Update on the Preliminary Performance Review
of the Health Care Authority

Health Care Authority Is in Compliance with 1996 Recommendations

Performance Evaluation and Research Division
Building 1, Room W-314
State Capitol Complex

(304) 347-4890

January 1999


The Health Care Cost Review Authority was created by Chapter 102 of the 1983 Acts of the Legislature. The agency was renamed the Health Care Authority by S.B. 458 (1997 Regular Session). The Authority is currently governed by Chapter 16, Article 29B of the West Virginia Code, as amended. The Authority is an autonomous agency within the Department of Health and Human Resources and is responsible for enforcing Chapter 16, Article 2D pertaining to Certificate of Need and Chapter 16, Article 5F pertaining to Health Care Disclosure. The Authority's mission is to protect the health and well-being of the citizens of this state by guarding against unreasonable loss of economic resources, to ensure the continuation of appropriate acute care hospital services, as well as to coordinate and oversee the health data collection of state agencies (WVC §16-29B-1 and §16-29B).

The Authority is headed by a three member board of directors, one of which is selected as chairman. Members of the board are appointed by the governor and must meet various qualifications as to partisanship and professional background.

The administrative portion of HCA, which has a staff of thirty-eight, provides legal, financial and support services. This part of the Authority is led by an executive director who oversees the agency's various divisions. These divisions and their duties are as follows:

Certificate of Need Division - Regulates capital expenditures on new health care facilities or services.

Data and Public Information - In charge of constructing and maintaining all database functions of the agency.

Health Planning - Responsible for updating the State Health Plan. This division was created in July 1995.

Financial Analysis and Compliance - Responsible for conducting full hospital audits and monitoring the repayment of overages. This Division was created in July 1995.

The Authority's annual revenues for fiscal year 1998 were approximately $3.8 million. It receives approximately 95% of its funding from hospital assessments which are based on the annual reporting information submitted by a hospital. The assessment charged by the Authority does not exceed one tenth of one percent of a hospital's gross revenues. The remaining 5% of funding comes from certificate of need fees and reimbursements which include charges for copies, data and the like.

Senate Bill 458 Changes

Senate Bill 458, (1997 Regular Session), directed the agency to make changes in the function and focus in reaction to the trends in the health care industry that may allow the development of competitive markets in the delivery of health care services through increasing efforts in the coordination of data collection for use in utilization review and quality assurance. The major changes include:

Additional duties in the area of gathering information on health care costs, dissemination of health care data and analyzing and reporting on changes in the health care delivery system (see Addendum 1 for a further explanation of collected data);

The board was specifically directed to coordinate and oversee the health care data collection of state agencies; lead state agencies' efforts to make the best use of emerging technology and to coordinate data base development;

The board was directed to examine the need for an alternative rate setting method;

The board was directed to study the certificate of need program; the hospital rate setting methodology and managed care markets and report to the governor, the legislative leadership and to the Legislative Oversight Commission on Health and Human Resources Accountability on its findings and recommendations.

The board was directed to create a quality assurance advisory group to assist it in developing a utilization review and quality assurance program.

As previously-mentioned S.B. 458 required the completion of studies on the certificate of need program, rate setting methodology and managed care markets in WVC §16-29B-19a. The purpose for these studies is to look at changing market forces that require periodic changes in the regulatory structure for health care providers. Findings and recommendations of the studies are discussed below.

Managed Care Study

The Managed Care Study was released October, 1998. The objectives of the report were to study managed care markets, including the need for regulatory programs in managed care markets.

The Managed Care Subcommittee of the HCA recommended several specific roles that the HCA might fulfill in order to promote the cost-effective development of services in the state.

The Subcommittee recommends that the scope of data collection be expanded to include impatient and outpatient utilization by all payers.

According to the Subcommittee, the HCA should determine the specific data to be collected, including enrollment data for all third party payers.

The Subcommittee recommends that the HCA develop core values for the state to follow in establishing and implementing its managed health care policy to promote the cost effective development and delivery of services.

The Subcommittee found that there is subjectivity in the application of access standards for HMOs. The access standards affect managed care contracting. Establishing network and access adequacy is the responsibility of the state health planning agency in several other states.

The Subcommittee recommends that the HCA develop a minimum criteria for assuring access and adequacy. These criteria could be used by state agencies to evaluate a managed care organization.
The Subcommittee is the promotion of managed care and health service integration in rural areas.

The Subcommittee recommends that the HCA monitor the impact of increasing managed care penetration on quality, costs, access and other pertinent parameters.

Certificate of Need Study

The Certificate of Need Study was released September, 1998. The objectives of the report were to examine any barriers or obstacles presented by the certificate of need program (CON) or standards in the state health plan to health care providers' need to reduce excess capacity, restructure services and integrate delivery of services. The CON Subcommittee recommended the following changes in the CON statute:

An increase in the capital expenditure threshold and an increase in the medical equipment threshold. The Subcommittee also recommends the elimination of the expenditure minimum for annual operating costs.

The scope of review for new services be limited to an identified 23 specific services.

Elimination of the exemption for facilities and services developed by HMOs

Development of a Task Force to study the development and certification of nursing home

The Authority be enabled to impose moratoriums on the review of services for which proliferation might cause adverse impacts.

Development of a Task Force to rewrite the state health plan and to consider the appropriateness and effectiveness of CON standards. This is to be completed within two years of passage in the 1999 Regular Session of legislation amending the CON statute.

The HCA establish a fast track process for review pof projects not affecting direct patient care.

Modification of the CON statute to allow applicants to re-file proposals as soon as new standards are effective.

The needs and benefits of integration of services among providers be explicity addresses.

Development of a Task Force to study the cost effectiveness of the CON program, completed within two years of the 1999 Regular Legislative Session.

Hospital Rate Review

The Hospital Rate Review study was completed August, 1998. The objective of this study was to examine the need for an alternative rate setting method. The Rate Setting Subcommittee made the following recommendations to the HCA:

Rate Setting shall terminate on June 30, 2000. Prior to January 1, 2000, the HCA will make recommendations to the legislature on the treatment of uncompensated care and graduate medical education costs and on the protection of individual self-pay patients.

The HCA shall implement an expedited rate setting process as an interim step, using performance benchmarks in its methodology.

The HCAs's activities should be refocused so it becomes the central health care data repository. Its efforts should be centered on data collection, disclosure and dissemination.

The HCA should take steps necessary to enforce compliance with filing requirements on hospitals prior to the elimination of rate review.

The HCA shall act as expeditiously as possible to process rate applications as soon as they are received.

The Performance Evaluation and Research Division made four recommendations regarding the original report. The Health Care Authority is in compliance with all the recommendations.

Issue Area 1: The Health Care Authority is Controlling Hospital Rate Increases in West Virginia

Recommendation 1

The Health Care Authority should continue to review rate increase requests and attempt to keep West Virginia health care costs below the national average.

Level of Compliance: In Compliance

The Health Care Authority has continued to keep West Virginia's health care costs below the national average. In 1997, West Virginia's cost per inpatient discharge was approximately 30% below the national average. The state's cost per outpatient discharge was approximately 36% below the national average. Also, West Virginia ranks the lowest in both inpatient and outpatient cost per discharge with all bordering states.

Issue Area 2: The Health Care Authority Has Not Staffed Its Audit Division

Recommendation 2

The Health Care Authority should complete its staffing of the Audit Division as soon as possible. The Authority should use the resources it has to train the recipients of these positions in order to compensate for any deficiencies they may have in the area of auditing health care facilities.

Level of Compliance: In Compliance

The Health Care Authority has fully staffed the Audit Division which is now called the Financial Compliance and Analysis Unit. The unit now has a rate director, audit director, four health care financial analysts, an auditor and a secretary.

Issue Area 3: The Health Care Authority Overcharges Hospitals for Services It Provides

Recommendation 3

The Health Care Authority should reduce the rate it charges hospitals to bring the amount of funds in line with the agency's expenditures.

Level of Compliance: In Compliance

The Health Care Authority's revenues have been in line with its expenditures during the last two fiscal years. However, there is an approximate balance in their revenue accounts of $2.9 million as of the end of fiscal year 1998. The majority of this amount was accumulated before fiscal year 1997.

Issue Area 4: The Health Care Cost Review Council Was Never Appointed

Recommendation 4

The Legislature should consider repealing WVC §16-29B-6 thus sunsetting the Health Care Cost Review Council.

Level of Compliance: Council Repealed

The Health Care Cost Review Council was eliminated by S.B. 458, enacted during the 1997 Regular Session of the Legislature. The Council was ineffective since it had never met nor were non-government members ever appointed since 1991. In the absence of this council, the Authority has solicited input from various ad hoc committees to assist in health care cost control policy.

Addendum 1

Below is a list of all the information collected by the Health Care Authority and will be incorporated into its computerized database system. The centralized collection of this information will promote effective health planning and policy decision making, efficient cost management, utilization review efforts, quality assurance within the health care community and better information to consumers to use to make informed decisions. Potential users of this database will include consumers, legislators and policy makers, state and private payers, providers, regulatory agencies, health planners, public health researchers, public media and other interested parties. The Authority does anticipate charging some form access fee for this information to maximize revenues.

Information currently collected under the Health Care Financial Disclosure Act:

Facilities required to report under the Act are hospitals, nursing homes, kidney disease treatment centers, ambulatory health care facilities, ambulatory surgical centers, home health agencies, rehabilitation facilities, health maintenance organizations, behavioral health centers, hospice, and facilities' related organizations.

All facilities provide:

Audited Financial Statements with notes, if prepared, or unaudited statements including a statement of revenue and expense, balance sheet, cash flow statement and retained earnings.

All facilities except non-profit, community-based primary care centers provide:

Statement of services available and rendered. For hospitals the American Hospital Association is accepted. The Authority's Annual Report of Nursing Homes is required for licensed nursing homes. These surveys include demographic, utilization, financial, and employee information in addition to services.
Approved budgets - projected revenue and expense
Copy and proof of publication of class I legal advertisement containing financial statements and ownership information.
Schedule of current rates for all patient services, inpatient and outpatient
Medicare, Medicaid, or other cost reports required by governmental funding agencies - contains utilization and financial information
Statement of charges, fees and other sums in excess of $55,000 collected by the facility, to include the name, address and amount collected
Form 10K, if applicable
Contracts entered into by the facility with any individual or group of health care providers
Income tax returns and applicable substitute, such as Form 990

Hospitals must also submit:

Trial balance - general ledger account information
Uniform Financial Report - comprehensive, financial and statistical data including revenue, costs, cost allocations, inpatient and outpatient utilization, operating expenses, number of FTEs and wages and salaries by job classification
Uniform Bill (UB) - Inpatient discharge data including diagnosis, procedure, revenue codes and gross charges

Other financial disclosure:

Annual Reports for Behavioral Health, Home Health, and Hospice -
surveys of demographic, utilization, revenue and expense data

Collected under Rate Setting for general acute care hospitals:

Rate application - data on revenue, expense, utilization, and related organizations
Discount contracts - any proposed discount arrangement between hospitals and non government payers

Collected under Certificate of Need:

Inventories of review able facilities and services such as megavoltage radiation therapy, MRI, open-heart surgery and cardiac catheterization and new technologies.

Information collected under Senate Bill 458

Consolidated encounter-level patient data - initial data is being accumulated from Medicaid, PEIA and Workers' Compensation. This client-centered database includes clinical, charge and reimbursement information for facility, physician, and pharmacy visits.
Data collected by other state agencies - the Authority is coordinating and facilitating the accessibility, linkage and sharing of existing and forthcoming computer databases. Examples of existing databases for which files or data dictionaries have been collected include:

Professional Licensing Boards and Registries - information on such specialists as osteopaths, LPN, RN, physicians, counseling, physical therapists, social services, podiatrists, pharmacies, and technologists including demographics, education, work settings and specialties
Epidemiology - cancer registry, HIV/Aids Reporting, hemophilia, vaccination, tuberculosis
Maternal and Child Health - Women, infants and children's health promotion, nutrition and related services
Vital Statistics - births, deaths and other vital events with clinical detail
State-owned Long-term Care Facilities - basic financial and utilization information
Office of Behavioral Health Services - fifteen computerized databases with financial and utilization data on behavioral health services funded by or through the Office.

Among other agencies contacted for health-related data are the Department of Rehabilitation, Department of Aging, Insurance Commission, and West Virginia University's Office of Health Services Research.

The Authority has begun to use its Geographical Information System (GIS) to process some of this information, which allows demographic pinpointing, mapping, tracking and projection of health status.