CCLME.ORG - DIVISION 1. DEPARTMENT OF INDUSTRIAL RELATIONS  CHAPTERS 1 through 6
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(b) Determination of hospital outpatient prospective payment rates: Included costs. The prospective payment system establishes a national payment rate, standardized for geographic wage differences, that includes operating and capital-related costs that are directly related and integral to performing a procedure or furnishing a service on an outpatient basis. In general, these costs include, but are not limited to
(1) Use of an operating suite, procedure room, or treatment room;
(2) Use of recovery room;
(3) Use of an observation bed;

(4) Anesthesia, certain drugs, biologicals, and other pharmaceuticals; medical and surgical supplies and equipment; surgical dressings; and devices used for external reduction of fractures and dislocations;
(5) Supplies and equipment for administering and monitoring anesthesia or sedation;
(6) Intraocular lenses (IOLs);
(7) Incidental services such a venipuncture;
(8) Capital-related costs;
(9) Implantable items used in connection with diagnostic x-ray tests, diagnostic laboratory tests, and other diagnostic tests;
(10) Durable medical equipment that is implantable;
(11) Implantable prosthetic devices (other than dental) which replace all or part of an internal body organ (including colostomy bags and supplies directly related to colostomy care), including replacement of these devices; and;
(12) Costs incurred to procure donor tissue other than corneal tissue.
(c) Determination of hospital outpatient prospective payment rates: Excluded costs. The following costs are excluded from the hospital outpatient prospective payment system.
(1) The costs of direct graduate medical education activities as described in s413.86 of this chapter.
(2) The costs of nursing and allied health programs as described in s413.86 of this chapter.
(3) The costs associated with interns and residents not in approved teaching programs as described in s415.202 of this chapter.
(4) The costs of teaching physicians attributable to Part B services for hospitals that elect cost-based reimbursement for teaching physicians under s415.160.

(5) The reasonable costs of anesthesia services furnished to hospital outpatients by qualified nonphysician anesthetists (certified registered nurse anesthetists and anesthesiologists' assistants) employed by the hospital or obtained under arrangements, for hospitals that meet the requirements under s412.113(c) of this chapter.
(6) Bad debts for uncollectible deductibles and coinsurances as described in s413.80(b) of this chapter.
(7) Organ acquisition costs paid under Part B.
(8) Corneal tissue acquisition costs.
42 C.F.R. s 419.32
Calculation of prospective payment rates for hospital outpatient services.
(a) Conversion factor for 1999. CMS calculates a conversion factor in such a manner that payment for hospital outpatient services furnished in 1999 would have equaled the base expenditure target calculated in s 419.30, taking into account APC group weights and estimated service frequencies and reduced by the amounts that would be payable in 1999 as outlier payments under s 419.43(d) and transitional pass-through payments under s 419.43(e).
(b) Conversion factor for calendar year 2000 and subsequent years. (1) Subject to paragraph (b)(2) of this section, the conversion factor for a calendar year is equal to the conversion factor calculated for the previous year adjusted as follows:
(i) For calendar year 2000, by the hospital inpatient market basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act reduced by one percentage point.
(ii) For calendar year 2001 -
(A) For services furnished on or after January 1, 2001 and before April 1, 2001, by the hospital inpatient market basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act reduced by one percentage point; and
(B) For services furnished on or after April 1, 2001 and before January 1, 2002, by the hospital inpatient market basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act, and increased by a transitional percentage allowance equal to 0.32 percent.
(iii) For the portion of calendar year 2002 that is affected by these rules, by the hospital inpatient market basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act reduced by one percentage point, without taking into account the transitional percentage allowance referenced in s 419.32(b)(ii)(B).
(iv) For calendar year 2003 and subsequent years, by the hospital inpatient market basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act.
(2) Beginning in calendar year 2000, CMS may substitute for the hospital inpatient market basket percentage in paragraph (b) of this section a market basket percentage increase that is determined and applied to hospital outpatient services in the same manner that the hospital inpatient market basket percentage increase is determined and applied to inpatient hospital services.
(c) Payment rates. The payment rate for services and procedures for which payment is made under the hospital outpatient prospective payment system is the product of the conversion factor calculated under paragraph (a) or paragraph (b) of this section and the relative weight determined under s 419.31(b).
(d) Budget neutrality.
(1) CMS adjusts the conversion factor as needed to ensure that updates and adjustments under s 419.50(a) are budget neutral.
(2) In determining adjustments for 2004 and 2005, CMS will not take into account any additional expenditures per section 1833(t)(14) of the Act that would not have been made but for enactment of section 621 of the Medicare Prescription Drug, Improvement, and Mordernization Act of 2003.
42 C.F.R. s 419.43
Adjustments to national program payment and beneficiary copayment amounts.
(a) General rule. CMS determines national prospective payment rates for hospital outpatient department services and determines a wage adjustment factor to adjust the portion of the APC payment and national beneficiary copayment amount attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner.
(b) Labor-related portion of payment and copayment rates for hospital outpatient services. CMS determines the portion of hospital outpatient costs attributable to labor and labor-related costs (known as the "labor-related portion" of hospital outpatient costs) in accordance with s 419.31(c)(1).
(c) Wage index factor. CMS uses the hospital inpatient prospective payment system wage index established in accordance with part 412 of this chapter to make the adjustment referred to in paragraph (a) of this section.
(d) Outlier adjustment -- (1) General rule. Subject to paragraph (d)(4) of this section, CMS provides for an additional payment for a hospital outpatient service (or group of services) not excluded under paragraph (f) of this section for which a hospital's charges, adjusted to cost, exceed the following:
(i) A fixed multiple of the sum of -
(A) The applicable Medicare hospital outpatient payment amount determined under s 419.32(c), as adjusted under s 419.43 (other than for adjustments under this paragraph (d) or paragraph (e) of this section); and
(B) Any transitional pass-through payment under paragraph (e) of this section.
(ii) At the option of CMS, a fixed dollar amount.
(2) Amount of adjustment. The amount of the additional payment under paragraph (d)(1) of this section is determined by CMS and approximates the marginal cost of care beyond the applicable cutoff point under paragraph (d)(1) of this section.
(3) Limit on aggregate outlier adjustments -- (i) In general. The total of the additional payments made under this paragraph (d) for covered hospital outpatient department services furnished in a year (as estimated by CMS before the beginning of the year) may not exceed the applicable percentage specified in paragraph (d)(3)(ii) of this section of the total program payments (sum of both the Medicare and beneficiary payments to the hospital) estimated to be made under this part for all hospital outpatient services furnished in that year. If this paragraph is first applied to less than a full year, the limit applies only to the portion of the year.

(ii) Applicable percentage. For purposes of paragraph (d)(3)(i) of this section, the term "applicable percentage" means a percentage specified by CMS up to (but not to exceed) -
(A) For a year (or portion of a year) before 2004, 2.5 percent; and
(B) For 2004 and thereafter, 3.0 percent.
(4) Transitional authority. In applying paragraph (d)(1) of this section for hospital outpatient services furnished before January 1, 2002, CMS may -
(i) Apply paragraph (d)(1) of this section to a bill for these services related to an outpatient encounter (rather than for a specific service or group of services) using hospital outpatient payment amounts and transitional pass-through payments covered under the bill; and
(ii) Use an appropriate cost-to-charge ratio for the hospital or CMHC (as determined by CMS), rather than for specific departments within the hospital.
(e) Budget neutrality. CMS establishes payment under paragraph (d) of this section in a budget-neutral manner excluding services and groups specified in paragraph (f) of this section.
(f) Excluded services and groups. Drugs and biologicals that are paid under a separate APC and devices of branchytherapy, consisting of a seed or seeds (including radioactive source) are excluded from qualification for outlier payments.
42 C.F.R. s 419.44
(a) Multiple surgical procedures. When more than one surgical procedure for which payment is made under the hospital outpatient prospective payment system is performed during a single surgical encounter, the Medicare program payment amount and the beneficiary copayment amount are based on -
(1) The full amounts for the procedure with the highest APC payment rate; and
(2) One-half of the full program and the beneficiary payment amounts for all other covered procedures.
(b) Terminated procedures. When a surgical procedure is terminated prior to completion due to extenuating circumstances or circumstances that threaten the well-being of the patient, the Medicare program payment amount and the beneficiary copayment amount are based on -
(1) The full amounts if the procedure is discontinued after the induction of anesthesia or after the procedure is started; or
(2) One-half of the full program and the beneficiary coinsurance amounts if the procedure is discontinued after the patient is prepared for surgery and taken to the room where the procedure is to be performed but before anesthesia is induced.]
42 C.F.R. s 419.62
Transitional pass-through payments: General rules.
(a) General. CMS provides for additional payments under ss 419.64 and 419.66 for certain innovative medical devices, drugs, and biologicals.
(b) Budget neutrality. CMS establishes the additional payments under ss 419.64 and 419.66 in a budget neutral manner.

(c) Uniform prospective reduction of pass-through payments. (1) If CMS estimates before the beginning of a calendar year that the total amount of pass-through payments under ss 419.64 and 419.66 for the year would exceed the applicable percentage (as described in paragraph (c)(2) of this section) of the total amount of Medicare payments under the outpatient prospective payment system. CMS will reduce, pro rata, the amount of each of the additional payments under ss 419.64 and 419.66 for that year to ensure that the applicable percentage is not exceeded.
(2) The applicable percentages are as follows:
(i) For a year before CY 2004, the applicable percentage is 2.5 percent.
(ii) For 2004 and subsequent years, the applicable percentage is a percentage specified by CMS up to (but not to exceed) 2.0 percent.
(d) CY 2002 incorporated amount. For the portion of CY 2002 affected by these rules, CMS incorporated 75 percent of the estimated pass-through costs (before the incorporation and any pro rata reduction) for devices into the procedure APCs associated with these devices.
42 C.F.R. s 419.64
Transitional pass-through payments: drugs and biologicals.
(a) Eligibility for pass-through payment. CMS makes a transitional pass-through payment for the following drugs and biologicals that are furnished as part of an outpatient hospital service:
(1) Orphan drugs. A drug or biological that is used for a rare disease or condition and has been designated as an orphan drug under section 526 of the Federal Food, Drug and Cosmetic Act if payment for the drug or biological as an outpatient hospital service was being made on August 1, 2000.
(2) Cancer therapy drugs and biologicals. A drug or biological that is used in cancer therapy, including, but not limited to, a chemotherapeutic agent, an antiemetic, a hematopoietic growth factor, a colony stimulating factor, a biological response modifier, and a bisphosphonate if payment for the drug or biological as an outpatient hospital service was being made on August 1, 2000.
(3) Radiopharmaceutical drugs and biological products. A radiopharmaceutical drug or biological product used in diagnostic, monitoring, and therapeutic nuclear medicine services if payment for the drug or biological as an outpatient hospital service was being made on August 1, 2000.
(4) Other drugs and biologicals. A drug or biological that meets the following conditions:
(i) It was first payable as an outpatient hospital service after December 31, 1996.
(ii) CMS has determined the cost of the drug or biological is not insignificant in relation to the amount payable for the applicable APC (as calculated under s 419.32(c)) as defined in paragraph (b) of this section.
(b) Cost. CMS determines the cost of a drug or biological to be not insignificant if it meets the following requirements:
(1) Services furnished before January 1, 2003. The expected reasonable cost of a drug or biological must exceed 10 percent of the applicable APC payment amount for the service related to the drug or biological.
(2) Services furnished after December 31, 2002. CMS considers the average cost of a new drug or biological to be not insignificant if it meets the following conditions:
(i) The estimated average reasonable cost of the drug or biological in the category exceeds 10 percent of the applicable APC payment amount for the service related to the drug or biological.
(ii) The estimated average reasonable cost of the drug or biological exceeds the cost of the drug or biological portion of the APC payment amount for the related service by at least 25 percent.
(iii) The difference between the estimated reasonable cost of the drug or biological and the estimated portion of the APC payment amount for the drug or biological exceeds 10 percent of the APC payment amount for the related service.
(c) Limited period of payment. CMS limits the eligibility for a pass-through payment under this section to a period of at least 2 years, but not more than 3 years, that begins as follows:
(1) For a drug or biological described in paragraphs (a)(1) through (a)(3) of this section - August 1, 2000.
(2) For a drug or biological described in paragraph (a)(4) of this section - the date that CMS makes its first pass-through payment for the drug or biological.
(d) Amount of pass-through payment. (1) Subject to any reduction determined under s 419.62(b), the pass-through payment for a drug or biological as specified in section 1842(o)(1)(A) and (o)(1)(D)(i) of the Act is 95 percent of the average wholesale price of the drug or biological minus the portion of the APC payment CMS determines is associated with the drug or biological.
(2) Subject to any reduction determined under s 419.62(b), the pass-through payment for a drug or biological as specified in section 1842(o)(1)(B) and (o)(1)(E)(i) of the act is 85 percent of the average wholesale price, determined as of April 1, 2003, of the drug or biological minus the portion of the APC payment CMS determines is associated with the drug or biological.
42 C.F.R. s 419.66
Transitional pass-through payments: medical devices.

(a) General rule. CMS makes a pass-through payment for a medical device that meets the requirements in paragraph (b) of this section and that is described by a category of devices established by CMS under the criteria in paragraph (c) of this section.
(b) Eligibility. A medical device must meet the following requirements:
(1) If required by the FDA, the device must have received FDA approval or clearance (except for a device that has received an FDA investigational device exemption (IDE) and has been classified as a Category B device by the FDA in accordance with ss 405.203 through 405.207 and 405.211 through 405.215 of this chapter) or another appropriate FDA exemption.
(2) The device is determined to be reasonable and necessary for the diagnosis or treatment of an illness or injury or to improve the functioning of a malformed body part (as required by section 1862(a)(1)(A) of the Act).
(3) The device is an integral and subordinate part of the service furnished, is used for one patient only, comes in contact with human tissue, and is surgically implanted or inserted whether or not it remains with the patient when the patient is released from the hospital.
(4) The device is not any of the following:
(i) Equipment, an instrument, apparatus, implement, or item of this type for which depreciation and financing expenses are recovered as depreciable assets as defined in Chapter 1 of the Medicare Provider Reimbursement Manual (CMS Pub. 15-1).
(ii) A material or supply furnished incident to a service (for example, a suture, customized surgical kit, or clip, other than radiological site marker).
(iii) A material that may be used to replace human skin (for example, a biological or synthetic material).
(c) Criteria for establishing device categories. CMS uses the following criteria to establish a category of devices under this section:
(1) CMS determines that a device to be included in the category is not described by any of the existing categories or by any category previously in effect, and was not being paid for as an outpatient service as of December 31, 1996.
(2) CMS determines that a device to be included in the category has demonstrated that it will substantially improve the diagnosis or treatment of an illness or injury or improve the functioning of a malformed body part compared to the benefits of a device or devices in a previously established category or other available treatment.
(3) Except for medical devices identified in paragraph (e) of this section, CMS determines the cost of the device is not insignificant as described in paragraph (d) of this section.
(d) Cost criteria. CMS considers the average cost of a category of devices to be not insignificant if it meets the following conditions:
(1) The estimated average reasonable cost of devices in the category exceeds 25 percent of the applicable APC payment amount for the service related to the category of devices.
(2) The estimated average reasonable cost of the devices in the category exceeds the cost of the device-related portion of the APC payment amount for the related service by at least 25 percent.
(3) The difference between the estimated average reasonable cost of the devices in the category and the portion of the APC payment amount for the device exceeds 10 percent of the APC payment amount for the related service.
(e) Devices exempt from cost criteria. The following medical devices are not subject to the cost requirements described in paragraph (d) of this section, if payment for the device was being made as an outpatient service on August 1, 2000:
(1) A device of brachytherapy.
(2) A device of temperature-monitored cryoablation.
(f) Identifying a category for a device. A device is described by a category, if it meets the following conditions:
(1) Matches the long descriptor of the category code established by CMS.
(2) Conforms to guidance issued by CMS relating to the definition of terms and other information in conjunction with the category descriptors and codes.
(g) Limited period of payment for devices. CMS limits the eligibility for a pass-through payment established under this section to a period of at least 2 years, but not more than 3 years beginning on the date that CMS establishes a category of devices.
(h) Amount of pass-through payment. Subject to any reduction determined under s 419.62(b), the pass-through payment for a device is the hospital's charge for the device, adjusted to the actual cost for the device, minus the amount included in the APC payment amount for the device.




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 9789.40. Pharmacy.
(a) The maximum reasonable fee for pharmacy services rendered after January 1, 2004 is100% of the fee prescribed in the relevant Medi-Cal payment system. Medi-Cal rates will be made available on the Division of Workers' Compensation's Internet Website (http://www.dir.ca.gov/DWC/dwc_home_page.htm) or upon request to the Administrative Director at:
Division of Workers' Compensation (Attention: OMFS - Pharmacy) P.O. Box 420603 San Francisco, CA 94142.
(b) For a pharmacy service or drug that is not covered by a Medi-Cal payment system, the maximum reasonable fee paid shall not exceed the fee specified in the OMFS 2003.




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 9789.50. Pathology and Laboratory.
(a) Effective for services after January 1, 2004, the maximum reasonable fees for pathology and laboratory services shall not exceed one hundred twenty (120) percent of the rate for the same procedure code in the CMS' Clinical Diagnostic Laboratory Fee Schedule, as established by Sections 1833 and 1834 of the Social Security Act (42 U.S.C. ss 1395l and 1395m) and applicable to California. The Clinical Diagnostic Laboratory Fee Schedule, which can be found on the CMS Internet Website (http://www.cms.hhs.gov/paymentsystems) is incorporated by reference and will be made available on the Division of Workers' Compensation's Internet Website (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.
(b) The following procedures in the Special Services and Reports section of the OMFS 2003 will not be valid for services rendered after January 1, 2004: CPT Codes 99000, 99001, 99017, 99019, 99020, 99021, 99026, and 99027.
(c) For any pathology and laboratory service not covered by a Medicare payment system, the maximum reasonable fee paid shall not exceed the fee specified in the OMFS 2003.




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 9789.60. Durable Medical Equipment, Prosthetics, Orthotics, Supplies.
(a) For services, equipment, or goods provided after January 1, 2004, the maximum reasonable reimbursement for durable medical equipment, supplies and materials, orthotics, prosthetics, and miscellaneous supplies and services shall not exceed one hundred twenty (120) percent of the rate set forth in the CMS' Durable Medical Equipment, Prosthetics/Orthotics, and Supplies (DMEPOS) Fee Schedule, as established by Section 1834 of the Social Security Act (42 U.S.C. s 1395m) and applicable to California. The DMEPOS Fee Schedule, which can be found on the CMS Internet Website (http:// www.cms.hhs.gov/paymentsystems) is incorporated by reference and will be made available on the Division of Workers' Compensation's Internet Website (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.
(b) The following procedures in the Special Services and Reports section of the OMFS 2003 will not be valid for services rendered after January 1, 2004: CPT Code 99002.
(c) For durable medical equipment, supplies and materials, orthotics, prosthetics, and miscellaneous supplies and services not covered by a Medicare payment system, the maximum reasonable fee paid shall not exceed the fee specified in the OMFS 2003.




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 9789.70. Ambulance Services.
(a) The maximum reasonable fee for ambulance services rendered after January 1, 2004 shall not exceed 120% of the applicable fee for the Calendar Year 2004 set forth in CMS's Ambulance Fee Schedule, which is established pursuant to Section 1834 of the Social Security Act (42 U.S.C. s 1395m) and applicable to California. The Ambulance Fee Schedule, which can be found at the CMS Internet Website http://www.cms.hhs.gov/suppliers/ambulance is incorporated by reference and will be made available on the Division of Workers' Compensation's Internet Website (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.
(b) For any ambulance service not covered by a Medicare payment system, the maximum reasonable fee paid shall not exceed the fee specified in the OMFS 2003.




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 9789.80. Skilled Nursing Facility. [Reserved]





s 9789.90. Home Health Care. [Reserved]





s 9789.100. Outpatient Renal Dialysis. [Reserved]





s 9789.110. Update of Rules to Reflect Changes in the Medicare Payment System.
The OMFS shall be adjusted within 60 days to conform to any relevant changes in the Medicare and Medi-Cal payment systems as required by law. The Administrative Director shall determine the effective date of the change and issue an order informing the public of the change and the effective date. Such order shall be posted on the Division's Internet Website: http:// www.dir.ca.gov/DWC/dwc_home_page.htm.




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 9789.111. Effective Date of Fee Schedule Provisions.
(a) The OMFS regulations for Physician Services (Sections 9789.10-9789.11) are effective for services rendered on or after July 1, 2004. Services rendered after January 1, 2004, but before July 1, 2004 are governed by the "emergency" regulations that were effective on January 2, 2004.
(b) The OMFS regulations for Inpatient Services (Sections 9789.20-9789.24) are effective for inpatient hospital admissions with dates of discharge on or after July 1, 2004. Services for discharges after January 1, 2004, but before July 1, 2004 are governed by the "emergency" regulations that were effective on January 2, 2004. Bills for services with date of admission on or before December 31, 2003 will be reimbursed in accordance with Section 9792.1.
(c) The OMFS regulations for Outpatient Services (Sections 9789.30-9789.38) are effective for services rendered on or after July 1, 2004. Services rendered after January 1, 2004, but before July 1, 2004 are governed by the "emergency" regulations that were effective on January 2, 2004.
(d) The OMFS regulation for pharmacy (Section 9789.40) is effective for services rendered after January 1, 2004.
(e) The OMFS regulation for Pathology and Laboratory (Section 9789.50) is effective for services rendered after January 1, 2004.
(f) The OMFS regulation for Durable Medical Equipment, Prosthetics, Orthotics, Supplies (Section 9789.60) is effective for services rendered after January 1, 2004.
(g) The OMFS regulation for Ambulance Services is effective for services rendered after January 1, 2004.




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 9790. Authority.
The rules and regulations contained in this Article are adopted pursuant to the authority contained in Sections 133, 4603.5, 307.1 and 5307.3 of the California Labor Code.


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 9790.1. Definitions.
(a) "Capital outlier factor" means (California fixed loss cost outlier threshold x geographic adjustment factor x large urban add-on x (capital cost-to-charge ratio to total cost-to-charge ratio)). The geographic adjustment factor is specified in the Federal Register of August 1, 2000 at Vol. 65, page 47126, Table 1a, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director. 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 September 29, 2000, the "large urban add-on" is an additional 3% of what would otherwise be payable to the health facility.
(b) "California fixed loss cost outlier threshold" means the factor calculated by adjusting the Medicare fixed loss cost outlier threshold for California workers' compensation inpatient admissions. The California fixed loss cost outlier threshold is $14,500.
(c) "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 payment, as determined by the federal Health Care Financing Administration for the purpose of determining reimbursement under Medicare.
(1) Prospective capital costs are determined by the following formula:
Capital standard federal payment rate x capital wage index x large urban add-on x [1 + capital disproportionate share adjustment factor + capital indirect medical education adjustment factor]

The "capital standard federal payment rate" is $382.03 as published by HCFA in the Federal Register of August 1, 2000, at Vol. 65, page 47127, Table 1d, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
The "capital wage index" was published in the Payment Impact File at positions 243-252.
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 September 29, 2000, the "large urban add-on" is an additional 3% of what would otherwise be payable to the health facility.
The "capital disproportionate share adjustment factor" was published in the Payment Impact File at positions 117-126.
The "capital indirect medical education adjustment factor" (capital IME adjustment) was published in Payment Impact File at positions 202-211.

(2) Prospective operating costs are determined by the following formula:
[(Labor-related national standardized amount x operating wage index) + nonlabor-related national standardized amount] x [1 + operating disproportionate share adjustment factor + operating indirect medical education adjustment]
The "labor-related national standardized amount" is $2,864.19 for large urban areas and $2,818.85 for other areas, as published by the federal Health Care Financing Administration [HCFA] in the Federal Register of August 1, 2000, at Vol. 65, page 47126, Table 1a, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director. The "labor-related national standardized amount" is $2,894.99 for large urban area sole community hospitals and $2,849.16 for other areas sole community hospitals, as published by the federal Health Care Financing Administration [HCFA] in the Federal Register of August 1, 2000, at Vol. 65, page 47127, Table 1e, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
The "operating wage index" was published in the Payment Impact File at positions 253-262.

The "nonlabor-related national standardized amount" is $1,164.21 for large urban areas and $1,145.78 for other areas, as published by HCFA in the Federal Register of August 1, 2000, at Vol. 65, page 47126, Table 1a, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director. The "nonlabor-related national standardized amount" is $1,176.73 for large urban area sole community hospitals and $1,158.10 for other areas sole community hospitals as published by the federal Health Care Financing Administration [HCFA] in the Federal Register of August 1, 2000, at Vol. 65, page 47127, Table 1e, which document is hereby incorporated by reference and will be made available upon request to the administrative director.
The "operating disproportionate share adjustment factor" was published in the Payment Impact File at positions 127-136.
The "operating indirect medical education adjustment" was published in the Payment Impact File at positions 212-221.
(3) A table of composite factors for each health facility in California is contained in Appendix A to Section 9792.1.
(d) "Costs" means the total billed charges for an admission, excluding non-medical charges such as television and telephone charges, multiplied by the hospital's total cost-to-charge ratio. For DRGs 496 through 500, for purposes of determining whether an admission is a cost outlier, "costs" exclude implantable hardware and/or instrumentation reimbursed under subsection (7) of Section 9792.1.
(e) "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 was published in the Payment Impact File at positions 161-168. The capital cost-to-charge ratio for each hospital was published in the Payment Impact File at positions 99-106. A table of hospital specific capital cost-to-charge, operating cost-to-charge and total cost-to-charge ratios for each health facility in California is contained in Appendix A to Section 9792.1.
(f) "Cost outlier case" means a hospitalization for which the hospital's costs, as defined in subdivision (d) above, exceed the Inpatient Hospital Fee Schedule payment amount by the hospital's outlier factor. If costs exceed the cost outlier threshold, the case is a cost outlier case.
(g) "Cost outlier threshold" means the sum of the Inpatient Hospital Fee Schedule payment amount plus the hospital specific outlier factor.
(h) "DRG weight" means the weighting factor for a diagnosis-related group assigned by the Health Care Financing Administration for the purpose of determining reimbursement under Medicare. A table is contained in Appendix B to Section 9792.1. Appendix B shows DRG weights as assigned by HCFA and, where applicable, "Revised DRG weights" in italics.
(i)(1) "Revised DRG weight" means the product of the DRG weight multiplied by the ratio set forth in subsection (i)(2) for 48 specified DRGs to reflect the different resource usage between the workers' compensation population and the Medicare population.
(2) The ratios that were applied to the DRG weights are contained in the column identified as "DWC Revised Ratio" in Appendix B of Section 9792.1.
(j) "Health facility" means any facility as defined in Section 1250 of the Health and Safety Code.
(k) "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.
( l ) "Inpatient Hospital Fee Schedule payment amount" is that amount determined by multiplying the DRG weight x hospital composite factor x 1.2.
(m) "Labor-related portion" is that portion of operating costs attributable to labor costs, as specified in the Federal Register of August 1, 2000 at Vol. 65, page 47126, Table 1a, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(n) "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.
(o) "Average length of stay" means the geometric mean length of stay for a diagnosis-related group assigned by the Health Care Financing Administration.
(p) "Operating outlier factor" means ((California fixed loss cost outlier threshold x ((labor-related portion x MSA wage index) + nonlabor-related portion)) x (operating cost-to-charge ratio to total cost-to-charge ratio)). The MSA wage index is specified at Federal Register of August 1, 2000 at Vol. 65, page 47149, Table 4a, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director. The nonlabor-related portion is that portion of operating costs as defined in the Federal Register of August 1, 2000 at Vol. 65, page 47126, Table 1a, which document is hereby incorporated by reference and will be made available upon request to the Administrative Director.
(q) "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 Appendix A to Section 9792.1.
(r) "Payment Impact File" means the FY 2001 Prospective Payment System Payment Impact File (August 2000 Update) (IMPCTF01.EXE) published by the federal Health Care Financing Administration, which document is hereby incorporated by reference. The description of the file is found at http:// www.hcfa.gov/stats/impctf01.doc. The file is accessible through http:// www.hcfa.gov/stats/pufiles.htm#ppfexmtp. 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.


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 9791. Services Covered.
Except as provided in this article, the Official Medical Fee Schedule applies to all covered medical services provided, referred or prescribed by physicians (as defined in Section 3209.3 of the Labor Code), regardless of the type of facility in which the medical services are performed, including clinic and hospital-based physicians working on a contract basis. The Schedule shall not apply to inpatient medical services provided by employees of a health facility, medical-legal expenses authorized under Section 4621 of the Labor Code, and medical expenses payable pursuant to Section 9795. Nothing contained in this schedule shall preclude any hospital as defined in subdivisions (a), (b), or (f) of Section 1250 of the Health and Safety Code, or any surgical facility which is licensed under subdivision (b) of Section 1204 of the Health and Safety Code, or 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 the Accreditation Association for Ambulatory Health Care (AAAHC), from charging and collecting a facility fee for the use of the emergency room or operating room of the facility.


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 9791.1. Medical Fee Schedule.
The Official Medical Fee Schedule shall include the procedures, procedure numbers, descriptions, instructions, and unit values adopted by the Administrative Director, effective January 1, 1994; as revised for services on or after January 1, 1996; and as thereafter revised and adopted. The Official California Workers' Compensation Medical Fee Schedule (Revised April 1, 1999, and as amended for dates of service on or after 7/12/02) is hereby incorporated by reference. An order form for purchasing a copy of the Schedule can be obtained by contacting the Division of Workers' Compensation at the following address:
division of workers' compensation (attention: omfs order) p.o. box 420603 san Francisco, California 94142
The amendments of the OMFS for dates of service on or after 7/12/02 may be obtained either by purchasing them from the Division or they may be downloaded at no charge from the Division's website at (http://www.dir.ca.gov/workers'_ comp.html).


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 9792. Determination of the Fee.
(a) The fee is determined by the use of the Official Medical Fee Schedule as defined in Section 9791.1 of these rules. For services provided on and after January 1, 1994, the conversion factors to be applied to unit values in the schedule are as follows:
Determination of the Fee

Evaluation and Management Services Section.... $7.15
Medicine Section.............................. $6.15
Surgery Section............................... $153.00
Radiology Section............................. $12.50
Pathology Section............................. $1.50
Anesthesia Section............................ $34.50


(b) For services in the Evaluation and Management Services Section provided on and after April 1, 1999, the conversion factor to be applied to unit values in the schedule is $8.50.
(c) The conversion factor shall be multiplied by the listed unit value (also known as relative value) of the procedure as set forth in the Official Medical Fee Schedule to establish the reasonable maximum fee. A medical provider or a licensed health care facility may be paid a fee in excess of the reasonable maximum fees if the fee is reasonable, accompanied by itemization, and justified by an explanation of extraordinary circumstances related to the unusual nature of the services rendered; however, in no event shall a physician charge in excess of his or her usual fee.


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 9792.1. Payment of Inpatient Services of Health Facilities.
(a) Maximum reimbursement 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 or revised DRG weight if a revised weight has been adopted by the administrative director. 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) 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.
(c) The following are exempt from the maximum reimbursement formula set forth in subdivision (a):
(1) Inpatient services for the following diagnoses: Psychiatry (DRGs 424-432), Substance Abuse (DRGs 433-437), Organ Transplants (DRGs 103, 302, 480, 481, 495), Rehabilitation (DRG 462 and inpatient rehabilitation services provided in any rehabilitation center that is authorized by the Department of Health Services in accordance with Title 22, ss 70301, 70595 - 70603 of the California Code of Regulations to provide rehabilitation services), Tracheostomies (DRGs 482, 483), and Burns (DRGs 475 and 504-511).
(2) Inpatient services provided by a Level I or Level II trauma center, as defined in Title 22, California Code of Regulations sections 100260, 100261, to a patient with an immediately life threatening or urgent injury.
(3) Inpatient services provided by a health facility for which there is no composite factor.
(4) Inpatient services provided by a health facility located outside the State of California.
(5) The cost of durable medical equipment provided for use at home.
(6) Inpatient services provided by a health facility transferring an inpatient to another hospital. 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 s9792.1(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 s9792.1(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 s9792.1(c)(1) through (c)(4), subdivision (c)(6) 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 s9792.1(a).
(7) Implantable hardware and/or instrumentation for DRGs 496 through 500, where the admission occurs on or after April 13, 2001. Implantable hardware and/or instrumentation for DRGs 496 through 500, where the admission occurs on or after April 13, 2001, shall be separately reimbursed at the provider's documented paid cost, plus an additional 10% of the provider's documented paid cost not to exceed a maximum of $250.00, plus any sales tax and/or shipping and handling charges actually paid.
(8) Cost Outlier cases. Inpatient services for cost outlier cases where the admission occurs on or after June 29, 2001, shall be reimbursed as follows:
Step 1: Determine the Inpatient Hospital Fee Schedule payment amount (DRG relative weight x 1.2 x hospital specific composite factor).
Step 2: Determine costs. Costs = (total billed charges x total cost-to-charge ratio).
Step 3: Determine outlier threshold. Outlier threshold = (Inpatient Hospital Fee Schedule payment amount + hospital specific outlier factor).
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 + (0.8 x (costs - cost outlier threshold)).
NOTE: For purposes of determining whether a case qualifies as a cost outlier case under this subsection, implantable hardware and/or instrumentation reimbursed under subsection (8) below is excluded from the calculation of costs. Once an admission for DRGs 496 through 500 qualifies as a cost outlier case, any implantable hardware and/or instrumentation shall be separately reimbursed under subsection (8) below.
(d) 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.
(e) This section, except as provided in subsections (c)(7) and (c)(8), shall apply to covered inpatient hospital stays for which the day of admittance is on or after April 1, 1999.
(f) Subsections (c)(7) and (c)(8) shall remain in effect only through December 31, 2001, and shall not apply to admissions occurring on or after January 1, 2002.
AN IMPORTANT NOTE CONCERNING SUBSECTIONS (c)(7) AND (c)(8):
Labor Code Section 5318, (as added by Statutes of 2001, chapter 252, effective January 1, 2002,) provides that: "Notwithstanding any other provision of law, the termination date of December 31, 2001, provided in Section 9792.1(f) of Title 8 of the California Code of Regulations shall be extended until the effective date of new regulations adopted by the administrative director, as required by Section 5307.1, providing for the biennial review of the fee schedule for health care facilities." Sections 9792.1(c)(7) and (c)(8) will therefore remain in effect for admissions on or after January 1, 2002, and will not sunset.


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. (continued)