Current Status Introducing Body:House Bill Number:4098 Primary Sponsor:Rudnick Committee Number:27 Type of Legislation:GB Subject:Hospital Rate Setting Commission Residing Body:House Current Committee:Medical, Military, Public and Municipal Affairs Computer Document Number:436/12903AC.93 Introduced Date:19930414 Last History Body:House Last History Date:19930414 Last History Type:Introduced, read first time, referred to Committee Scope of Legislation:Statewide All Sponsors:Rudnick Type of Legislation:General Bill
Bill Body Date Action Description CMN Leg Involved
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4098 House 19930414 Introduced, read first time, 27
referred to Committee
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TO AMEND TITLE 44, CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 113 SO AS TO ENACT THE HOSPITAL RATE SETTING COMMISSION ACT WHICH ESTABLISHES A HOSPITAL RATE SETTING COMMISSION AS AN AGENCY OF STATE GOVERNMENT AND TO PROVIDE FOR THE MEMBERS OF THE COMMISSION AND ITS POWERS AND DUTIES; WHICH PROVIDES COST BASES AND THAT RATES CHARGED IN HEALTH CARE FACILITIES MUST BE APPROVED BY THE COMMISSION; AND WHICH PROVIDES PROCEDURES FOR APPEALS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. It is declared to be the public policy of the State that hospital services of the highest quality and of demonstrated need, efficiently provided and properly utilized at a reasonable cost, are of vital concern to the public health. In order to provide for the protection and promotion of the health of the inhabitants of the State, promote the financial solvency of hospitals, and contain the rising cost of hospital services, the Hospital Rate Setting Commission, established pursuant to this chapter, has the central, comprehensive responsibility for the development and administration of the State's policy with respect to hospital cost containment programs, and all public and private institutions, whether state, county, municipal, incorporated or not incorporated, serving principally as facilities for the prevention, diagnosis, or treatment of human disease, pain, injury, deformity, or physical condition, are subject to the provisions of this chapter.
SECTION 2. Title 44 of the 1976 Code is amended by adding:
`Section 44-113-10. This chapter may be cited as the `Hospital Rate Setting Commission Act'.
`Section 44-113-20. The following words or phrases, as used in this act, have the following meanings, unless the context otherwise requires:
(1) `Health care facility' means the same as this term is defined in Section 44-7-130(10).
(2) `Health service` means the same as this term is defined in Section 44-7-130(11).
(3) `Commission' means the Hospital Rate Setting Commission established pursuant to this act.
(4) `Preliminary cost base' means that proportion of a hospital's current cost which may reasonably be required to be reimbursed to a properly utilized hospital for the efficient and effective delivery of appropriate and necessary health care services of high quality required by the hospital's mix of patients. The preliminary cost base initially may include costs identified by the executive director of the commission and approved or adjusted by the commission as being in excess of that proportion of a hospital's current costs identified above, which excess costs must be eliminated in a timely and reasonable manner prior to certification of the revenue base. The preliminary cost base must be established in accordance with regulations promulgated by the commission.
(5) `Certified revenue base' means the preliminary cost base adjusted by the commission, as appropriate and necessary pursuant to regulations promulgated by the commission, to provide for the financial solvency of a hospital which is properly utilized and which delivers, effectively and efficiently, appropriate and necessary health care services of a high quality required by its mix of patients.
(6) `Hospital' means the same as this term is defined in Section 44-7-130(12).
Section 44-113-30. (A) There is established the Hospital Rate Setting Commission which consists of nine members, one from each congressional district in the State and one from the State at large, all of whom must be appointed by the Governor upon the advice and consent of the Senate, and the Commissioner of the Department of Health and Environmental Control and the Chief Insurance Commissioner, or their designees from within their agencies, who serve as ex officio voting members of the commission. The terms of the appointed members are for four years and until their successors are appointed, confirmed by the Senate, and qualify, except that the initial appointed members from the First, Third, and Fifth Congressional Districts shall serve terms of two years and until their successors are appointed, confirmed, and qualify; thereafter, these members or their successors shall serve terms of four years. No appointed member is eligible for appointment for more than two consecutive four-year terms. The designees of the Commissioner of the Department of Health and Environmental Control and of the Chief Insurance Commissioner, if any, must be officials with the rank of deputy or assistant commissioner.
(B) Three of the members appointed by the Governor must be consumers of health care services who are not providers of health care services, and two of the members appointed by the Governor must have experience in hospital administration or finance.
(C) The commission shall annually select a chairman and a vice-chairman from among its total membership. Five members of the commission constitute a quorum, and no action of the commission may be taken except upon the affirmative vote of a majority of the commission's total membership. The commission shall meet at least six times a year in Columbia and at any other time and location as directed by the chairman or as requested by five other members.
(D) Any appointed member may be removed from office by the Governor for good cause shown. Any vacancy occurring in the membership of the commission for any reason must be filled in the same manner as original appointment but for the unexpired term only.
(E) Commission members shall receive no compensation for the performance of their duties but must be allowed the usual mileage, per diem, and subsistence for the actual performance of their duties as provided by law for members of state boards, committees, and commissions.
(F) The commission shall select an executive director who shall carry out the policies of the commission and any duties, functions, and responsibilities assigned him by the commission or by the provisions of this act. The executive director must be paid an annual salary as may be appropriated by the General Assembly in the annual General Appropriations Act. The executive director, with the approval of the commission, shall employ such staff, clerical, administrative, or otherwise, and, also with the approval of the commission, purchase such supplies and equipment as may be necessary for the commission to discharge its duties faithfully, within the monetary limits as may be appropriated by the General Assembly for these purposes in the annual General Appropriations Act.
Section 44-113-40. (A) The executive director of the commission, to effectuate the provisions and purposes of this act, has the power to inquire into health services and the operation of health care facilities and to conduct periodic inspections of these facilities with respect to the fitness and adequacy of the premises, equipment, personnel, rules and bylaws, and the adequacy of financial resources and sources of future revenues.
(B) The commission shall promulgate regulations in accordance with the state's Administrative Procedures Act to effectuate the provisions and purposes of this act, including, but not limited to: (1) the establishment of requirements for a uniform statewide system of reports and audits relating to the quality of health care provided, health care facility utilization, and costs; and (2) certification by the commission of schedules of rates, payments, reimbursement, grants, and other charges for health services.
(C) The commission may enter into contracts with any government agency, institution of higher learning, voluntary nonprofit agency, or appropriate planning agency or council, and these entities are authorized to enter into contracts with the commission to effectuate the provisions and purposes of this act.
(D) The executive director of the commission may provide consultation and assistance to health care facilities in operational techniques, including, but not limited to, planning, principles of management, and standards of health services.
(E) At the request of the executive director, health care facilities shall furnish to the commission reports and information as the commission may require to effectuate the provisions and purposes of this act, excluding confidential communications from patients.
(F) The executive director of the commission may institute or cause to be instituted in a court of competent jurisdiction proceedings to compel compliance with the provisions of this act or the determinations, regulations, and orders of the commission.
Section 44-113-50. Rates charged by any health care facility in this State for any of its services are subject to the approval of the commission pursuant to the provisions of this act and the regulations promulgated by the commission under the authority of this act. A health care facility which makes charges for services in accordance with rates which have not received commission approval is subject to loss of licensure as a health care facility in this State for a period of two years.
Section 44-113-60. No health care facility may be operated in this State unless it:
(1) establishes and maintains a uniform system of cost accounting approved by the commission; and
(2) establishes and maintains a uniform system of reports and audits meeting the requirements of the commission.
Section 44-113-70. (A) The executive director shall determine the order in which hospitals in the State of South Carolina shall have their preliminary cost base and appropriate schedule of rates approved by the commission. The executive director shall propose and the commission approve or adjust the preliminary cost base, and the commission shall approve an appropriate schedule of rates for all hospitals within eighteen months of the effective date of this act. The schedule of rates must be reasonable and sufficient to provide the revenue requirements of the preliminary cost base and must be adjusted from time to time, as appropriate, to reach the certified revenue base.
(B) The commission shall certify the revenue base, so long as the conditions described in items (4) and (5) of Section 2 have been met, and shall perform any other duties which may be specified elsewhere in this act.
(C) The commission shall promulgate regulations, in accordance with the state's Administrative Procedures Act, as may be necessary to effectuate the purposes of this act.
(D) A hospital must continue to be reimbursed under the rate setting system in effect on the day preceding the effective date of this act, except as that system is amended by regulation, until the commission approved the hospital's preliminary cost base.
Section 44-113-80. (A) No government agency and no hospital service corporation organized under the laws of this State and no other purchasers of health care services may purchase, pay for, or make reimbursement or grant-in-aid for any health care service provided by a health care facility unless at the time the service was provided, the health care facility possessed a valid license or was otherwise authorized to provide the service.
(B) Payment by government agencies and payment by hospital service corporations organized under the laws of this State for health care services provided by a hospital must be at reasonable rates approved by the commission as provided for by regulations promulgated by the commission.
(C) The schedule of rates must be reasonable and sufficient to provide the revenue requirements of the certified revenue base of a hospital, considering the health care system as a whole and based on financial elements approved by the commission. Rates of payment by hospital service corporations organized under the law of this State for health care services provided by a hospital must be set by the commission. Payment by all other purchasers of health care services provided by a hospital must be at reasonable rates approved by the commission as provided in this act. All payment rates must be equitable for each payor or class of payors without discrimination or individual preference except for quantifiable economic benefits rendered to the institution or to the health care delivery system taken as a whole. In addition to other such benefits which the commission may consider, it shall consider the following, if found to be quantifiable:
(1) degree of promptness and volume of payments to hospitals so that hospitals are provided with funds for current financing of their services; and
(2) broad provision of health insurance coverages which are not otherwise affordable or obtainable at premium rates which are not self-supporting. In determining the quantifiable economic benefits to which consideration must be given in approving payment rates, the commission may consider overall financial benefits to society which are provided by programs offered by a payor or class of payors.
(D) Payment by government agencies and payment by hospital service corporations organized under the laws of this State for health services provided by health care facilities other than hospitals must be at reasonable rates set by the commission based on financial elements approved by the commission. Rates of payment by hospital service corporations organized under the laws of this State for health care services provided by a health care facility other than hospitals must be set in consultation with the Chief Insurance Commissioner.
(E) The financial elements of the preliminary cost base and of the certified revenue base must include the reasonable cost of the following, as defined in regulations promulgated by the commission: direct patient care; principal and interest payments; paid taxes, excluding income taxes; educational, research, and training programs, not otherwise paid for by the State; the provision of health care services to individuals unable to pay for them for reasons of indigency; bad debts, so long as adequate recovery procedures are followed; preservation, replacement, and improvement of facility and equipment subject to appropriate planning requirements; and reasonable working capital. These financial elements may include, where applicable and appropriate, a reasonable return on investment where a hospital is operating efficiently and effectively. In determining proposed payments to hospitals, the commission shall take into account a facility's income from all sources, including specific purpose grants and other funds from governmental sources, but excluding income and principal from board or donor restricted funds, gifts, and special fund raising projects.
(F) To establish and maintain a fair and equitable system for determining the payments, the executive director of the commission shall require each health care facility to report such financial, statistical, and patient information as may be required, in accordance with a uniform system of reporting established by him. The commission may promulgate regulations which assess penalties for failure to report such information within the time as may be prescribed in the regulations.
Section 44-113-90. (A) The commission shall make the determinations and hear appeals provided for in this act in a timely manner pursuant to regulations promulgated by the commission. The regulations must require that in the event the commission does not perform its duties within the time period specified in the regulations the commission may permit a hospital to make a temporary reasonable change in rates which is effective immediately, when it considers it in the public interest to do so. Notwithstanding the temporary change in rates, the review procedure set forth in this section must be conducted by the commission as soon thereafter as is possible.
(B) Pursuant to regulations promulgated by the commission, the executive director of the commission shall propose and the commission shall make automatic periodic adjustments to each preliminary cost base or certified revenue base for changes in economic factors reasonably calculated to provide for the effects of general economic inflation or deflation; for industrywide changes in the efficiency of delivering health care services; and for each hospital's actual changes in volume and case-mix, which are necessary and appropriate. The commission shall approve an appropriate change in the schedule of rates to reflect these adjustments.
(C) Pursuant to regulations promulgated by the commission, the commission shall consider adjustments to the certified revenue bases and schedules of rates, so long as the adjustment:
(1) result from statutes and regulations affecting the delivery of health care; and
(2) may affect one or more hospitals. The adjustments must take into account the effectiveness and efficiency of the health care delivery system as a whole. Where appropriate the commission may sit en banc and hold public hearings in order to obtain the evidence required to support its conclusions and determinations. In the case of these hearings the commission shall provide actual notice to the affected planning and licensing authorities and hospitals and to the State Consumer Advocate.
(D) Pursuant to regulations promulgated by the commission, all other changes in the commission's determinations require a review by the commission in a public hearing of the entire preliminary cost base or certified revenue base and schedule of rates. Determinations of the commission may be appealed by hospitals, the Consumer Advocate, affected planning, licensing, or inspection agencies and payors, and other affected parties, and must be conducted in accordance with the Administrative Procedures Act. During the pendency of any appeal, the schedule of rates approved by the commission pursuant to this chapter shall remain in effect.
(E) In all appeals, the burden of proof is on the petitioner. All determinations rendered under this act must be consistent with regulations and must set forth in detail the commission's reasoning and conclusions regarding the parties and considerations specified in this chapter.
Section 44-113-95. (A) The commission shall adjust a hospital's schedule of rates to ensure that services which are provided to emergency room patients who do not require those services on an emergency basis are reimbursed at a rate appropriate for primary care, according to regulations promulgated by the commission. Nothing in this section may be construed to restrict the right of the commission to increase a hospital's schedule of rates for required emergency services, except that the increase may not be solely to offset a reduction in hospital revenue as a result of reduced rates for primary care provided in the emergency room.
(B) Nothing in this section may be construed to permit a hospital to refuse to provide emergency room services to a patient who does not require the services on an emergency basis."
SECTION 3. This act takes effect upon approval by the Governor.