another facility and does not actually remain overnight.
(n) "Inpatient Hospital Fee Schedule maximum payment amount" is that amount determined by multiplying the DRG weight yhospital composite factor y1.20.
(o) "Labor-related portion" is that portion of operating costs attributable to labor costs, as specified in the Federal Register of October 6, 2003 (correcting the publication of August 1, 2003), at Vol. 68, page 57735, Table 1A, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(p) "Medical services" means those goods and services provided pursuant to Article 2 (commencing with Section 4600) of Chapter 2 of Part 2 of Division 4 of the Labor Code.
(q) "Operating outlier factor" means ((fixed loss cost outlier threshold y ((labor-related portion ywage index) + nonlabor-related portion)) y(operating cost-to-charge ratio/ total cost-to-charge ratio)).
(1) The wage index, also referred to as operating wage index in the Payment Impact File at positions 253-262, is specified as the wage index at Federal Register of October 6, 2003 (correcting rule published on August 1, 2003) at Vol. 68, page 57736, Table 4A for urban areas; Table 4B on page 57743 for rural areas, and Table 4C on page 57744 for reclassified hospitals, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(2) The nonlabor-related portion is that portion of operating costs attributable to nonlabor costs as defined in the Federal Register of October 6, 2003 (correcting the publication of August 1, 2003), at Vol. 68, page 57735, Table 1A, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(r) "Outlier factor" means the sum of the capital outlier factor and the operating outlier factor. A table of hospital specific outlier factors for each health facility in California is contained in Section 9789.23.
(s) "Payment Impact File" means the FY 2004 Prospective Payment System Payment Impact File (October 2003 Update) (IMPFILE04) published by the federal Centers for Medicare & Medicaid Services (CMS), which document is hereby incorporated by reference. The description of the file is found at http:// cms.hhs.gov/providers/hipps/impact_rcd_lay.pdf . The file is accessible through http://cms.hhs.gov/providers/hipps/ippspufs.asp. A paper copy of the Payment Impact File, with explanatory material, is available from the Administrative Director upon request. An electronic copy is available from the Administrative Director at http://www.dir.ca.gov/DWC/dwc_home_page.htm .
(t) "Professional Component" means the charges associated with a professional service provided to a patient by a hospital based physician. This component is billed separately from the inpatient charges.

Note: Authority cited: Sections 133, 4603.5, 5307.1 and 5307.3, Labor Code. Reference: Sections 4600, 4603.2, 5307.1 and 5318, Labor Code.

s 9789.22. Payment of Inpatient Hospital Services.
(a) Maximum payment for inpatient medical services shall be determined by multiplying 1.20 by the product of the health facility's composite factor and the applicable DRG weight. The fee determined under this subdivision shall be a global fee, constituting the maximum reimbursement to a health facility for inpatient medical services not exempted under this section. However, preadmission services rendered by a health facility more than 24 hours before admission are separately reimbursable.
(b) The maximum payment for inpatient medical services includes reimbursement for all of the inpatient operating costs specified in Title 42, Code of Federal Regulations, Section 412.2(c), effective date October 1, 2002 and revised as of October 1, 2003, which is incorporated by reference and will be made available upon request to the Administrative Director, and the inpatient capital-related costs specified in Title 42, Code of Federal Regulations, Section 412.2(d), effective date October 1, 2002 and revised as of October 1, 2003, which is incorporated by reference and will be made available upon request to the Administrative Director.
(c) The maximum payment shall include the cost items specified in Title 42, Code of Federal Regulations, Section 412.2(e)(1), (2), (3), and (5), revised as of October 1, 2003, which in incorporated by reference and will be made available upon request to the Administrative Director. The maximum allowable fees for cost item set forth at 42 C.F.R. s412.2(e)(4), "the acquisition costs of hearts, kidneys, livers, lungs, pancreas, and intestines (or multivisceral organ) incurred by approved transplantation centers," shall be based on the documented paid cost of procuring the organ or tissue.
(d) Health facilities billing for fees under this section shall present with their bill the name and address of the facility, the facility's Medicare ID number, and the applicable DRG codes. The billings shall include the principal and secondary diagnoses and surgical procedures. They shall also set forth the patient characteristics, including the DRG weight, the charges, the costs for new technology, and the length of stay.
(e) Cost Outlier cases. Inpatient services for cost outlier cases, shall be reimbursed as follows:
(1) Step 1: Determine the Inpatient Hospital Fee Schedule maximum payment amount (DRG weight y1.2 yhospital specific composite factor).
(2) Step 2: Determine costs. Costs = (total billed charges ytotal cost-to-charge ratio).
(3) Step 3: Determine outlier threshold. Outlier threshold = (Inpatient Hospital Fee Schedule payment amount + hospital specific outlier factor + any new technology pass-through payment determined under Section 9789.22(g)).
(4) If costs exceed the outlier threshold, the case is a cost outlier case and the admission is reimbursed at the Inpatient Hospital Fee Schedule payment amount + new technology pass-through payment determined under Section 9789.22(g) + (0.8 y(costs - cost outlier threshold)).
(5) For purposes of determining whether a case qualifies as a cost outlier case under this subdivision, charges for implantable hardware and/or instrumentation reimbursed under subsection (f) is excluded from the calculation of costs. If an admission for DRGs 496, 497, 498, 519, 520, 531 and 532 qualifies as a cost outlier case, any implantable hardware and/or instrumentation shall be separately reimbursed under subsection (f).
(f) Implantable medical devices, hardware, and instrumentation for DRGs 496, 497, 498, 519, 520, 531 and 532 shall be separately reimbursed at the provider's documented paid cost, plus an additional 10% of the provider's documented paid cost, net of discounts and rebates, not to exceed a maximum of $250.00, plus any sales tax and/or shipping and handling charges actually paid. For purposes of this subdivision, a device is an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar related article, including a component part, or accessory which is: (1) recognized in the official National Formulary, or the United States Pharmacopoeia, or any supplement to them; (2) intended for use in the cure, mitigation, treatment, or prevention of disease; or (3) intended to affect the structure or any function of the body, and which does not achieve any of its primary intended purposes through chemical action within or on the body and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes.
(g) "New technology pass-through": Additional payments will be allowed for new medical services and technologies as provided by CMS and set forth in Title 42, Code of Federal Regulations Sections 412.87 (effective September 7, 2001 and revised as of October 1, 2003), Section 412.88 (effective September 7, 2001 and amended August 1, 2002 and August 1, 2003 and revised as of October 1, 2003), which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(h) Sole Community Hospitals: If a hospital meets the criteria for sole community hospitals, under Title 42, Code of Federal Regulations s412.92(a), effective October 1, 2002 and revised as of October 1, 2003, and has been classified by CMS as a sole community hospital, its payment rates are determined under Title 42, Code of Federal Regulations s 412.92(d), effective October 1, 2002 and as revised as of October 1, 2003, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(i) Transfers
(1) Inpatient services provided by a health facility transferring an inpatient to another hospital are exempt from the maximum reimbursement formula set forth in subdivision (a). Maximum reimbursement for inpatient medical services of a health facility transferring an inpatient to another hospital shall be a per diem rate for each day of the patient's stay in that hospital, not to exceed the amount that would have been paid under Title 8, California Code of Regulations s9789.22(a). However, the first day of the stay in the transferring hospital shall be reimbursed at twice the per diem amount. The per diem rate is determined by dividing the maximum reimbursement as determined under Title 8, California Code of Regulations s9789.22(a) by the average length of stay for that specific DRG. However, if an admission to a health facility transferring a patient is exempt from the maximum reimbursement formula set forth in subdivision (a) because it satisfies one or more of the requirements of Title 8, California Code of Regulations s9789.22(j), this subdivision shall not apply. Inpatient services provided by the hospital receiving the patient shall be reimbursed under the provisions of Title 8, California Code of Regulations s9789.22(a).
(2) Post-acute care transfers exempt from the maximum reimbursement set forth in subdivision (a).
(A) When an acute care patient is discharged to a post-acute care provider which is a rehabilitation hospital or distinct part rehabilitation unit of an acute care hospital or a long-term hospital, and the patient's discharge is assigned to one of the following qualifying DRGs: 12, 14, 24, 25, 89, 90, 113, 121, 122, 130, 131, 236, 239, 243, 263, 264, 277, 278, 296, 297, 320, 321, 429, 462, 483, or 468; payment to the transferring hospital shall be made as set forth in subdivision (i)(1) of this section.
(B) When an acute care patient is discharged to a post-acute care provider and the patient's discharge is assigned to one of the following qualifying DRGs 209, 210 or 211, the payment to the transferring hospital is 50% of the amount paid under subdivision (a) of this section, plus 50% of the per diem, set forth in subdivision (i)(1) for each day, up to the full DRG amount.
(j) The following are exempt from the maximum reimbursement formula set forth in subdivision (a) and are paid on a reasonable cost basis.
(1) Critical access hospitals;

(2) Children's hospitals that are engaged in furnishing services to inpatients who are predominantly individuals under the age of 18.
(3) Cancer hospitals as defined by Title 42, Code of Federal Regulations, Section 412.23(f), effective date October 1, 2002 and as revised as of October 1, 2003, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(4) Veterans Administration hospitals.
(5) Long term care hospitals as defined by Title 42, Code of Federal Regulations, Section 412.23(e), effective date October 1, 2002 and as revised as of October 1, 2003, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(6) Rehabilitation hospital or distinct part rehabilitation units of an acute care hospital or a psychiatric hospital or distinct part psychiatric unit of an acute care hospital.
(7) The cost of durable medical equipment provided for use at home is exempt from this Inpatient Hospital Fee Schedule. The cost of durable medical equipment shall be paid pursuant to Section 9789.60.
(8) Out of state hospitals.
(k) A health facility that is not listed on the Medicare Cost Report should notify the Administrative Director and provide in writing the following information: OSHPD Licensure number, Medicare provider number, physical location, number of beds, and, if applicable, avearage FTE residents in approved training programs. If a hospital has been in operation for more than one year, information should also be provided on the precentage of inpatient days attributable to Medicaid patients.
(l) Any health care facility that believes its composite factor or hospital specific outlier factor was erroneously determined because of an error in tabulating data may request the Administrative Director for a re-determination of its composite factor or hospital specific outlier factor. Such requests shall be in writing, shall state the alleged error, and shall be supported by written documentation. Within 30 days after receiving a complete written request, the Administrative Director shall make a redetermination of the composite factor or hospital specific outlier factor or reaffirm the published factor.

Note: Authority cited: Sections 133, 4603.5, 5307.1, 5307.3 and 5318, Labor Code. Reference: Sections 4600, 4603.2, 5307.1 and 5318, Labor Code.

s 9789.23. Hospital Cost to Charge Rations, Hospital Specific Outliers, and Hospital Composite Factors.

Full Payment Impact File (impfile04zip) at http:// www.cms.gov/providers/hipps/ippsputs.asp (Section 9789.23 reflects teh modifications of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173, ss 402, 402 and 502, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
Record Layout at http://cms.hhs.gov/providers/hipps/impact_rcd_lay.pdf.
Composite Rate (in italics) reflects Sole Community Hospital adjustment

Note: Authority cited: Sections 133, 4603.5, 5307.1, 5307.3 and 5318, Labor Code. Reference: Sections 4600, 4603.2, 5307.1 and 5318, Labor Code.

s 9789.24. Diagnostic Related Groups, Relative Weights, Geometric Mean Length of Stay.

s 9789.30. Hospital Outpatient Departments and Ambulatory Surgical Centers - Definitions.
(a) "Adjusted Conversion Factor" means the CMS' conversion factor for 2003 of $52.151 ythe market basket inflation factor of 1.034 y(0.4 + (0.6 ywage index)).
(b) "Ambulatory Payment Classifications (APC)" means the Centers for Medicare & Medicaid Services' (CMS) list of ambulatory payment classifications of hospital outpatient services.
(c) "Ambulatory Surgical Center (ASC)" means any surgical clinic as defined in the California Health and Safety Code Section 1204, subdivision (b)(1), any ambulatory surgical center that is certified to participate in the Medicare program under Title XVIII (42 U.S.C. SEC. 1395 et seq.) of the federal Social Security Act, or any surgical clinic accredited by an accrediting agency as approved by the Licensing Division of the Medical Board of California pursuant to Health and Safety Code Sections 1248.15 and 1248.4.
(d) "Annual Utilization Report of Specialty Clinics" means the Annual Utilization Report of Clinics that is filed by February 15 of each year with the Office of Statewide Health Planning and Development by the ASCs as required by Section 127285 and Section 1216 of the Health and Safety Code.
(e) "APC Payment Rate" means CMS' hospital outpatient prospective payment system rate for Calendar Year 2004 as set forth in the Federal Register on November 7, 2003, Volume 68, No. 216, Addendum B, pages 63488 through 63655 conformed to comply with CMS-1471-CN, Federal Register, Volume 68, No. 250 (December 31, 2003), pages 75442 through 75445, and CMS-1371-IFC, Federal Register, Volume 69, No. 3 (January 6, 2004), pages 820 through 844.
(f) "APC Relative Weight" means CMS' APC relative weight as set forth in CMS' hospital outpatient prospective payment system for the Calendar Year 2004 as set forth in the Federal Register on November 7, 2003, Volume 68, No. 216, Addendum B, pages 63488 through 63655 conformed to comply with CMS-1471-CN, Federal Register, Volume 68, No. 250 (December 31, 2003), pages 75442 through 75445, and CMS-1371-IFC, Federal Register, Volume 69, No. 3 (January 6, 2004), pages 820 through 844.
(g) "CMS" means the Centers for Medicare & Medicaid Services of the United States Department of Health and Human Services.
(h) "Cost to Charge Ratio for ASC" means the ratio of the facility's total operating costs to total gross charges during the preceding calendar year.
(i) "Cost to Charge Ratio for Hospital Outpatient Department" means the hospital cost-to-charge used by the Medicare fiscal intermediary to determine high cost outlier payments.
(j) "HCPCS" means CMS' Healthcare Common Procedure Coding System, which describes products, supplies, procedures and health professional services and includes, the American Medical Associations (AMA's) Physician "Current Procedural Terminology", Fourth Edition (CPT-4) codes, alphanumeric codes, and related modifiers.
(k) "HCPCS Level I Codes" are the AMA's CPT-4 codes and modifiers for professional services and procedures.
(l) "HCPCS Level II Codes" are national alphanumeric codes and modifiers maintained by CMS for health care products and supplies, as well as some codes for professional services not included in the AMA's CPT-4.
(m) "Health facility" means any facility as defined in Section 1250 of the Health and Safety Code.
(n) "Hospital Outpatient Department" means any hospital outpatient department of a health facility as defined in the California Health and Safety Code Section 1250 and any hospital outpatient department that is certified to participate in the Medicare program under Title XVIII (42 U.S.C. SEC. 1395 et seq.) of the federal Social Security Act.
(o) "Hospital Outpatient Department Services" means services furnished by any health facility as defined in the California Health and Safety Code Section 1250 and any hospital that is certified to participate in the Medicare program under Title XVIII (42 U.S.C. SEC. 1395 et seq.) of the federal Social Security Act to a patient who has not been admitted as an inpatient but who is registered as an outpatient in the records of the hospital.
(p) "Market Basket Inflation Factor" means 3.4%, the market basket percentage increase determined by CMS for FY 2004, as set forth in the Federal Register on August 1, 2003, Volume 68, at page 45346.
(q) "Outpatient Prospective Payment System (OPPS)" means Medicare's payment system for outpatient services at hospitals. These outpatient services are classified according to a list of ambulatory payment classifications (APCs).
(r) "Total Gross Charges" means the facility's total usual and customary charges to patients and third-party payers before reductions for contractual allowances, bad debts, courtesy allowances and charity care.
(s) "Total Operating Costs" means the direct cost incurred in providing care to patients. Included in operating cost are: salaries and wages, rent or mortgage, employee benefits, supplies, equipment purchase and maintenance, professional fees, advertising, overhead, etc. It does not include start up costs.
(t) "Wage Index" means CMS' wage index for urban, rural and hospitals that are reclassified as described in CMS' 2004 Hospital Outpatient Prospective Payment System (HOPPS), adopted for the Calendar Year 2004, published in the Federal Register on November 7, 2003, Volume 68, No. 216, Addenda H through J, pages 63682 through 63690.
(u) "Workers' Compensation Multiplier" means the 120% Medicare multiplier required by Labor Code Section 5307.1, or the 122% multiplier that includes an extra 2% reimbursement for high cost outlier cases.

Note: Authority cited: Sections 133, 4603.5, 5307.1 and 5307.3, Labor Code. Reference: Sections 4600, 4603.2 and 5307.1, Labor Code.

s 9789.31. Hospital Outpatient Departments and Ambulatory Surgical Centers - Adoption of Standards.
(a) The Administrative Director incorporates by reference, the Centers for Medicare and Medicaid Services' (CMS) 2004 Hospital Outpatient Prospective Payment System (HOPPS), adopted for the Calendar Year 2004, published in the Federal Register on November 7, 2003, Volume 68, No. 216, Addenda A through J, pages 63478 through 63690 (CMS-1471-FC), as changed by CMS-1471-CN, Federal Register, Volume 68, No. 250 (December 31, 2003), pages 75442 through 75445, and CMS-1371-IFC, Federal Register, Volume 69, No. 3 (January 6, 2004), pages 820 through 844. See http://www.cms.hhs.gov/regulations/hopps/. The payment system includes:
(1) Addendum A "List of Ambulatory Payment Classifications (APCs) with Status Indicators, Relative Weights, Payment Rates, and Copayment Amounts Calendar Year 2004."
(2) Addendum B "Payment Status by HCPCS Code and Related Information Calendar Year 2004."
(3) Addendum D1 "Payment Status Indicators for Hospital Outpatient Prospective Payment System."
(4) Addendum D2 "Code Conditions."
(5) Addendum E "CPT Codes Which Would Be Paid Only As Inpatient Procedures."
(6) Addendum H "Wage Index For Urban Areas"
(7) Addendum I "Wage Index For Rural Areas"

(8) Addendum J "Wage Index For Hospitals That Are Reclassified."
(b) The Administrative Director incorporates by reference the American Medical Associations' Physician "Current Procedural Terminology," 2004 Edition.
(c) The Administrative Director incorporates by reference CMS' 2004 Alphanumeric "Healthcare Common Procedure Coding System (HCPCS)."

Note: Authority cited: Sections 133, 4603.5, 5307.1 and 5307.3, Labor Code. Reference: Sections 4600, 4603.2 and 5307.1, Labor Code.

s 9789.32. Outpatient Hospital Department and Ambulatory Surgical Center Fee Schedule - Applicability.
(a) Sections 9789.30 through 9789.38 shall be applicable to the maximum allowable fees for emergency room visits and surgical procedures rendered on or after July 1, 2004. For purposes of this section, emergency room visits shall be defined by CPT codes 99281-99285 and surgical procedures shall be defined by CPT codes 10040-69990. A facility fee is payable only for the specified emergency room and surgical codes and for supplies, drugs, devices, blood products and biologicals that are an integral part of the emergency room visit or surgical procedure. A supply, drug, device, blood product and biological is considered an integral part of an emergency room visit or surgical procedure if:
(1) the item has a status code N and is packaged into the APC payment for the emergency room visit or surgical procedure (in which case no additional fee is allowable) or,
(2) the item is furnished in conjunction with an emergency room visit or surgical procedure and has been assigned Status Code G, H or K.
Payment for other services furnished in conjunction with a surgical procedure or emergency room visit shall be in accordance with subdivision (c) of this Section.
(b) Sections 9789.30 through 9789.38 apply to any hospital outpatient department as defined in Section 9789.30(n) and any hospital outpatient department that is certified to participate in the Medicare program under Title XVIII (42 U.S.C. SEC. 1395 et seq.) of the federal Social Security Act and any ASC as defined in the California Health and Safety Code Section 1204, subdivision (b)(1), any ambulatory surgical center that is certified to participate in the Medicare program under Title XVIII (42 U.S.C. SEC. 1395 et seq.) of the federal Social Security Act, and any surgical clinic accredited by an accrediting agency as approved by the Licensing Division of the Medical Board of California pursuant to Health and Safety Code Sections 1248.15 and 1248.4, performing procedures and services on an outpatient basis.
(c) The maximum allowable fees for services, drugs and supplies furnished by hospitals and ambulatory surgical centers that do not meet the requirements in (a) for a facility fee payment and are not bundled in the APC payment rate for a surgical service or emergency room visit will be determined as follows:
(1) The maximum allowable fees for professional medical services which are performed by physicians and other licensed health care providers shall be paid according to Section 9789.10 and Section 9789.11.
(2) The maximum allowable fees for organ acquisition costs and corneal tissue acquisition costs shall be based on the documented paid cost of procuring the organ or tissue.
(3) The maximum allowable fee for drugs not otherwise covered by a Medicare fee schedule payment for facility services shall be 100% of the fee prescribed by Medi-Cal pursuant to Labor Code Section 5307.1 subdivision (a), or, where applicable, Section 9789.40.
(4) The maximum allowable fee for clinical diagnostic tests shall be determined according to Section 9789.50.
(5) The maximum allowable fees for non-surgical ancillary services with a status code indicator "X" shall be determined according to Section 9789.10 and Section 9789.11.
(6) The maximum allowable fee for durable medical equipment, prosthetics and orthotics shall be determined according to Section 9789.60.
(7) The maximum allowable fee for ambulance service shall be determined according to Section 9789.70.
(d) Only hospitals may charge or collect a facility fee for emergency room visits. Only hospital outpatient departments and ambulatory surgical centers as defined in Section 9789.30(n) and Section 9789.30(c) may charge or collect a facility fee for surgical services provided on an outpatient basis.
(e) Hospital outpatient departments and ambulatory surgical centers shall not be reimbursed for procedures on the inpatient only list, Section 9789.31(a)(5), Addendum E, except that pre-authorized services rendered are payable at the pre-negotiated fee arrangement. The pre-authorization must be provided by an authorized agent of the claims administrator to the provider. The fee agreement and pre-authorization must be memorialized in writing prior to performing the medical services.
(f) Critical access hospitals and hospitals that are excluded from acute PPS are exempt from this fee schedule.
(g) Out of state hospital outpatient departments and ambulatory surgical centers are exempt from this fee schedule.
(h) Hospital outpatient departments and ambulatory surgical centers billing for facility fees and other services under this Section shall present with their bill the name and physical address of the facility, the facility's Medicare Provider Number or UPIN (or, in the absence of the Medicare number, the OSHPD Facility Number). The bill shall include the dates of service, the diagnosis and current HCPCS codes and charges for each billed service, including HCPCS codes for any items and services that are packaged into the APC payment for a significant procedure.

Note: Authority cited: Sections 133, 4603.5, 5307.1 and 5307.3, Labor Code. Reference: Sections 4600, 4603.2 and 5307.1, Labor Code.

s 9789.33. Hospital Outpatient Departments and Ambulatory Surgical Facilities Fee Schedule - Determination of Maximum Reasonable Fee.
(a) For Services rendered on or after July 1, 2004, the maximum allowable payment for outpatient facility fees for hospital emergency room services or for surgical services performed at a hospital outpatient department or at an ambulatory surgical center shall be determined based on the following. The 1.22 factor shall be used in lieu of an additional payment for high cost outlier cases.

(1) CTP codes 99281-99285 and CPT codes 10040-69990 with status code indicators "S", "T", "X" or "V":
(APC relative weight y$52.151) y(.40 + .60 yapplicable wage index) yinflation factor of 1.034 y1.22
(A) Table A in Section 9789.34 contains an "adjusted conversion factor" which incorporates the standard conversion factor, wage index and inflation factor. The maximum payment rate for ASCs and non-listed hospitals can be determined as follows:
APC relative weight yadjusted conversion factor y1.22
(B) Table B in Section 9789.35 contains an "adjusted conversion factor" which incorporates the standard conversion factor, wage index and inflation factor. The maximum payment rate for the listed hospitals can be determined as follows:
APC relative weight yadjusted conversion factor y1.22
(2) Procedure codes for drugs and biologicals with status code indicator "G":

APC payment rate y1.22
(3) Procedure codes for devices with status code indicator "H":
Documented paid costs, net of discounts and rebates, plus 10% not to exceed $250.00, plus any sales tax and/or shipping and handling charges actually paid.
(4) Procedure codes for drugs and biologicals with status code indicator "K":
APC payment rate y1.22
(b) Alternative payment methodology. In lieu of the maximum allowable fees set forth under (a), the maximum allowable fees for a facility meeting the requirements in subdivisions (c)(1) through (c)(5) will be determined as follows:
(1) Standard payment:
(A) CTP codes 99281-99285 and CPT codes 10040-69990 with status code indicators "S", "T", "X" or "V":

(APC relative weight y$52.151) y(.40 + .60 yapplicable wage index) yinflation factor of 1.034 y1.20
(B) Procedure codes for drugs and biologicals with status code indicator "G":
APC payment rate y1.20
(C) Procedure codes for devices with status code indicator "H":
Documented paid costs, net of discounts and rebates, plus 10% not to exceed $250.00, plus any sales tax and/or shipping and handling charges actually paid.
(D) Procedure codes for drugs and biologicals with status code indicator "K"
APC payment rate y1.20
(2) Additional payment for high cost outlier case:
[(Facility charges ycost-to-charge ratio) - (standard payment y2.6)] y.50
(3) In determining the additional payment, the facility's charges and payment for devices with status code indicator "H" shall be excluded from the computation.
(c) The following requirements shall be met for election of the alternative payment methodology:
(1) A facility seeking to be paid for high cost outlier cases under subdivision 9789.33(b) must file a written election using DWC Form 15 "Election for High Cost Outlier," contained in Section 9789.37 with the Division of Workers' Compensation, Medical Unit (Attention: OMFS-Outpatient). P.O. Box 8888, San Francisco, CA 94128. The form must be post-marked by March 1 of each year and shall be effective for one year commencing with services furnished on or after April 1 of the year in which the election is made.
(2) The maximum allowable fees applicable to a facility that does not file a timely election satisfying the requirements set forth in this subdivision and Section 9789.37 shall be determined under subdivision (a).
(3) The maximum allowable fees applicable to a hospital that does not participate under the Medicare program shall be determined under subdivision (a).

(4) The cost-to-charge ratio applicable to a hospital participating in the Medicare program shall be the hospital's cost-to-charge ratio used by the Medicare fiscal intermediary to determine high cost outlier payments under 42 C.F.R. s 419.43(d), which is incorporated by reference, as contained in Section 9789.38 Appendix X. The cost-to-charge ratio being used by the intermediary for services furnished on February 15 of the year the election is filed shall be included on the hospital's election form.
(5) The cost-to-charge ratio applicable to an ambulatory surgery center shall be the ratio of the facility's total operating costs to total gross charges during the preceding calendar year. Total Operating Costs are the direct costs incurred in providing care to patients. Included in operating cost are: salaries and wages, rent or mortgage, employee benefits, supplies, equipment purchase and maintenance, professional fees, advertising, overhead, etc. It does not include start up costs. Total gross charges are defined as the facility's total usual and customary charges to all patients and third-party party payers before reductions for contractual allowances, bad debts, courtesy allowances and charity care. The facility's election form, as contained in Section 9789.37 shall include a completed Annual Utilization Report of Specialty Clinics filed with Office of Statewide Health Planning and Development (OSHPD) for the preceding calendar year, which is incorporated by reference. The facility's election form shall further include the facility's total operating costs during the preceding calendar year, the facility's total gross charges during the preceding calendar year, and a certification under penalty of perjury signed by the Chief Executive Officer and a Certified Public Accountant, as to the accuracy of the information. Upon request from the Administrative Director, an independent audit may be conducted at the expense of the ASC. (Note: While ASCs may not typically file Annual Utilization Report of Specialty Clinics with OSHPD, any ASC applying for the alternative payment methodology must file the equivalent, subject to the Division of Workers' Compensation's audit.) A copy of the Annual Utilization Report of Specialty Clinics may be obtained at OSHPD's website at http:// www.oshpd.ca.gov/HID/HID/clinic/util/index.htm#Forms or upon request to the Division of Workers' Compensation, Medical Unit (Attention: OMFS-Outpatient), P.O. Box 8888, San Francisco, CA 94128.
(6) Before April 1 of each year the AD shall post a list of those facilities that have elected to be paid under this paragraph and the facility-specific cost-to-charge ratio that shall be used to determine additional fees allowable for high cost outlier cases. The list shall be posted on the Division of Workers' Compensation website: http://www.dir.ca.gov/DWC/dwc_home_page.htm or is available upon request to the Division of Workers' Compensation, Medical Unit (Attention: OMFS-Outpatient), P.O. Box 8888, San Francisco, CA 94128.
(d) Any ambulatory surgical center that believes its cost-to-charge ratio in connection with its election to participate in the alternative payment methodology for high cost outlier cases under Section 9789.33(b) was erroneously determined because of error in tabulating data may request the Administrative Director for a re-determination of its cost-to-charge ratio. Such requests shall be in writing, shall state the alleged error, and shall be supported by written documentation. Within 30 days after receiving a complete written request, the Administrative Director shall make a redetermination of the cost-to-charge ratio or reaffirm the published cost-to-charge ratio.
(e) The OPPS rules in 42 C.F.R s 419.44 regarding reimbursement for multiple procedures are incorporated by reference as contained in Section 9789.38 Appendix X.
(f) The OPPS rules in 42 C.F.R. ss 419.62, 419.64, and 419.66 regarding transitional pass-through payments for innovative medical devices, drugs and biologicals shall be incorporated by reference, as contained in Section 9789.38 Appendix X, except that payment for these items shall be in accordance with subdivisions (a) or (b) as applicable.
(g) The payment determined under subdivisions (a) and (b) include reimbursement for all of the included cost items specified in 42 CFR s419.2(b)(1)-(12), which is incorporated by reference, as contained in Section 9789.38 Appendix X.
(h) The maximum allowable fee shall be determined without regard to the cost items specified in 42 C.F.R. s 419.2(c)(1), (2), (3), (4), and (6), as contained in Section 9789.38 Appendix X. Cost item set forth at 42 C.F.R. s 419.2(c)(5), as contained in Section 9789.38 Appendix X, is payable pursuant to Section 9789.32(c)(1). Cost items set forth at 42 C.F.R. s 419.2(c)(7) and (8), as contained in Section 9789.38 Appendix X, are payable pursuant to Section 9789.32(c)(2).
(i) The maximum allowable fees shall be determined without regard to the provisions in 42 C.F.R. s 419.70.

Note: Authority cited: Sections 133, 4603.5, 5307.1, and 5307.3, Labor Code. Reference: Sections 4600, 4603.2, and 5307.1, Labor Code.

s 9789.34. Table A.
(See Addenda H and I set forth in Section 9789.31)
Adjusted
MSA Constituent Wage Conversion
Code Urban/Rural Area Counties Index Factor [FNa1]
680 Bakersfield, CA Kern 0.9967 53.82
1620 Chico-Paradise, CA Butte 1.0193 54.55
2840 Fresno, CA Fresno 1.0142 54.38
Madera
4480 Los Angeles-Long Los Angeles 1.1832 59.85
Beach, CA
4940 Merced, CA Merced 0.9967 53.82
5170 Modesto, CA Stanislaus 1.1275 58.05
5775 Oakland, CA Alameda 1.5119 70.49
Contra Costa
5945 Orange County, CA Orange 1.1492 58.75
6690 Redding, CA Shasta 1.1352 58.30
6780 Riverside-San Riverside 1.1348 58.29
Bernardino, CA San
Bernardino
6920 Sacramento, CA El Dorado 1.1845 59.89
Placer
Sacramento
7120 Salinas, CA Monterey 1.4339 67.96
7320 San Diego, CA San Diego 1.1147 57.64
7360 San Francisco, CA Marin 1.4514 68.53
San Francisco
San Mateo
7400 San Jose, CA Santa Clara 1.4626 68.89
7460 San Luis Obispo- San Luis 1.1429 58.55
Atascadero- Obispo
Paso Robles, CA
7480 Santa Barbara- Santa Barbara 1.0441 55.35
Santa Maria-
Lompoc, CA
7485 Santa Cruz- Santa Cruz 1.2942 63.44
Watsonville, CA
7500 Santa Rosa, CA Sonoma 1.2877 63.23
8120 Stockton-Lodi, CA San Joaquin 1.0404 55.23
8720 Vallejo-Fairfield- Napa 1.3425 65.01
Napa, CA Solano
8735 Ventura, CA Ventura 1.1064 57.37
8780 Visalia- Tulare 0.9967 53.82
Tulare-
Porterville, CA
9270 Yolo, CA Yolo 0.9967 53.82
9340 Yuba City, CA Sutter 1.0196 54.56
Yuba
Non-
MSA 0.9967 53.82
Areas of
State
[FNa1] $52.151

Note: Authority cited: Sections 133, 4603.5, 5307.1 and 5307.3, Labor Code. Reference: Sections 4600, 4603.2 and 5307.1, Labor Code.

s 9789.35. Table B.
(See Addenda H, I and J set forth in Section 9789.31)

Note: Authority cited: Sections 133, 4603.5, 5307.1 and 5307.3, Labor Code. Reference: Sections 4600, 4603.2 and 5307.1, Labor Code.

s 9789.36. Update of Rules to Reflect Changes in the Medicare Payment System.
Sections 9789.30 through 9789.38 shall be adjusted to conform to any relevant changes in the Medicare payment schedule, including mid-year changes, no later than 60 days after the effective date of those changes. Updates shall be posted on the Division of Workers' Compensation webpage at http:// www.dir.ca.gov/DWC/dwc_home_page.htm. The annual updates to the Hospital Outpatient Departments and Ambulatory Surgical Centers Fee Schedule shall be effective every year on January 1.

Note: Authority cited: Sections 133, 4603.5, 5307.1 and 5307.3, Labor Code. Reference: Sections 4600, 4603.2 and 5307.1, Labor Code.

s 9789.37. DWC Form 15 Election for High Cost Outlier.

Note: Authority cited: Sections 133, 4603.5, 5307.1 and 5307.3, Labor Code. Reference: Sections 4600, 4603.2 and 5307.1, Labor Code.

s 9789.38. Appendix X.
The federal regulations as incorporated by reference and/or referred to in Sections 9789.30 through 9789.36 are set forth below in numerical order.
42 C.F.R. s 419.2
Basis of payment.
(a) Unit of payment. Under the hospital outpatient prospective payment system, predetermined amounts are paid for designated services furnished to Medicare beneficiaries. These services are identified by codes established under the Centers for Medicare & Medicaid Services Common Procedure Coding System (HCPCS). The prospective payment rate for each service or procedure for which payment is allowed under the hospital outpatient prospective payment system is determined according to the methodology described in subpart C of this part. The manner in which the Medicare payment amount and the beneficiary copayment amount for each service or procedure are determined is described in subpart D of this part. (continued)