A Health Care Financing Administration (HCFA) $450,000 research and demonstration project grant included funding for a contract between a consortium of three rural Wisconsin hospitals, acting in cooperation with the Wisconsin Hospital Association and the Rural Wisconsin Health Cooperative (the Consortium), and WDHSS to implement a unified set of administrative rules, statutory language and pilot surveys to institutionalize the rural medical center as a new provider type. The followingupdate is taken from a 2/29/96 letter to the Region V HCFA office by Wisconsin's Administrator of the Division of Health, Kevin Piper.

Overview

The passage of a new law in Wisconsin, 1995 Wisconsin Act 98, creates a licensure category for health care providers known as rural medical centers. With the recent passage of enabling legislation for the rural medical center licensure category, the Division of Health is also seeking clarification on federal reimbursement and survey requirements for rural medical centers.

Statutory language authorizing the creation of the rural medical center licensure category originated in the 1995-97 Wisconsin biennial budget bill. The rural medical center language was later introduced as freestanding legislation in the Wisconsin Senate and Assembly in June and August of 1995. Hearings were held in September 1995 by the Senate committee on Health, Human Services and Aging and the Assembly Committee on Rural Affairs.

Rural medical center legislation was passed and signed into law as 1995 Wisconsin Act 98 in December 1995, to establish a category of health are providers to be licensed, inspected, and otherwise regulated by the Wisconsin Department of Health and Social Services (WDHSS) beginning on July 1, 1996. With recommendations from an external advisory committee, WDHSS has drafted a proposed administrative code, HSS 127, to implement the rural medical center enabling legislation.

Prior Correspondence

The Wisconsin Division of Health previously provided an abstract on the rural medical center initiative to the Health Care Financing Administration (HCFA) in a letter to Mr. Chester Stroyny dated February 9, 1995, from Ms. Judy Fryback, Director of the Bureau of Quality Compliance, and myself, then-Director of the Bureau of Health Care Financing. As Ms. Fryback and I explained in that letter, recognition of the rural medical center as a new licensure category was the central recommendation of a 1991 public/private study committee staffed by WDHSS. Ongoing development and implementation of the rural medical center category is being conducted under a portion of the $450,000 HCFA research and demonstration project entitled "Rural medical centers: Wisconsin's Alternative Model," which was awarded under the 1992 Rural Health Care Transition Grants Program.

On February 21, 1995, representatives from the Wisconsin Division of Health briefed Ms. Lucille Rinaldo of the HCFA Regional Office, Division of Medicaid and Managed Care Programs, on the history and intent of the rural medical center initiative and discussed methods, such as waivers fro demonstration projects under § 1115 of the Social Security Act, for securing HCFA approval of the rural medical center initiative. Since that time, WDHSS has emphasized the enactment of rural medical center enabling legislation as a prerequisite to pursuing resolution of federal reimbursement and survey issues involving the rural medical center category.

Development of Rural medical center Category under HCFA Research and Demonstration Project Grant

The HCFA $450,000 research and demonstration project grant included funding for a contract between a consortium of three rural Wisconsin hospitals, acting in cooperation with the Wisconsin Hospital Association and the Rural Wisconsin Health Cooperative (the Consortium), and WDHSS to implement a unified set of administrative rules, statutory language and pilot surveys to institutionalize the rural medical center as a new provider type. Accordingly, the Consortium and WDHSS entered into a $150,000, three-year contract for services to fund the development and implementation of a state licensure category for rural medical centers. The content and final approval of WDHSS's administrative rules is subject to all applicable public notice and comment mechanisms.

The grant also included funding for three projects that responded to local community health care needs and applied the Rural medical center model at the three rural hospitals in the Consortium.

1995 Wisconsin Act 98

Rural medical center enabling legislation is intended to alleviate regulatory complexity and reduce administrative costs that tend to undermine access to a variety of quality health care services in rural areas. 1995 Wisconsin Act 98 creates a unified application and facility survey process within one administrative code, in lieu of separate licensing and inspects for numerous classifications of health care services. This unified approach supports diversification of rural health care services and, in turn, better serves communities by tailoring health care services to local needs.

Licensure as a rural medical center is elective, solely at the provider's option. Under 1995 Wisconsin Act 98, a facility may choose licensure as a rural medical center if:

• It is located in a county, city, town, or village that has a population of less than 15,000 and in an area that the federal bureau of the census has not defined as an urbanized area, and
  
  
• It provides two or more types of health care services subject to facility survey inspections by WDHSS to determine compliance with state and federal requirements.

"Health care services" include those provided in or by a hospital, nursing hoe, hospice, rural health clinic, ambulatory surgery center, rural primary care hospital, home health agency, outpatient physical therapy service, outpatient occupational therapy service, end-stage renal disease service or other services that are specified in rules that WDHSS promulgates.

Combinations of health care services at a rural medical center could include, for example, a rural nursing home that also operates a home health agency or hospice program, or a rural hospital that also operates a nursing home.

Questions Presented with Respect to Federal Reimbursement and Survey Requirements

Section 3 of 1995 Wisconsin Act 98 provides that WDHSS may conduct unannounced surveys or inspections of a rural medical center facility, or investigations of complains the Department receives concerning the operation of a rural medical center (see provision of Act to be codified at Wis. Stat. § 50.53(1). WDHSS has drafted section 127.05(1) of the proposed administrative rules to provide that the Department may conduct facility surveys or inspections every two years, as often as required by the federal government or as the Department, within its discretion, deems necessary. This language is intended to facilitate a single, consolidated survey every two years for rural medical centers instead of the current separate inspections for the various classifications of health care services.

As the Wisconsin Division of Health is preparing for the eventual operation of the rural medical center licensure category, I am seeking clarification of the following federal reimbursement and survey issues:

• What steps must WDHSS take to obtain federal recognition of the rural medical center provider category for purposes of Medicare and Medicaid reimbursement?
  
  
• What steps must WDHSS take to ensure that payment under Medicare and Medicaid are forthcoming to providers for services provided at or by a rural medical center?
  
  
• If HCFA determines that it will not recognize the rural medical center as a reimbursable provider type, will HCFA nonetheless authorize reimbursement under Medicare and Medicaid for the actual health care services provided at a state-licensed rural medical center?
  
  
• If HCFA determines that it will not recognize the rural medical center as a reimbursable provider type, will HCFA nonetheless recognize the survey results of the health care services provided at rural medical centers?
  
  
• Will WDHSS be required to obtain any waivers, for example under § 1115 of the Social Security Act, from HCFA to implement a two-year consolidated survey of combinations of health care services at rural medical centers where the two-year framework for consolidated surveys runs counter to HCFA's existing timetables for individual facility surveys?

It is appropriate for HCFA to reimburse providers for health care services provided under the rural medical center category or licensure designation and to grant any waivers necessary to implement the consolidated, two-year survey timetable for rural medical centers. Such decisions would be consonant with the rural medical center project activity conducted to date under the HCFA research and demonstration grant and the subsequent Consortium/WDHSS contract for services. Moreover, HCFA's reimbursement of services provided at rural medical centers, granting of waivers for the two-year consolidated survey timetable and ultimately certification of the rural medical center as a provider type would promote the following public health and provider benefits for rural health care:

• Relieve unnecessary burdens placed on rural health care facilities by Wisconsin statutes and administrative rules while maintaining a high level of quality of care.
  
  
• Reduce the current splintered regulation of hospitals, nursing home, home health agencies, and hospices which commonly occurs for rural facilities.
  
  
• Relieve provider frustration and misperception stemming from inadequate regulatory communication.
  
  
• Facilitate the sharing of health care staff between nominally separate health care units.
  
  
• Facilitate an expedited departmental review and approval process for new licensed programs initiated by rural medical centers.
  
  
• Acknowledge socio-demographic changes in the rural health care environment.
  
  
• Reduce unnecessary expenses and encourage more effective health care delivery.
  
  
• Reduce inconsistent or redundant rules and surveys.
  
  
• Facilitate provider diversification into other services.