{"data":{"id":"us-ky/krs-205.6406","jurisdiction":"us-ky","citation":"KRS 205.6406","heading":"Hospital rate improvement programs -- Calculation and payment of","body":"assessment on hospitals to provide state matching dollars for federal Medicaid\nfunds -- Supplemental payments to hospitals -- Federal participation and\napproval required for implem entation of programs -- Modification upon\napproval of supplemental payment formula -- Program to increase outpatient\nreimbursement.\n(1) To the extent allowable under federal law, the department shall develop the\nfollowing programs to increase Medicaid reim bursement for inpatient and\noutpatient hospital services provided by a qualifying hospital to Medicaid\nrecipients:\n(a) A program to increase inpatient reimbursement to qualifying hospitals within\nthe Medicaid fee -for-service program in an aggregate amount equivalent to\nthe UPL gap;\n(b) A program to increase inpatient reimbursement to qualifying hospitals within\nthe Medicaid managed care program in an aggregate amount equivalent to the\nmanaged care gap for inpatient services; and\n(c) A program to increase outpatient reimbursement to qualifying hospitals within\nthe Medicaid managed care program in an aggregate amount equivalent to the\nmanaged care gap for outpatient services.\n(2) On an annual basis prior to the start of each program year, the department shall\ndetermine:\n(a) The maximum allowable UPL for inpatient services provided in the Kentucky\nMedicaid fee-for-service program;\n(b) The fee-for-service UPL gap for applicable ownership groups;\n(c) A per discharge uniform add -on amount to be applied to Medicaid fee-for-\nservice discharges at qualifying hospitals for that program year, determined\nby dividing the UPL gap for the applicable ownership group by total fee -for-\nservice hospital inpatient discharges at qualifying hospitals in the data used to\ncalculate the UPL gap. Claims for discharges that already receive an enhanced\nrate at qualifying hospitals that also are classified as a pediatric teaching\nhospital or as a psychiatric access hospital shall be excluded from the\ncalculation of the per discharge uniform add-on, unless the department is\nrequired to include these claims to obtain federal approval;\n(d) The maximum managed care gap for inpatient services;\n(e) A per discharge uniform add -on amount to be applied to Medicaid managed\ncare discharges at qualifying hospitals for that program year in an amount that\nis calculated by dividing the managed care gap for inpatient services by total\nmanaged care in-state qualifying hospital inpatient discharges in the data used\nto calculate the managed care gap. Claims for discharges that already receive\nan enhanced rate at qualifying hospitals that also are classified as a pediatric\nteaching hospital or as a psychiatric access hospital shall be excluded from the\ncalculation of the per discharge uniform add -on, unless the de partment is\nrequired to include these claims to obtain federal approval;\n(f) The maximum managed care gap for outpatient services; and\n(g) A uniform add-on amount to be paid to each qualifying hospital to supplement\nMedicaid managed care payments for outpatient services performed by the\nqualifying hospital in a program year. The uniform add -on amount payable to\neach qualifying hospital shall be:\n1. A uniform percentage increase calculated by dividing the managed care\ngap for outpatient services by the total payments from managed care to\nin-state qualifying hospitals for outpatient services taken from the data\nused to calculate the managed care  gap for outpatient services unless a\ndifferent method for calculating the uniform add -on amount is required\nby the Centers for Medicare and Medicaid Services; and\n2. Made as a lump-sum payment to each qualifying hospital on a quarterly\nbasis unless a diff erent method for paying qualifying hospitals the\nuniform add -on amount is required by the Centers for Medicare and\nMedicaid Services.\nAt least thirty (30) days prior to the beginning of each program year, the department\nshall provide each qualifying hospi tal the opportunity to verify the base data to be\nutilized in both the fee -for-service and managed care gap calculations for both\ninpatient and outpatient services, with data sources and methodologies identified.\n(3) On a quarterly basis in the program year, the department shall:\n(a) Calculate a fee -for-service quarterly supplemental payment for each\nqualifying hospital using fee -for-service claims for inpatient discharges paid\nin the quarter to the qualifying hospital multiplied by the uniform add -on\namount determined in subsection (2)(c) of this section;\n(b) Calculate a managed care quarterly supplemental payment for each qualifying\nhospital to be paid by each managed care organization using managed care\nencounter claims for inpatient discharges received in the quarter multiplied by\nthe uniform add-on amount determined in subsection (2)(e) of this section;\n(c) Calculate a managed care quarterly supplemental payment for each qualifying\nhospital to be paid by each managed care organization as determined in\nsubsection (2)(g) of this section;\n(d) Make the quarterly supplemental payment calculated under paragraph (a) of\nthis subsection;\n(e) Provide each managed care organization with a listing of the supplemental\npayments as calculated under paragraphs (b) and (c ) of this subsection to be\npaid by each managed care organization to each qualifying hospital for both\ninpatient and outpatient services;\n(f) Provide each managed care organization with a supplemental capitation\npayment to cover the managed care organizati on's quarterly supplemental\npayments to be paid to qualifying hospitals for both inpatient and outpatient\nservices in the quarter;\n(g) Determine the amount of state funds necessary to obtain federal matching\nfunds that equal the total quarterly supplementa l payments to be paid to all\nqualifying hospitals in both the fee -for-service and the Medicaid managed\ncare programs authorized by this section;\n(h) For purposes of the inpatient program authorized by subsection (1)(b) of this\nsection, determine a per disc harge hospital inpatient assessment for the\nquarter for each qualifying hospital, which shall be calculated by first\napplying towards the state share determined under paragraph (g) of this\nsubsection the qualifying hospital disproportionate share percentag e of the\nexcess disproportionate share taxes and then dividing the remaining state\nshare by the total discharges reported by all in -state qualifying hospitals on\nthe Medicare cost report filed by those qualifying hospitals in the calendar\nyear two (2) years prior to the program year;\n(i) Determine each qualifying hospital's quarterly inpatient assessment by\nmultiplying the assessment established in paragraph (h) of this subsection by\nthe hospital's total discharges from the qualifying hospital's Medicare co st\nreport filed in the calendar year two (2) years prior to the program year;\n(j) For purposes of the outpatient program authorized by subsection (1)(c) of this\nsection, determine each qualifying hospital's assessment to be contributed to\nthe state's share  of this outpatient program as calculated under paragraph (g)\nof this subsection. Each qualifying hospital's outpatient assessment shall be a\npercentage of the state share calculated as the qualifying hospital's total\noutpatient net revenue divided by the total outpatient net revenue of all\nqualifying hospitals on the Medicare cost reports filed in the calendar year\ntwo (2) years prior to the program year;\n(k) Determine each qualifying hospital's quarterly outpatient assessment by\nmultiplying the outpatient  portion of the assessment established in paragraph\n(g) of this subsection by the hospital's percentage established in paragraph (j)\nof this subsection; and\n(l) Provide each qualifying hospital with a notice sent on the same day as the\ndistribution to mana ged care organizations of the supplemental capitation\npayments pursuant to paragraph (f) of this subsection, of the qualifying\nhospital's quarterly assessment, that shall state the total amount due from the\nassessment, the date assessment is due, the total  number of inpatient paid\nclaims and total outpatient payments used to calculate the qualifying hospital's\nquarterly supplemental distribution, and the amount of quarterly supplemental\ndistribution payments for inpatient and outpatient services due to be r eceived\nby the qualifying hospital from the department and each Medicaid managed\ncare organization.\n(4) In calculating the quarterly supplemental payments under subsection (3)(a), (b), and\n(c) of this section for qualifying hospitals that are also classifi ed as a pediatric\nteaching hospital or as a psychiatric access hospital, no add -on shall be applied to\nthe paid claims for the services for which that hospital also receives supplemental\npayments pursuant to state plan methodologies and managed care contracts in effect\non January 1, 2019.\n(5) Each qualifying hospital shall receive four (4) quarterly supplemental payments in\nthe program year, as determined under subsection (3) of this section.\n(6) Medicaid managed care organizations shall pay the supplementa l payments to\nqualifying hospitals within five (5) business days of receiving the supplemental\ncapitation payment from the department.\n(7) A qualifying hospital shall pay its quarterly assessment no later than fifteen (15)\ndays from the date the qualifying  hospital is notified of the assessment from the\ndepartment. A non -state government -owned hospital may make payment of its\nassessment through an intergovernmental transfer. The department may delay or\nwithhold a portion of the supplemental payment if a hos pital is delinquent in its\npayment of a quarterly assessment.\n(8) The department shall complete the actions required under subsection (3) of this\nsection expeditiously and within the same quarter as all required information is\nreceived.\n(9) Qualifying hospitals may notify the department of errors in the data used to make a\nquarterly supplemental payment by providing documentation within thirty (30) days\nof receipt of a quarterly supplemental payment from a Medicaid managed care\norganization. If the departme nt agrees that an error occurred in a qualifying\nhospital's quarterly supplemental payment, the department shall reconcile the\npayment error through an adjustment in the qualifying hospital's next quarterly\nsupplemental payment.\n(10) The programs in this s ection shall not be implemented if federal financial\nparticipation is not available or if the provider tax waiver is not approved. A\nqualifying hospital shall have no obligation to pay an assessment if any federal\nagency determines that federal financial p articipation is not available for any\nassessment. Any assessments received by the department that cannot be matched\nwith federal funds shall be returned pro rata to the qualified hospitals that paid the\nassessments.\n(11) The department may implement the ho spital rate improvement programs only if\nMedicaid state plan amendments required for federal financial participation are\napproved by the United States Centers for Medicare and Medicaid Services.\n(12) The assessment authorized under KRS 205.6405 to 205.6408  shall be restricted for\nuse to accomplish the inpatient and outpatient reimbursement increases established\nunder this section. The Commonwealth shall not maintain or revert funds received\nunder KRS 205.6405 to 205.6408 to the state general fund, except th at the\ndepartment may receive two hundred fifty thousand dollars ($250,000) in state\nfunds each program year to administer the programs. The department shall not\nestablish Medicaid fee -for-service rate -setting methodology changes that result in\nrate reductions from policies in effect as of October 1, 2018, for acute care hospitals\nand July 1, 2019, for hospitals paid on a per diem basis.\n(13) The department shall promulgate administrative regulations to implement the\nprovisions of KRS 205.6405 to 205.6408.\n(14) If the department submits, and the United States Centers for Medicare and\nMedicaid Services (CMS) approves, a supplemental payment form ula that permits\nthe managed care gap to be calculated based upon a percentage of average\ncommercial rates (ACR) that results in a total annual supplemental payment greater\nthan eighty percent (80%) of ACR for both inpatient and outpatient services,\ninstead of the Medicare upper payment limit, then the hospital rate improvement\nprograms for qualifying hospitals shall be modified as follows:\n(a) The amount of funds the department may receive to administer the programs\nas stated in subsection (12) of this sec tion shall be replaced by an\nadministrative fee that shall be calculated to be an amount equal to four\npercent (4%) of the assessment collected under this section. The\nadministrative fee payable under this paragraph shall accrue only for\nsupplemental payme nts attributable to state fiscal year 2021 -2022 and for\nstate fiscal years thereafter so long as CMS approves the supplemental\npayment formula in accordance with this subsection. The administrative fee\nshall be paid within thirty (30) days after supplement al payments for inpatient\nand outpatient services are issued to qualifying hospitals; and\n(b) The department shall not be required under KRS 205.6408 to transfer any\nexcess disproportionate share taxes to the hospital Medicaid assessment fund\nfor use as state matching dollars for the payments made under this section.\n(15) To the extent federal matching funds are available, the department may create a\nprogram to increase outpatient reimbursement to qualifying hospitals within the\nMedicaid fee -for-service pro gram in an aggregate amount equivalent to the UPL\ngap.","path":["KRS Chapter 205"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=53464","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:52:04Z","sha256":"714cdee6016c7df4debc818fdbbe324a0ecedf1185d701c63846d03cd3f3cdeb","source_id":"us-ky","stale":false,"prev":"us-ky/krs-205.6405","next":"us-ky/krs-205.6407"},"notice":"GroundRules: Original legal text. Not legal advice."}