DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services
San Francisco Regional Office
90 Seventh Street, Suite 5-300 (5W) San Francisco, CA 94103-6706

DIVISION OF MEDICAID & CHILDREN’S HEALTH OPERATIONS

Tom Betlach, Director
Arizona Health Care Cost Containment System
801 East Jefferson Street
Phoenix, AZ 85034

Dear Mr. Betlach:

April 27, 2015

Enclosed is an approved copy of Arizona State Plan Amendment (SPA) No. 14-013-B.  This amendment extends an outpatient hospital reimbursement rate reduction effective for claims with dates of service through September 30, 2015. In the period specified by the SPA, reimbursement will be reduced by 5 percent of the payment that otherwise would have been made under the methodology in effect as of October 1, 2011.

The effective date of this SPA is October 1, 2014 as requested.  Enclosed are the following approved State Plan pages to be incorporated within your approved State Plan:

•	Attachment 4.19-B, pages 1 - 1(a)

If you have any questions, please have your staff contact Brian Zolynas at (415) 744-3601 or at brian.zolynas@cms.hhs.gov.

Sincerely,

/s/

Hye Sun Lee
Acting Associate Regional Administrator
Division of Medicaid & Children’s Health Operations

cc:  Jessica Woodard
HeeYoung Ansell

DEPARTMENT OF HEALTH AND HUMAN SERVICES	 FORM APPROVED CENTERS FOR MEDICARE AND MEDICAID SERVICES	OMB NO. 0938-0193
TRANSMITTAL AND NOTICE OF APPROVAL OF
STATE PLAN MATERIAL

FOR: Centers for Medicare and Medicaid Services	1. TRANSMITTAL NUMBER:
14-013B	2. STATE
Arizona	
	3. PROGRAM IDENTIFICATION: TITLE XIX OF THE
SOCIAL SECURITY ACT (MEDICAID)	
TO: REGIONAL ADMINISTRATOR
CENTERS FOR MEDICARE AND MEDICAID SERVICES DEPARTMENT OF HEALTH AND HUMAN SERVICES	4. PROPOSED EFFECTIVE DATE
October 1, 2014	
5. TYPE OF PLAN MATERIAL (Check One):

NEW STATE PLAN	AMENDMENT TO BE CONSIDERED AS NEW PLAN	AMENDMENT	
COMPLETE BLOCKS 6 THRU 10 IF THIS IS AN AMENDMENT (Separate Transmittal for each amendment)	
6. FEDERAL STATUTE/REGULATION CITATION:

42 CFR 447 Subpart C	7. FEDERAL BUDGET IMPACT:

FFY 15: Forthcoming $2,011,000	
8. PAGE NUMBER OF THE PLAN SECTION OR ATTACHMENT:

Att. 4.19-B, page 1(a).	9. PAGE NUMBER OF THE SUPERSEDED PLAN SECTION
OR ATTACHMENT (If Applicable): Same	
10. SUBJECT OF AMENDMENT:

Continues current outpatient hospital reimbursement rates for the period October 1, 2014 to September 30, 2015.	
11. GOVERNOR’S REVIEW (Check One):
GOVERNOR’S OFFICE REPORTED NO COMMENT	OTHER, AS SPECIFIED: COMMENTS OF GOVERNOR’S OFFICE ENCLOSED
NO REPLY RECEIVED WITHIN 45 DAYS OF SUBMITTAL	
12. SIGNATURE OF STATE AGENCY OFFICIAL:	16. RETURN TO:

Monica Coury
801 E. Jefferson, MD#4200
Phoenix, Arizona 85034	
13. TYPED NAME:
Monica Coury		
14. TITLE:
Assistant Director		
15. DATE SUBMITTED:
October 31, 2014		
FOR REGIONAL OFFICE USE ONLY	
17. DATE RECEIVED:
October 31, 2014	18. DATE APPROVED:
April 27, 2015	
PLAN APPROVED – ONE COPY ATTACHED	
19. EFFECTIVE DATE OF APPROVED MATERIAL:
October 1, 2014	20. SIGNATURE OF REGIONAL OFFICIAL:
/s/	
21. TYPED NAME:
Hye Sun Lee	22. TITLE: Acting Associate Regional Administrator,
Division of Medicaid & Children’s Health Operations	
23. REMARKS:
Box 7: Pen & Ink change made per State on 3/27/15 RAI response.	

FORM HCFA-179 (07-92)

State: ARIZONA
METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES OTHER TYPES OF CARE

Attachment 4.19-B Page 1

The following is a description of methods and standards for determining payment rates for specific services when
payments are made directly to providers. Fee-for-services payments are made in accordance with the Arizona Health Care Cost Containment System Fee-For-Service Provider Manual and are subject to the limitations set forth in Attachment 3.1- A of the State Plan. AHCCCS rates were set as of October 1, 2014, and are effective for dates of service on or after that date. AHCCCS rates are published on the agency’s website at www.azahcccs.gov/commercial/ProviderBilling/rates/rates.aspx and apply to the following services: Outpatient Hospital; Laboratory; Pharmacy; Hospice; Clinic Services, including Freestanding Ambulatory Surgery Centers and Freestanding Dialysis Centers; Migrant Health Center, Community Health Center and Homeless Health Center Services, Home Health Services, including Durable Medical Equipment, Supplies and Prosthetic Devices; Diagnostic, Screening and Preventive Services; EPSDT Services; Freestanding Birth Centers; Behavioral Health; Family Planning; Physician; Nurse-Midwife; Pediatric and Family Nurse Practitioner; Other Licensed Practitioner; Dental; Vision; Respiratory Care; Transportation; Private Duty Nurse; Other Practitioners; Physical Therapy; Occupational Therapy; Services for individuals with speech, hearing and language disorders; Prosthetic devices; Screening; Preventative; Rehabilitation.

•    Outpatient Hospital Services
From July 1, 2004 through June 30, 2005, AHCCCS shall reimburse a hospital by applying a hospital-specific outpatient cost- to-charge ratio to covered charges.   If the hospital increases its charges for outpatient services filed with the Arizona
Department of Health Services by more than 4.7 per cent for dates of service effective on or after July 7, 2004, the hospital- specific cost-to-charge ratio will be reduced by the amount that it exceeds 4.7 per cent. If charges exceed 4.7 per cent, the effective date of the increased charges will be the effective date of the adjusted AHCCCS cost-to-charge ratio.

For dates of service beginning July 1, 2005, AHCCCS shall reimburse hospitals for outpatient acute care hospital services from a prospective fee schedule, by procedure code, established by AHCCCS.  Hospitals with similar characteristics (peer groups) such as: rural/CAH designation, bed size, pediatric emphasis, special needs hospitals, public ownership, GME programs or Level I Trauma Centers, may be paid percentage adjustments above the fee schedule amount not to exceed the total payments received under comparable circumstances pursuant to Medicare upper limits.  Rural hospitals, defined as hospitals in Arizona, but outside Maricopa and Pima counties, may be paid an adjustment above the fee schedule amount not to exceed the total payments received under comparable circumstances pursuant to Medicare upper limits.

Services that do not have an established fee specified by the AHCCCS’ outpatient hospital prospective fee schedule will be paid by multiplying the charges for the service by a statewide outpatient cost-to-charge ratio. For dates of service July 1, 2005 through September 30, 2011, the statewide outpatient cost-to-charge ratio is computed from hospitals’ 2002 Medicare Cost Reports.

For dates of service beginning October 1, 2011, the statewide cost-to-charge ratio calculation shall equal either the CMS Medicare Outpatient Urban or the CMS Medicare Outpatient Rural Cost to Charge Ratio for Arizona.  The urban cost-to- charge ratio will be used for hospitals located in a county of 500,000 residents or more and for out-of-state hospitals. The rural cost-to-charge ratio will be used for hospitals located in a county of fewer than 500,000 residents.

Hospitals shall not be reimbursed for emergency room treatment, observation hours, or other outpatient hospital services performed on an outpatient basis, if the eligible person is admitted as an inpatient to the same hospital directly from the emergency room, observation or other outpatient department. The emergency room, observation, and other outpatient hospital services provided before the admission are included in the inpatient reimbursement.

Outpatient hospital payments shall be subject to the quick pay discounts and the slow pay penalties described in Attachment
4.19-A.

Rebase
AHCCCS will rebase the outpatient hospital fee schedule every five years.

TN No. 14-013B
Supersedes	Approval Date:	April 27, 2015	Effective Date: October 1, 2014
TN No. 11-018

Attachment 4.19-B Page 1(a)

State: ARIZONA
METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES OTHER TYPES OF CARE

5% Rate Reduction
Notwithstanding the methods and rates as otherwise described, for claims with dates of service between
April 1, 2011 and September 30, 2011, all payments for outpatient hospital services will be reduced by 5% of the payment that would otherwise have been made under the methodology in effect as of October 1, 2010, as described above.

For claims with dates of service effective from October 1, 2011 to September 30, 2015, all payments for outpatient hospital services will be reduced by 5% under the methodology in effect as of October 1, 2011.

Payments for services provided by the Indian Health Service or Tribal 638 Health facilities are not subject to this 5% rate reduction.

TN No. 14-013B
Supersedes	Approval Date:  April 27, 2015	Effective Date: October 1, 2014
TN No. 13-017B