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HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The legislature finds that the rural hospitals
 2 of this State are essential to the provision of health care to
 3 all of our citizens.  All hospitals are hurt by reimbursement
 4 trends but the rural facilities are especially disadvantaged due
 5 to the low volume of patients and high expense of providing care
 6 in the remote areas of our State. In recognition of this fact,
 7 the federal government has passed 42 U.S.C. 1395i-4, which
 8 establishes the Medicare Rural Hospital Flexibility Program, a
 9 national program designed to assist states and rural communities
10 in improving access to essential health care services through the
11 establishment of limited service hospitals and rural health
12 networks.  The program creates the critical access hospital as a
13 limited service hospital eligible for Medicare certification and
14 reimbursement and supports the development of rural health
15 networks consisting of critical access hospitals, acute general
16 hospitals, and other health care providers.
17      The department of health has developed a Hawaii Rural Health
18 Plan for the Medicare Rural Hospital Flexibility Program ("Rural
19 Plan") to guide the implementation of the federal Medicare Rural

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 1 Hospital Flexibility Program. In order to optimize the benefits
 2 of this initiative, the legislature intends that this Act serve
 3 to modify current law by changing the methodology for calculating
 4 Medicaid reimbursements to the critical access hospitals.
 5 Pursuant to the Act, Medicaid reimbursements to critical access
 6 hospitals shall be calculated on a cost basis using Medicare
 7 reasonable cost principles.  The Act shall not be applied in a
 8 manner that requires reduction in reimbursement to other long
 9 term care providers.  The State's share of the matching funds
10 shall be provided through Hawaii Health Systems Corporation
11 appropriations to the extent funds are available.
12      To ensure federal reimbursement, the federal government must
13 approve the Rural Plan and the Medicaid payment methodology and
14 other modifications to the State Medicaid Plan.
15      SECTION 2.  As used in this Act, "critical access hospital"
16 means a hospital located in the State of Hawaii which is included
17 in the Rural Plan approved by the federal health care financing
18 administration and approved as a critical access hospital by the
19 department of health as provided in the Rural Plan and as defined
20 in 42 U.S.C. section 1395i-4.
21      SECTION 3.  Section 346-59, Hawaii Revised Statutes, is
22 amended by amending subsection (a) to read as follows:

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 1      "(a)  The department shall adopt rules under chapter 91
 2 concerning payment to providers of medical care.  The department
 3 shall determine the rates of payment due to all providers of
 4 medical care, and pay such amounts in accordance with the
 5 requirements of the appropriations act and the Social Security
 6 Act.  Payments to critical access hospitals for services rendered
 7 to Medicaid beneficiaries shall be calculated on a cost basis
 8 using Medicare reasonable cost principles."
 9      SECTION 4.  Section 346D-1.5, Hawaii Revised Statutes, is
10 amended to read as follows:
11      "346D-1.5 Medicaid reimbursement equity.  Not later than
12 June 30, 2003, there shall be no distinction between hospital-
13 based and nonhospital-based reimbursement rates for
14 institutionalized long-term care under Medicaid.  Reimbursement
15 for institutionalized intermediate care facilities and
16 institutionalized skilled nursing facilities shall be based
17 solely on the level of care rather than the location.  This
18 section is not applicable to critical access hospitals."
19      SECTION 5.  The State's share of matching funds shall be
20 provided through Hawaii Health Systems Corporation appropriations
21 to the extent funding is available.
22      SECTION 6.  New statutory material is underscored.

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 1      SECTION 7.  This Act shall take effect on July 1, 2000, and
 2 shall be repealed effective June 30, 2004.
 4                           INTRODUCED BY: ________________________

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