N.J. Admin. Code § 10:52-5.10

Current through Register Vol. 56, No. 11, June 3, 2024

Section 10:52-5.10 - Standard costs per case

(a) The standard to be used in the calculation of the proposed rates for each inpatient DRG is as follows:

1. For services provided on or after October 1, 1996, the standard to be used in the calculation of the proposed rates for each inpatient DRG is determined as the median non-physician patient care costs per Medicaid/NJ FamilyCare fee-for-service case in all hospitals whose costs are included in the data base, adjusted for labor market differentials. Standards shall be calculated across all hospitals for which current cost bases were derived from a common reporting period.

(b) Determination of the labor equalization factor to calculate Statewide standard costs per case shall be as follows:

1. An equalization factor shall be calculated for the non-physician direct patient care costs of each hospital (excluding ambulatory care centers) to account for differing hospital pay scales in the calculation of standards. Each hospital's equalization factor is determined as non-physician direct patient care costs (prior to allocation of costs from patient care general services) at average pay scales for all New Jersey hospitals (excluding those hospitals classified as Rehabilitation Facilities) divided by Labor Market Area non-physician direct patient care costs.

2. The Labor Market Areas recognized in 1990 by the Department of Health will be used for rate setting in subsequent years.

3. Labor Market Areas are:

Counties or Municipalities
i.	Paterson--Clifton--Passaic	Passaic
ii.	Hackensack	Bergen
iii.	Newton--Phillipsburg	Sussex, Warren
iv.	Trenton--Flemington	Mercer, Hunterdon
v.	Newark, Suburban	Union, Essex, Somerset,
Morris, except cities of
Elizabeth, Belleville, East
Orange, Irvington and Newark
vi.	Jersey City	Hudson
vii.	New Brunswick--Perth Amboy	Middlesex
viii	Long Branch--Toms River	Monmouth, Ocean
ix.	Atlantic City--Cape May	Atlantic, Cape May
x.	Vineland--Millville Camden--Salem	Burlington, Gloucester
Cumberland
xi.	Newark, Central City (not included in	Newark, Elizabeth,
v. above)	Belleville, East Orange, Orange,
and Irvington

4. This factor is multiplied by the hospital's actual cost per case for all DRGs.

5. Labor costs shall be adjusted to Statewide averages by first grouping all non-physician direct patient care labor costs (after fringe benefit costs have been distributed) into eight labor categories as follows:

i. Registered Nursing: Includes non-physician salaries reported in RNS, CCA, DEL, DIA and ORR cost centers.

ii. Licensed Practical Nursing: Includes non-physician salaries reported in LPN cost center.

iii. Attendants: Includes non-physician salaries reported in ATT and CSS cost centers.

iv. Clerical: Includes non-physician salaries reported in CLR cost center.

v. Health Technical: Includes non-physician salaries reported in BBK, EDG, LAB, RAD, NMD, and THR cost centers.

vi. Therapists/Technical: Includes non-physician salaries reported in OPM, PHM, PHT, and RSP cost centers.

vii. General Services: Includes non-physician salaries reported in DTY, HKP, PLT, and L&L cost centers.

viii. Administrative and Clerical: Includes non-physician salaries reported in the MRD, A&G, FIS, EDR, and PCC cost centers.

6. The portion of the routine cost centers that shall be attributed to each of the four types of nursing skill levels is based on the distribution of costs as reported to the Division.

7. By dividing non-physician direct patient care costs by the non-physician hours in each category, the average hourly rates for the eight labor categories are computed for each hospital. The sum of all of the hospital's non-physician direct patient care costs for the eight labor categories divided by the total non-physician hours is equal to the Statewide average. To determine each hospital's labor equalization factor, the Statewide average cost per hour for each labor category is multiplied by the hospital's number of non-physician labor hours for that category and is added to all other non-physician costs (that is, supplies and other costs). This amount is divided by the result of the same calculation using the Labor Market Area cost per hour, rather than Statewide average, resulting in the hospital's equalization factor.

8. Whenever the number of hospitals in a given labor market area decreases to a number less than four, the Division shall calculate and compare the mean equalization factors of the Labor Market Area, both before and after the decrease. If they differ by plus or minus one percent or more, that Labor Market Area shall be merged with the geographically contiguous Labor Market Area having the most similar hourly wage rate, averaged for all salaried employees and based on the most recent data available; the factors of all Labor Market Areas shall be recalculated and effective in the following rate year.

(c) Calculation of standards shall be as follows:

1. Effective for services provided on or after October 1, 1996, the calculation of standards shall be based on all hospital UB records for Medicaid/NJ FamilyCare patients, where Medicaid/NJ FamilyCare is the primary payor. The cost per case of each hospital's Medicaid/NJ FamilyCare patients with UB records categorized by inpatient DRGs is multiplied by each hospital's equalization factor for the appropriate DRGs and hospitals. The median equalized cost of all such records in all hospitals calculated after teaching costs have been removed from the hospitals' preliminary cost bases is the incentive standard for each DRG.

2. Determination of Labor Unequalization Factor to Calculate Standard Cost Per Case of Each Labor Market Area.

i. An unequalization factor shall be calculated for the non-physician direct patient care costs of each hospital to account for differing prevailing compensation patterns across New Jersey's Labor Market Areas in the comparison of hospital and standard costs per case. The Statewide standard times the unequalization factor is the unequalized standard in terms of the hospital's Labor Market Area.

ii. The reciprocal of the hospital's equalization factor is the hospital's unequalization factor and is applied to non-physician costs only.

(d) Effective for services provided on or after October 1, 1996, GME and IME shall no longer be reimbursed through the Medicaid/NJ FamilyCare fee-for-service hospital inpatient DRG rates. After all indirect costs have been fully allocated to the using cost centers, GME and IME costs shall be removed from the cost base before calculating the standards and Medicaid/NJ FamilyCare fee-for-service hospital inpatient rates. GME is removed by removing cost centers that contain adjusted GME costs before the direct patient care (DPC) rate is set. IME is removed from the DPC rate by multiplying by one minus the Indirect Medical Education (IME) factor based on the Medicare cost report and the fiscal agent's settlement data. GME and IME shall be reimbursed in accordance with N.J.A.C. 10:52-8.

N.J. Admin. Code § 10:52-5.10

Amended by 50 N.J.R. 1261(a), effective 5/21/2018