Senate Bill S6980

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  6980

                            I N  S E N A T E

                              April 9, 2014
                               ___________

Introduced by Sen. HANNON -- (at request of the Department of Health) --
  read  twice  and  ordered printed, and when printed to be committed to
  the Committee on Health

AN ACT to amend the public health law, in relation to  general  hospital
  inpatient  reimbursement for annual rate periods and the effectiveness
  of certain provisions thereof; to amend the social services  law,  the
  state  finance  law,  the  insurance law and the workers' compensation
  law, in relation to technical conformity with changes to  annual  rate
  periods;  to  amend  chapter 639 of the laws of 1996, constituting the
  "New York Health Care Reform Act of 1996", in relation to  the  effec-
  tiveness thereof; to amend chapter 1 of the laws of 1999, constituting
  the New York Health Care Reform act of 2000, in relation to the effec-
  tiveness  thereof;  to  amend chapter 81 of the laws of 1995, amending
  the public health law and other laws relating to medical reimbursement
  and welfare reform, in relation  to  the  effectiveness  thereof;  and
  repealing  certain  provisions of the public health law and the insur-
  ance law relating to making technical corrections

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  Section  2807-c  of  the public health law, as amended by
chapter 731 of the laws of 1993, paragraphs (a), (a-1), (b), (b-2),  and
(c) of subdivision 1, the opening paragraph of paragraph (a) of subdivi-
sion  3-a,  paragraph  (c),  clauses (B) and (D) of subparagraph (i) and
subparagraph (ii) of paragraph (f) of subdivision 11, paragraph  (a)  of
subdivision  14,  paragraph (c) of subdivision 14-a, subparagraph (v) of
paragraph (a) of subdivision 14-b, paragraph (a)   of subdivision  14-c,
paragraphs (a) and (b) of subdivision 14-d, paragraph (b) of subdivision
16-a,  the  opening paragraph, and paragraphs (b) and (c) of subdivision
18, the opening paragraph, paragraphs (b) and  (b-1),  and  the  opening
paragraph  of  subparagraph  (ii)  of  paragraph  (f) of subdivision 19,
subdivision 19-a, paragraph (e) of subdivision  21  as  amended  by  and
paragraph  (a-3) of subdivision 1, paragraph (d) of subdivision 2, para-
graph (s) of subdivision 11, paragraph (e) of subdivision 12,  paragraph
(d) of subdivision 14-a, paragraph (e) of subdivision 14-d, and subdivi-

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
              

                                                           LBD13873-03-4

S. 6980                             2

sions  28  and 29 as added by chapter 639 of the laws of 1996, paragraph
(g) of subdivision 16 as separately amended by chapters 474 and  639  of
the  laws of 1996, the opening paragraph of paragraph (a) of subdivision
1,  paragraphs  (f) and (k) of subdivision 4, subparagraph (vi) of para-
graph (b) and paragraph (c) of  subdivision  5,  subparagraph  (iii)  of
paragraph  (c) of subdivision 6, the opening paragraph and clause (G) of
subparagraph (i) of paragraph (f) of subdivision 11,  paragraph  (a)  of
subdivision  18,  subdivision  19-b,  and paragraphs (b), (c) and (d) of
subdivision 21 as amended and paragraph (c) of subdivision 10  as  added
by  chapter  1  of the laws of 1999, paragraph (a-2) of subdivision 1 as
amended by section 6 of part OO of chapter 57 of the laws of  2008,  the
opening  paragraph of subparagraph (i) of paragraph (a-3) of subdivision
1 as amended by section 15 of part C of chapter 63 of the laws of  2001,
clauses  (E)  and (F) of subparagraph (i) of paragraph (a-3) of subdivi-
sion 1 as added by section 47-a of part B of chapter 58 of the  laws  of
2010,  paragraph (b-1) of subdivision 1 as amended by section 10 of part
C of chapter 58 of the laws of 2010, the opening paragraph of  paragraph
(i)  of subdivision 1 as amended by section 36, the opening paragraph of
paragraph (j) of subdivision 1 as amended by  section  37,  subparagraph
(ii)  of  paragraph  (k)  of subdivision 1 as amended by section 40, the
opening paragraph of paragraph  (l)  of  subdivision  1  as  amended  by
section  38,  the  opening  paragraph  and subparagraphs (i) and (ii) of
paragraph (e-1) of subdivision 4 as amended by section 41, paragraph (a)
of subdivision 32 as amended by section  39,  clauses  (A)  and  (B)  of
subparagraph  (iii)  of  paragraph  (g)  of subdivision 35 as amended by
section 44 and clause (E) of subparagraph (i) of paragraph (i) of subdi-
vision 35 as amended by section 3-f of part B of chapter 58 of the  laws
of 2010, subparagraph (i) of paragraph (b-1) of subdivision 1 as amended
by  section 32, subparagraph (xi) as amended and subparagraphs (xii) and
(xiii) of paragraph (b) of subdivision 35 as added by section 36 of part
H, paragraphs (a) and (e) of subdivision 8 as amended by  section  7  of
part  D  and  paragraph (e-1) of subdivision 21 as added by section 2 of
part B of chapter 59 of the laws of 2011, clauses (B), (C)  and  (D)  of
subparagraph  (iv)  of  paragraph (e) of subdivision 1, paragraph (q) of
subdivision 11, paragraph (a) of subdivision 17,  subparagraph  (ii)  of
paragraph  (a)  of subdivision 25 and paragraph (b) of subdivision 27 as
amended by chapter 255 of the laws of 1994, paragraph (h) of subdivision
1, clause (B) of subparagraph (iii) of paragraph (b) of  subdivision  5,
paragraphs  (f)  and  (g) of subdivision 8, paragraph (r) of subdivision
11, subparagraph (iv) of paragraph (c) of subdivision  14,  subparagraph
(ii) of paragraph (b) of subdivision 17 as added and subparagraph (i) of
paragraph  (e)  of subdivision 9, subparagraph (ii) of paragraph (e) and
subparagraph (i) of paragraph (f) of subdivision 11,  paragraph  (d)  of
subdivision  14,  paragraphs  (a) and (d) of subdivision 14-b, paragraph
(e) of subdivision 17 as amended by chapter 81  of  the  laws  of  1995,
subparagraph  (i) of paragraph (b) of subdivision 17 as amended by chap-
ter 255 of the laws of 1994 and as designated by chapter 81 of the  laws
of  1995,  subparagraph (iii) of paragraph (h) of subdivision 1 as added
by chapter 152 of the laws of 2003, paragraphs (i) and (j)  of  subdivi-
sion  1  as added by section 23, paragraph (k) of subdivision 1 as added
by section 65-b, paragraph (l) of subdivision 1 as added by section 65-f
and paragraph (f) of subdivision 30 as amended by section 44 of  part  A
and  paragraph  (c) of subdivision 3 as amended by section 34, paragraph
(e) of subdivision 3 as added by section 34-a and subparagraphs (i)  and
(ii) of paragraph (d) of subdivision 25 as amended by section 33 of part
C  of  chapter 58 of the laws of 2007, subparagraph (i) of paragraph (i)

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and subparagraph (i) of paragraph (j) of subdivision  1  as  amended  by
chapter  500  of the laws of 2007, subparagraph (ii) of paragraph (i) of
subdivision 1 as amended by section 19, subparagraph (ii)  of  paragraph
(j) of subdivision 1 as amended by section 19-a of part B, paragraph (h)
of  subdivision  18 as added by section 41 and paragraphs (a) and (b) of
subdivision 30 as amended by section 22-b of part B and  subdivision  33
as  added  by  section  12  of part C of chapter 58 of the laws of 2008,
paragraph (e) of subdivision 4 as amended by section 30 and  subdivision
31 as amended by section 24 of part J of chapter 82 of the laws of 2002,
paragraph (e-1) of subdivision 4 as added by section 12, paragraph (e-2)
of  subdivision  4  as  added  by section 13, subdivision 35 as added by
section 2 of part C, subparagraph (iii) of paragraph (f) of  subdivision
4  as  amended  by  section  16,  subparagraph (iii) of paragraph (k) of
subdivision 4 as amended by section 17, the opening paragraph of subpar-
agraph (vi) of paragraph (b) of subdivision 5 as amended by section  18,
the  opening paragraph and subparagraph (i) of paragraph (c) of subdivi-
sion 5 as amended by section 19 and clause (B-1) of subparagraph (i)  of
paragraph  (f)  of  subdivision  11  as amended by section 20 of part B,
paragraph (l) of subdivision 4 as amended by section 11, paragraph (s-8)
of subdivision 11 as amended by section 13-a, clause (A) of subparagraph
(i) of paragraph (a) of subdivision 30 as amended by section  4,  clause
(A) of subparagraph (i) of paragraph (b) of subdivision 30 as amended by
section  5  and  subparagraph (ii) of paragraph (a) of subdivision 33 as
amended by section 1-b of part C of chapter 58  of  the  laws  of  2009,
clause  (D)  of subparagraph (iv) of paragraph (e-2) of subdivision 4 as
added by section 30, the opening paragraph of paragraph (l) of  subdivi-
sion 4 as amended by section 25, subparagraphs (ii) and (x) of paragraph
(b)  of  subdivision  35 as amended by section 33-a and paragraph (c) of
subdivision 35 as amended by section 26 of part A, subparagraph  (v)  of
paragraph  (b)  of  subdivision  35  as  amended by section 7 of part B,
subdivision 14-f as amended by section 2 and the  opening  paragraph  of
subparagraph  (i)  of  paragraph  (i)  of  subdivision  35 as amended by
section 4 of part C of chapter 56 of the laws of  2013,  paragraphs  (f)
and  (k)  of subdivision 4 and clause (A) of subparagraph (iii) of para-
graph (b) of subdivision 5 as separately amended by chapters 194 and 474
of the laws of 1996, subparagraph (iii) of paragraph (b) as  amended  by
section  2, clause (A) of subparagraph (iii) as amended by section 3 and
clause (C) of subparagraph (iii) of paragraph (b) of  subdivision  5  as
added by section 4 of chapter 593 of the laws of 2006, subparagraph (iv)
of paragraph (b) of subdivision 5 as added by chapter 194 of the laws of
1996,  subparagraphs  (iv)  and (v) of paragraph (b) of subdivision 5 as
amended and paragraphs (s-1) and (s-2) of subdivision  11  as  added  by
chapter 433 of the laws of 1997, subdivision 10 as amended by section 22
and  paragraphs  (s-3)  and  (s-4) of subdivision 11 as added by section
32-e of part F of chapter 412 of the laws of 1999, subparagraph  (i)  of
paragraph (c) of subdivision 10 and paragraph (s-5) of subdivision 11 as
amended  by  chapter 419 of the laws of 2000, subparagraph (vi) of para-
graph (f) of subdivision 11 as added by chapter 170 of the laws of 1994,
paragraph (s-6) of subdivision 11 as amended by section 6 of part  H  of
chapter  686  of  the laws of 2003, paragraph (s-7) of subdivision 11 as
added by section 68 of part  C,  paragraph  (c)  of  subdivision  16  as
amended  by section 64 and paragraph (f) of subdivision 31 as amended by
section 7 of part B of chapter 58 of the laws of 2005, subparagraph (iv)
of paragraph (b) of subdivision 5 as added and paragraph (b) of subdivi-
sion 14 as amended by chapter 474 of the laws of 1996, paragraph (e)  of
subdivision  16 as amended by chapter 484 of the laws of 2009, paragraph

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(d) of subdivision 18 as amended by section 3-d  and  paragraph  (i)  of
subdivision  35  as added by section 3-a of part B of chapter 109 of the
laws of 2010, paragraph (f) of subdivision 18 as amended by  section  46
and  subparagraph  (ii) of paragraph (b) of subdivision 20 as amended by
section 48-c of part D of chapter 56 of the laws of 2012, paragraph  (g)
of  subdivision  18  as  added by section 22 and subparagraphs (iii) and
(iv) of paragraph (e) of subdivision 30 as amended by  section  10-i  of
part  D  of chapter 57 of the laws of 2006, paragraph (i) of subdivision
18 as added by chapter 319 of the laws of  2011,  subparagraph  (ii)  of
paragraph (f) of subdivision 19 as amended by chapter 311 of the laws of
1994,  paragraph  (b) of subdivision 20 as amended by section 26 of part
A-3 of chapter 62 of the laws of 2003, subparagraph (i) of paragraph (c)
of subdivision 20 as amended by section 23 of subpart D of part  V-1  of
chapter 57 of the laws of 2009, paragraphs (d) and (e) of subdivision 25
as added by section 7 of part B of chapter 58 of the laws of 2004, para-
graph  (c) of subdivision 27 as separately amended by chapter 922 of the
laws of 1990 and chapter 731 of the laws  of  1993,  subdivision  30  as
amended  by  section  3  of part E of chapter 63 of the laws of 2005 and
subdivision 32 as amended by section 1 of part U of chapter  57  of  the
laws of 2007, is amended to read as follows:
  S  2807-c.  General  hospital inpatient reimbursement [for annual rate
periods beginning on or after January first,  nineteen  hundred  eighty-
eight.  1.  Payor  payments. Payments to general hospitals for inpatient
hospital services provided to persons who are not eligible for  payments
as  beneficiaries  of  title  XVIII  of  the federal social security act
(medicare) shall be determined pursuant to this section. Payor  payments
shall  be  as follows unless an alternative reimbursement methodology is
authorized in accordance with paragraph (e), (f), (g),  (h)  or  (i)  of
subdivision four of this section].  1. (a) Payments to general hospitals
for  reimbursement  of  inpatient hospital services provided to patients
eligible for payments made by state governmental agencies [for  patients
discharged prior to January first, two thousand and on and after January
first,  two thousand; or for patients discharged prior to January first,
nineteen hundred ninety-seven provided in accordance with policies writ-
ten by corporations organized and operating in accordance  with  article
forty-three  of  the  insurance law, or payment by such a corporation on
behalf of subscribers of a foreign corporation as described in paragraph
(d) of subdivision twelve of this section, which provide for  reimburse-
ment  on  an expense incurred basis; or for patients discharged prior to
January first, nineteen hundred ninety-seven provided to subscribers  of
organizations  operating  in  accordance  with the provisions of article
forty-four  of  this  chapter,]  shall  be  [case  based  payments   per
discharge,  for  each diagnosis-related group] established in accordance
with [paragraph (a) of subdivision three of] this  section[,  and  shall
include:
  (i)  a  reimbursable  inpatient operating cost component determined in
accordance with subdivision five of this section;
  (ii) capital related inpatient expenses determined in accordance  with
subdivision eight of this section;
  (iii) for patients discharged prior to January first, nineteen hundred
ninety-seven  (A)  a  bad  debt and charity care allowance determined in
accordance with subdivision fourteen of  this  section,  (B)  a  general
health care services allowance determined in accordance with subdivision
fourteen-b  of  this section, and (C) a bad debt and charity care allow-
ance for financially distressed hospitals determined in accordance  with
subdivision fourteen-c of this section;

S. 6980                             5

  (iv)  a  projection  of  reimbursable inpatient operating costs to the
rate year by the trend factor determined in accordance with  subdivision
ten of this section; and
  (v)  adjustments for any modifications to the case payments determined
in accordance with paragraph (a), (b), (c) or (d) of subdivision four of
this section].
  [(a-1)] (B) Payments made by local governmental  agencies  to  general
hospitals  for  reimbursement of inpatient hospital services provided to
inmates of local  correctional  facilities  as  defined  in  subdivision
sixteen  of  section  two of the correction law shall be at the rates of
payment determined pursuant to this section for state governmental agen-
cies, excluding adjustments pursuant to subdivision [fourteen-f] SIX  of
this section.
  [(a-2)]  (C) (i) With the exception of those enrollees covered under a
payment rate methodology agreement negotiated with a  general  hospital,
payments  for  inpatient hospital services provided to patients eligible
for medical assistance pursuant to title eleven of article five  of  the
social  services  law made by organizations operating in accordance with
the provisions of article forty-four of this chapter or by health  main-
tenance organizations organized and operating in accordance with article
forty-three  of  the  insurance  law  shall be the rates of payment that
would be paid for such patients under the  medical  assistance  program,
(i)  determined pursuant to this section, excluding adjustments pursuant
to subdivision [fourteen-f] SIX of  this  section,  and  (ii)  excluding
medical  education  costs  that  are  reimbursed directly to the general
hospital in accordance with paragraph [(a-3)] (D) of this subdivision.
  (ii) Effective July first, two thousand seven, with the  exception  of
those enrollees covered under a payment rate methodology agreement nego-
tiated  with a general hospital, payment for inpatient hospital services
provided to patients enrolled in  the  child  health  insurance  program
pursuant  to  title one-A of article twenty-five of this chapter made by
organizations operating in accordance with  the  provisions  of  article
forty-four of this chapter or by health maintenance organizations organ-
ized  and operating in accordance with article forty-three of the insur-
ance law shall be the rates of payment that  would  be  paid  under  the
medical  assistance program determined pursuant to this section, exclud-
ing  adjustments  pursuant  to  subdivision  [fourteen-f]  SIX  of  this
section.
  [(a-3)] (D) Notwithstanding any inconsistent provision of law:
  (i)  the  commissioner shall establish, subject to the approval of the
director of the budget, discrete rates of payment for general  hospitals
for  the period July first, nineteen hundred ninety-six through December
thirty-first, nineteen hundred ninety-nine  and  periods  on  and  after
January  first,  two  thousand for payments under the medical assistance
program pursuant to title eleven of article five of the social  services
law  for  persons  eligible  for  medical assistance who are enrolled in
health maintenance organizations  and  for  payments  under  the  family
health  plus  program  for  persons  enrolled  in approved organizations
pursuant to title eleven-D of article five of the  social  services  law
based on the components of rates of payment established pursuant to this
section for persons eligible for medical assistance who are not enrolled
in health maintenance organizations for a general hospital for such rate
period  that  reflect the estimated reimbursable costs of direct medical
education expenses and indirect medical education expenses in the deter-
mination of:

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  (A) [the hospital-specific average  reimbursable  inpatient  operating
cost per discharge pursuant to subdivision six of this section, and
  (B)  group  category average inpatient reimbursable operating cost per
discharge pursuant to subdivision seven of this section, and
  (C) the operating cost component of rates of payment pursuant to para-
graphs (f) and (k) of subdivision four of this section, and
  (D) the operating cost component of rates  of  payment  in  accordance
with paragraphs (e), (g) and (i) of subdivision four of this section for
general  hospitals or distinct units of general hospitals not reimbursed
on the basis of case based payments per discharge; and
  (E) notwithstanding clauses (A) through (D) of this subparagraph,  for
periods  on  and after December first, two thousand nine,] the operating
cost component of rates of payment subject to subdivision  [thirty-five]
SEVENTEEN of this section, and
  [(F)  notwithstanding  clauses  (A) through [(D)] (C) of this subpara-
graph, for periods on and after December first, two thousand nine,]
  (B) the operating cost component of rates of payment subject to  para-
graphs  [(e-1),  (e-2)  and (1) of subdivision four] (B), (C) AND (F) OF
SUBDIVISION TWO of this section for general hospitals or distinct  units
of  general hospitals not reimbursed on the basis of case based payments
per discharge; and
  (ii) such rates of payment may be established by the  commissioner  on
any  appropriate  payment  basis,  including  a  case  mix  adjusted per
discharge basis.
  [(b) For patients discharged prior to January first, nineteen  hundred
ninety-seven,  payments  to general hospitals for reimbursement of inpa-
tient hospital services  provided  to  patients  eligible  for  payments
pursuant  to  the comprehensive motor vehicle insurance reparations act;
or enrolled in a self-insured  fund  which  provides  for  reimbursement
directly  to  general  hospitals  on an expense incurred basis, with the
exception of those enrollees covered under a  payment  rate  methodology
agreement in accordance with the provisions of paragraph (a) of subdivi-
sion two of this section; or insured under a commercial insurer licensed
to do business in this state and authorized to write accident and health
insurance  and  whose  policy provides inpatient hospital coverage on an
expense incurred basis; or receiving inpatient hospital services  pursu-
ant  to  an  out-of-plan  benefits system authorized pursuant to section
four thousand four hundred six of this chapter, except where  such  out-
of-plan,  inpatient  hospital  services  are  offered by an organization
organized pursuant to the not-for-profit corporation law or which  meets
the qualifications of section 501(c) of the internal revenue code, shall
be  case  based payments per discharge, for each diagnosis-related group
established in accordance with paragraph (a)  of  subdivision  three  of
this  section,  and  equal  to  the  case  payments to general hospitals
provided in accordance  with  paragraph  (a)  of  this  subdivision  for
services provided to subscribers of corporations organized and operating
in  accordance  with  article forty-three of the insurance law, adjusted
for uncovered services,  and  increased  by  thirteen  percent  or,  for
payments  pursuant to the workers' compensation law, the volunteer fire-
fighters' benefit law and the volunteer ambulance workers' benefit  law,
increased by five percent. Funds received by a general hospital based on
the  payment  differential  applied  pursuant to this paragraph shall be
hospital funds for patient care purposes.   Without  due  cause  general
hospitals  shall  not  refuse to accept direct payments from a payor who
would  otherwise  be  eligible  to  reimburse  hospitals  for  inpatient

S. 6980                             7

services  on  a case based payment per discharge in accordance with this
subdivision.
  (b-1)]  (E)  (i)  For  patients discharged on and after January first,
nineteen hundred ninety-seven and prior to January first,  two  thousand
and on and after January first, two thousand, payments to general hospi-
tals  for  reimbursement  of  inpatient  hospital  services  provided to
patients eligible for payments pursuant  to  the  workers'  compensation
law,  the  volunteer  firefighters' benefit law, the volunteer ambulance
workers' benefit law, and  the  comprehensive  motor  vehicle  insurance
reparations  act shall be at the rates of payment determined pursuant to
this section for  state  governmental  agencies,  excluding  adjustments
pursuant to subdivision [fourteen-f] SIX of this section and subdivision
[thirty-three]   SIXTEEN   of   this  section,  excluding  such  further
reductions to such payments as are enacted as part of the  state  budget
for  the  state fiscal year commencing April first, two thousand ten and
excluding such further reductions to such payments  as  are  enacted  as
part  of the state budget for state fiscal years commencing on and after
April first, two thousand eleven.
  (ii) The provisions of paragraph [(d)]  (A)  of  subdivision  [eleven]
FIVE of this section shall continue to apply to such payors for payments
determined pursuant to this paragraph.
  [(b-2)]  (F)  A  payor  included  in the payor categories specified in
paragraph (a) [or (b-1)] of this subdivision shall not be  provided  the
option  of payment to a general hospital for inpatient services based on
the lower of hospital charges or the case based  payment  per  discharge
determined in accordance with this section for a patient or apportioning
the  appropriate  case  based  payment  per  discharge  for a patient by
excluding payment for a  preexisting  condition  or  acquired  condition
which  has  to  be  treated along with the reason for the admission [or,
except as may affect qualification for payments in accordance with para-
graph (b) or (d) of subdivision four of this section,  for  days  within
the inlier stay determined to be medically unnecessary].
  [(c)  Charge  based payments. For patients discharged prior to January
first, nineteen hundred ninety-seven, payments to general hospitals  for
reimbursement  of inpatient hospital services provided to those for whom
a case based payment per discharge system is not authorized by paragraph
(a) or (b) of this  subdivision,  or  who  are  not  covered  under  the
provisions of paragraph (a) of subdivision two of this section, shall be
on  the  basis  of  the hospital's charges; provided, however, for these
patients the definition of a short stay patient  pursuant  to  paragraph
(d)  of  subdivision four of this section shall apply, and reimbursement
to hospitals for such patients shall be at payments developed in accord-
ance with paragraph (d) of subdivision four of this  section,  increased
by  thirteen  percent.  The  maximum  amount to be charged to any charge
paying patient for a case shall be one hundred  twenty  percent  of  the
case  based  payment  per discharge as determined under paragraph (b) of
this subdivision for the diagnosis-related group with which the  patient
is  identified.  Each general hospital shall establish a charge schedule
and inpatient charges from this schedule shall be applied uniformly  for
all  inpatient  charge  based  payments  made  in  accordance  with this
section.
  (d) The components of rates of payment calculated in  accordance  with
this  section  related  to  inpatient  operating costs shall be based on
general hospital reimbursable inpatient operating costs used  in  deter-
mining  payments  for  services pursuant to section twenty-eight hundred
seven-a of this article during the rate period January  first,  nineteen

S. 6980                             8

hundred  eighty-seven  through  December  thirty-first, nineteen hundred
eighty-seven (or for a distinct unit of a general hospital excluded from
case based payments pursuant to paragraph (e) or (g) of subdivision four
of  this  section  such  distinct  unit reimbursable inpatient operating
costs), excluding inpatient operating costs related to services provided
to beneficiaries of title XVIII  of  the  federal  social  security  act
(medicare)  in  accordance  with  paragraph (g) of subdivision eleven of
this section and adjusted to reflect the annualized cost impact of  rate
revisions  or  adjustments, including the volume adjustment and case mix
adjustment for the nineteen hundred eighty-seven rate period, made  with
respect to such services, which shall be defined as a general hospital's
or distinct unit's reimbursable inpatient operating cost base; a projec-
tion  to  the  nineteen  hundred  eighty-eight  rate period by the trend
factor determined in accordance with subdivision ten  of  this  section;
and  an increase to reflect special additional inpatient operating costs
determined and allocated in accordance with paragraph (e) of this subdi-
vision.
  (e) General hospital  special  additional  inpatient  operating  costs
shall  be determined and allocated among general hospitals in accordance
with subparagraphs (i), (iii) and (iv) of this paragraph.  For  purposes
of  computing  group  category  average inpatient reimbursable operating
costs in accordance with paragraph (a)  of  subdivision  seven  of  this
section  and an equivalent cost component for general hospitals that are
excluded from the case based payment per diagnosis-related group  system
in  accordance  with  paragraph  (e)  or (g) of subdivision four of this
section special additional inpatient operating costs  shall  include  an
additional  increase determined and allocated among general hospitals in
accordance with subparagraph (ii) of this paragraph.
  (i) The total cost increases pursuant to  this  subparagraph  for  all
general  hospitals  shall in the aggregate be one hundred thirty million
dollars for the nineteen hundred eighty-eight  rate  period  to  reflect
nineteen  hundred  eighty-five  costs  incurred  in  excess of the trend
factor between nineteen hundred eighty-one and nineteen hundred  eighty-
five,  such cost increases to be projected from nineteen hundred eighty-
eight to subsequent annual rate periods by the applicable trend  factor,
and  shall  be  allocated among general hospitals in accordance with the
following methodology:
  Five hundred dollars per bed shall  be  allocated  to  costs  of  each
general  hospital  based on the total number of inpatient beds for which
the hospital is certified pursuant to the operating  certificate  issued
for  such  general  hospital  in  accordance  with  section twenty-eight
hundred five of this  article  in  effect  on  January  first,  nineteen
hundred eighty-eight.
  A  factor  of one quarter of one percent of a general hospital's reim-
bursable inpatient operating cost base as defined in  paragraph  (d)  of
this  subdivision,  trended through nineteen hundred eighty-eight, shall
be allocated to costs of general hospitals for technology advances and a
further one quarter of one percent of such costs shall be  allocated  to
costs  of  general hospitals for increased activities related to quality
assurance and patient discharge planning.
  The balance of one hundred thirty million dollars after deducting  the
dollar value of the per bed cost enhancement and the dollar value of the
percentage  cost  enhancements  shall  be  allocated to costs of general
hospitals based on the ratio of each general hospital's nineteen hundred
eighty-five cost incurred in excess of the trend factor between nineteen
hundred eighty-one and nineteen hundred  eighty-five  in  the  following

S. 6980                             9

discrete  areas, summed, to the total sum of such cost over trend of all
general hospitals applied to such balance: malpractice insurance  costs,
infectious and other waste disposal costs, water charges, direct medical
education  expenses,  working  capital  interest costs of hospitals that
qualified for distributions made in accordance  with  paragraph  (b)  of
subdivision  sixteen  of  section  twenty-eight  hundred seven-a of this
article, costs of distinct psychiatric units excluded  from  case  based
payments  per diagnosis-related group, and ambulance costs. For purposes
of this subparagraph, nineteen  hundred  eighty-five  cost  incurred  in
excess of the trend factor between nineteen hundred eighty-one and nine-
teen hundred eighty-five shall be calculated for each such discrete area
based  on  a general hospital's inpatient operating costs for the fiscal
year ending in nineteen hundred eighty-five, after  excluding  inpatient
operating  costs  related to services provided to beneficiaries of title
XVIII of the federal social security act (medicare), for  such  discrete
area  in  excess  of the hospital's comparable component of reimbursable
inpatient operating costs for its fiscal year ending in nineteen hundred
eighty-one,  after  excluding  inpatient  operating  costs  related   to
services  provided to beneficiaries of title XVIII of the federal social
security act (medicare), trended through nineteen hundred eighty-five by
the appropriate component of the trend factors and adjusted  to  reflect
approved  decreases  or increases in inpatient operating costs resulting
from all rate adjustments.
  (ii) The total additional cost increases pursuant to this subparagraph
for all general hospitals  shall  in  the  aggregate  be  forty  million
dollars  for  the  nineteen hundred eighty-eight rate period, such addi-
tional cost increases to be projected from nineteen hundred eighty-eight
to the rate period by the applicable trend factor, to be allocated among
general hospitals in accordance with the following methodology:
  The additional increase of forty million dollars shall be allocated to
costs of general hospitals that are included in group categories  estab-
lished  pursuant  to  paragraph (b) of subdivision seven of this section
based on the ratio of the  nineteen  hundred  eighty-eight  intermediate
group  operating  costs  of  each such general hospital, and to costs of
general hospitals that are excluded from  the  case  based  payment  per
diagnosis-related  group  system in accordance with paragraph (e) or (g)
of subdivision four of this section based on the ratio of  the  nineteen
hundred  eighty-eight  intermediate operating costs of each such general
hospital, to the total sum of such intermediate  group  operating  costs
and  intermediate  operating costs applied to the forty million dollars.
For purposes of this subparagraph, intermediate group operating costs of
a general hospital shall be calculated  in  accordance  with  rules  and
regulations  adopted  by  the  council  and approved by the commissioner
based on the reimbursable inpatient operating cost  base  determined  in
accordance with paragraph (d) of this subdivision of such general hospi-
tal; adjusted to exclude operating costs related to specialized hospital
services  for  which an alternative reimbursement methodology is adopted
pursuant to paragraph (e) or (g) or, if effective,  (i)  of  subdivision
four  of  this section; and trended to the nineteen hundred eighty-eight
rate period by the trend factor determined in accordance  with  subdivi-
sion  ten  of  this section; and increased to reflect special additional
inpatient operating costs determined and allocated  in  accordance  with
subparagraph (i) of this paragraph; and adjusted to exclude a factor for
operating  costs  of patients who required an alternate level of care in
accordance with paragraph (h) of subdivision four of this  section;  and
adjusted to exclude the components of the trended reimbursable inpatient

S. 6980                            10

operating  cost base related to education, physician, ambulance services
and organ acquisition costs determined in accordance with  subparagraphs
(i),  (iii)  and  (iv)  of  paragraph  (c)  of subdivision seven of this
section  and  malpractice insurance costs, and the components of special
additional inpatient operating costs determined and allocated in accord-
ance with subparagraph  (i)  of  this  paragraph  associated  with  cost
increases in such costs. For purposes of this subparagraph, intermediate
operating  costs  of  a  general  hospital  excluded from the case based
payment per  diagnosis-related  group  system  shall  be  calculated  in
accordance  with  rules  and  regulations  adopted  by  the  council and
approved by the commissioner based on the reimbursable inpatient operat-
ing cost base determined in accordance with paragraph (d) of this subdi-
vision of such general hospital; trended to the nineteen hundred  eight-
y-eight  rate  period  by the trend factor determined in accordance with
subdivision ten of this section; and increased to reflect special  addi-
tional  inpatient operating costs determined and allocated in accordance
with subparagraph (i) of this  paragraph;  and  adjusted  to  exclude  a
factor  for  operating costs of patients who required an alternate level
of care developed consistent with the provisions  of  paragraph  (h)  of
subdivision four of this section; and adjusted to exclude the components
of  the  trended  reimbursable  inpatient operating cost base related to
education, physician, ambulance services  and  organ  acquisition  costs
determined  consistent  with  the provisions of subparagraphs (i), (iii)
and (iv) of paragraph (c) of subdivision seven of this section and malp-
ractice insurance costs, and the components of special additional  inpa-
tient  operating  costs  determined  and  allocated  in  accordance with
subparagraph (i) of this paragraph associated  with  cost  increases  in
such costs.
  (iii)  Cost  increases pursuant to this subparagraph shall be made for
the nineteen hundred ninety-one rate period to  reflect  cost  increases
incurred  in  excess  of  the trend factor and not included in the costs
used in determining payments in accordance with paragraph  (d)  of  this
subdivision and subparagraphs (i) and (ii) of this paragraph. Such costs
shall  in  the  aggregate  be  three hundred twenty-nine million dollars
exclusive of costs related to  services  provided  to  beneficiaries  of
title  XVIII  of  the federal social security act (medicare). Such costs
increases shall be projected from nineteen hundred ninety-one to  subse-
quent  annual  rate periods by the applicable trend factor, and shall be
allocated among general hospitals, except those general hospitals  whose
base  year  for  determining payments for services in such facilities is
nineteen hundred eighty-seven, in accordance with the following  method-
ology:
  (A)  Up  to  two hundred twenty-two million dollars shall be allocated
for labor adjustments. If the total of the adjustments is less than  two
hundred  twenty-two million dollars, then the adjustments shall be fully
funded. If the total of the adjustments is more than two  hundred  twen-
ty-two million dollars, then the adjustment specified in accordance with
item  (II) of this clause shall be funded at the lower of twenty percent
of the total amount allocated for labor adjustments or its  proportional
share  of the labor adjustments unless the labor adjustment specified in
item (I) of this clause is less than eighty percent of the total  amount
allocated  for  labor adjustments in which case the adjustment specified
in item (II) of this clause shall be equal to the difference between two
hundred twenty-two million dollars and the total amount of  the  adjust-
ment specified in item (I) of this clause.

S. 6980                            11

  (I)  A  portion of the amount allocated for labor adjustments shall be
for labor cost increases related  to  registered  nurses'  salaries  and
fringes (twenty percent of salaries) and an add-on for the ripple effect
on other health care professionals of at least thirty-five percent. Such
adjustment  shall  cover  both  inpatient  and outpatient cost incurred,
based on costs reported in a survey conducted by the department for  the
period  January  first,  nineteen hundred ninety through June thirtieth,
nineteen hundred ninety on  forms  specified  by  the  commissioner  and
received  by  the  department  no  later  than  November first, nineteen
hundred ninety, annualized, in excess of  nineteen  hundred  eighty-five
labor  costs  related to registered nurses' salaries and fringes trended
to nineteen hundred ninety and the nineteen hundred eighty-eight  state-
wide  nurse  salary adjustment trended to nineteen hundred ninety by the
appropriate components of the trend  factors  adjusted  to  reflect  the
effect  of  the  annualization  of  nineteen hundred ninety data and the
result trended to nineteen hundred ninety-one and shall be based  exclu-
sively  on  regional  experience.  Such regional adjustment shall not be
less than zero. Each individual hospital within a region shall receive a
portion of the regional adjustment equal to its share of the total inpa-
tient and outpatient reimbursable operating costs for the region exclud-
ing costs related to services provided to beneficiaries of  title  XVIII
of  the  federal  social  security  act  (medicare) and excluding direct
medical education costs.
  (II) A portion of the amount allocated for labor adjustments shall  be
for personnel costs other than those related to registered nurses' sala-
ries  and  fringes  and  the  ripple effect on other health care profes-
sionals. Such adjustment shall cover both inpatient and outpatient costs
incurred, based on costs reported in a survey conducted by  the  depart-
ment  for the period January first, nineteen hundred ninety through June
thirtieth, nineteen hundred ninety on forms specified by the commission-
er and received by the department no later than November first, nineteen
hundred ninety, annualized, in excess of  nineteen  hundred  eighty-five
personnel  costs  covered by this adjustment trended to nineteen hundred
ninety and the annualized rate adjustments approved in nineteen  hundred
eighty-nine for personnel costs covered by this adjustment for increased
hospital  costs to meet additional state requirements that became effec-
tive July  first,  nineteen  hundred  eighty-nine  trended  to  nineteen
hundred  ninety  by  the  appropriate  components  of  the trend factors
adjusted to reflect the effect of the annualization of nineteen  hundred
ninety  data  and  the result trended to nineteen hundred ninety-one and
shall be based exclusively on regional data.
  (III) In the event that federal financial  participation  in  payments
made  for  beneficiaries eligible for medical assistance under title XIX
of the federal social security act based upon the allocation and adjust-
ment specified in items (I) and (II) of this clause  related  to  outpa-
tient  costs  as  a  component  of  such payments is not approved by the
federal government then such outpatient costs shall not be considered in
calculating such adjustment.
  (B) Health personnel development.
  Four million five hundred thousand  dollars  shall  be  allocated  for
labor adjustments to be made available for health occupation development
and  workplace  demonstration  programs  authorized  pursuant to section
twenty-eight hundred  seven-h  of  this  article.  The  commissioner  is
directed  to make rate adjustments subject to the approval of the direc-
tor of the budget to cover the cost of such  programs,  which  shall  be
made available for the duration of such programs.

S. 6980                            12

  (C)  Thirty-three  million  dollars  shall be allocated for technology
advances and changes in medical practice. A fixed amount per  bed  shall
be  allocated  to  the costs of each general hospital based on the total
number of inpatient beds for which the  general  hospital  is  certified
pursuant  to  the operating certificate issued for such general hospital
in accordance with section twenty-eight hundred five of this article  in
effect on June thirtieth, nineteen hundred ninety.
  (D)  Thirty-four  million  dollars shall be allocated to those general
hospitals providing comprehensive health care to  the  communities  they
serve as determined by the commissioner pursuant to regulations approved
by  the  council.  Comprehensive  health  care includes providing and/or
accommodating patients' health care needs at the appropriate levels  and
settings  of care, and reaches outside of traditional inpatient services
to outpatient and other services. Factors to be considered  in  deciding
which  general hospitals are providing comprehensive health care and the
size of the adjustment shall include but not be limited to:  clinic  and
emergency room volume compared to inpatient volume (measured using total
volume   and/or  volume  related  to  medicaid  and  medically  indigent
patients); number and type of clinic services offered;  availability  of
services;  whether  the  general  hospital is an AIDS designated center,
prenatal care assistance program provider, home  health  care  provider,
trauma center, burn center; whether the general hospital offers neonatal
intensive  care  services,  dialysis  services,  birthing  center backup
agreements, AIDS outpatient programs, specific mental health,  drug  and
alcohol  programs  including outpatient and emergency services and those
designated pursuant to section 9.39  of  the  mental  hygiene  law;  and
whether  the  general  hospital's  emergency room is designated as a 911
receiving hospital. In the event that federal financial participation in
payments made for beneficiaries eligible for  medical  assistance  under
title  XIX  of the federal social security act based upon the adjustment
specified in this clause as a component of such payments is not approved
by the  federal  government  because  of  the  inclusion  of  outpatient
services then such outpatient services shall not be considered in calcu-
lating  such adjustment. If such exclusion results in the allocation for
this adjustment not being spent, then any unspent portion shall be real-
located to further fund the adjustments specified in clauses (D) and (E)
of this subparagraph in the same proportion as their original funding.
  (E)(I) Twenty-six million dollars shall be allocated to the  costs  of
general hospitals based on the ratio of each general hospital's nineteen
hundred  eighty-nine cost incurred in excess of the trend factor between
nineteen hundred eighty-five and nineteen  hundred  eighty-nine  in  the
certain discrete areas, summed, to the total sum of such cost over trend
of  all  general  hospitals  applied to the total funds under this allo-
cation. Such discrete cost areas shall include but not  be  limited  to:
infectious  and other waste disposal costs, universal precautions, work-
ing capital interest costs, costs for asbestos  removal,  costs  of  low
osmolality  contrast  media, malpractice costs, water and sewer charges,
ambulance costs and costs related to designation as a trauma center. For
purposes of this clause, nineteen hundred eighty-nine cost  incurred  in
excess  of  the  trend  factor  between nineteen hundred eighty-five and
nineteen hundred eighty-nine shall be calculated for each such  discrete
area  based  on  a  general hospital's inpatient operating costs for the
fiscal year ending in  nineteen  hundred  eighty-nine,  after  excluding
inpatient  operating costs related to services provided to beneficiaries
of title XVIII of the federal social security act (medicare),  for  such
discrete  area in excess of the hospital's comparable component of reim-

S. 6980                            13

bursable inpatient operating costs for its fiscal year ending  in  nine-
teen  hundred  eighty-five,  after  excluding  inpatient operating costs
related to services provided to beneficiaries  of  title  XVIII  of  the
federal social security act (medicare), trended through nineteen hundred
eighty-nine  by  the  appropriate  component  of  the  trend factors and
adjusted to reflect approved decreases or increases in inpatient operat-
ing costs resulting from all rate adjustments.
  (II) Any funds allocated under this clause and not distributed  pursu-
ant  to item (I) of this clause shall be allocated for the following: to
reimburse for a portion of the cost increases incurred above  the  trend
factor  between nineteen hundred eighty-one and nineteen hundred eighty-
five for those discrete cost areas specified in the  last  paragraph  of
subparagraph  (i) of paragraph (e) of this subdivision as added by chap-
ter two of the laws of nineteen hundred eighty-eight and not  reimbursed
in  accordance  with  such  paragraph.  Such funds shall be allocated to
general hospitals in the same manner as specified in such paragraph.
  (F) Seven million two hundred thousand dollars shall be  allocated  to
account  for the increase in the number of patients admitted through the
emergency room and the high costs of treating such  patients  which  has
resulted  in  an  increase  in severity within diagnosis related groups.
Such funds shall be allocated to general hospitals based on the nineteen
hundred  eighty-nine  hospital-specific  data  on  increased  admissions
through  the emergency room since nineteen hundred eighty-one, excluding
those admissions related to providing services to beneficiaries of title
XVIII of the federal social security act (medicare).
  (G) Two hundred fifty dollars per bed shall be allocated to the  costs
of each general hospital having two hundred or less certified acute care
beds  and  classified  as  a  rural hospital for purposes of determining
payment for inpatient acute care services provided to  beneficiaries  of
title XVIII of the federal social security act (medicare) or under state
regulations,  for  recruiting and retaining health care personnel, based
on the total number of inpatient acute care beds for which such  general
hospital  is  certified pursuant to the operating certificate issued for
such general hospital in accordance with  section  twenty-eight  hundred
five of this article in effect on June thirtieth, nineteen hundred nine-
ty.
  (H) One million dollars shall be allocated to assist general hospitals
involved in a merger, acquisition, or consolidation in meeting the costs
associated  with  such merger, acquisition, or consolidation on or after
January first, nineteen hundred ninety-one. The commissioner shall  make
rate adjustments for such allocations.
  (I) Five hundred thousand dollars shall be allocated for a practition-
er  placement  program  to  assist general hospitals in the placement of
physicians and other  health  care  practitioners  to  practice  primary
health  care  and/or  dentistry  in  underserved  areas,  to  serve  the
medically needy, and including services with affiliated community  based
providers.  The  commissioner shall make rate adjustments for such allo-
cations. Notwithstanding any inconsistent provision of this subdivision,
this clause shall not apply in rate periods commencing on or after Janu-
ary first, nineteen hundred ninety-four.
  (iv) Cost increases pursuant to this subparagraph shall  be  made  for
the  nineteen  hundred ninety-four rate period to reflect cost increases
incurred in excess of the trend factor and not  included  in  the  costs
used  in  determining  payments in accordance with paragraph (d) of this
subdivision and subparagraphs (i), (ii) and  (iii)  of  this  paragraph.
Such  costs  shall in the aggregate be one hundred seventy-three million

S. 6980                            14

dollars exclusive of costs related to services provided to beneficiaries
of title XVIII of the federal social security act (medicare). Such  cost
increases shall be projected from nineteen hundred ninety-four to subse-
quent  annual  rate periods by the applicable trend factor, and shall be
allocated among general hospitals in accordance with the following meth-
odology:
  (A) Forty-six million dollars shall  be  allocated  to  the  costs  of
general  hospitals  for  treating  tuberculosis  patients.  Each general
hospital shall receive a portion of this total equal to its share of the
statewide total of inpatient tuberculosis discharges based on  the  most
recent twelve month period for which data is available.
  (B)  Sixty-three  million dollars shall be allocated for labor adjust-
ments in accordance with the following methodology:
  (I) Fifty-five million dollars  shall  be  for  labor  cost  increases
incurred  prior  to  June thirtieth, nineteen hundred ninety-three. Each
general hospital shall receive a portion of  this  total  equal  to  its
share  of  the  statewide total of inpatient and outpatient reimbursable
operating costs based on nineteen hundred ninety  data  excluding  costs
related  to  services  provided  to  beneficiaries of title XVIII of the
federal social security act  (medicare)  and  excluding  direct  medical
education costs.
  (II)  Eight  million  dollars  of the amount to be allocated for labor
adjustments pursuant to this clause  shall  be  distributed  to  general
hospitals located in the counties of Ulster, Sullivan, Orange, Dutchess,
Putnam,  Rockland,  Columbia,  Delaware  and Westchester, to account for
prior disproportionate increases in unreimbursed labor costs. Each indi-
vidual hospital shall receive a portion of  the  eight  million  dollars
equal  to  its  share of the total inpatient and outpatient reimbursable
operating costs based on nineteen hundred ninety data for all  hospitals
located  in  the  above-referenced  counties  excluding costs related to
services provided to beneficiaries of title XVIII of the federal  social
security act (medicare) and excluding direct medical education costs.
  (C)  Fifty-five  million  dollars  shall  be allocated to the costs of
increased activities related to regulatory compliance, universal precau-
tions and infection control related to  AIDS,  tuberculosis,  and  other
infectious  diseases, including the training of employees with regard to
infection control, and for infectious and other waste disposal costs.  A
fixed  amount  per  bed  shall be allocated to the costs of each general
hospital based on the total number  of  inpatient  beds  for  which  the
general  hospital  is  certified  pursuant  to the operating certificate
issued for each general hospital in accordance with section twenty-eight
hundred five of this article in effect on August twenty-fourth, nineteen
hundred ninety-three.
  (D) Three million dollars shall be allocated as follows:
  (I) Two hundred fifty dollars per bed shall be allocated to the  costs
of each general hospital having two hundred or less certified acute care
beds  and  classified  as  a  rural hospital for purposes of determining
payment for inpatient services provided to beneficiaries of title  XVIII
of  the  federal  social  security  act  (medicare) or under state regu-
lations, in recognition of the unique costs incurred by these facilities
in complying with state regulations, based on the total number of  inpa-
tient  acute  care  beds  for  which  such general hospital is certified
pursuant to the operating certificate issued for such  general  hospital
in  accordance with section twenty-eight hundred five of this article in
effect on August twenty-fourth, nineteen hundred ninety-three.

S. 6980                            15

  (II) The remainder shall be allocated on a proportional basis  to  the
costs  of  each  general  hospital  classified  as  a rural hospital for
purposes of determining payment for inpatient services provided to bene-
ficiaries of title XVIII of the federal social security  act  (medicare)
or  under state regulations, in recognition of the unique costs incurred
by these facilities to provide hospital services in remote  or  sparsely
populated areas, according to the following methodology:
  (1)  the  net  income,  or  the net loss expressed as a negative, as a
proportion of the net patient revenue, of each such hospital,  based  on
operating  results  for the nineteen hundred ninety and nineteen hundred
ninety-one rate years, shall be computed and averaged, and expressed  as
a percentage;
  (2) each such resulting percentage average shall be multiplied by each
such  hospital's  number  of  inpatient  beds for which such hospital is
certified pursuant to the operating certificate issued for such hospital
in accordance with section two thousand eight hundred five of this arti-
cle in effect on June  thirtieth,  nineteen  hundred  ninety,  and  such
resulting  products for all such hospitals shall be summed, and such sum
shall be divided by the total of all such beds for all  such  hospitals,
and the resulting quotient shall be the weighted average rural operating
margin expressed as a percentage; and
  (3) one percentage point shall be subtracted from each such hospital's
average  net  operating  margin,  and  the resulting difference shall be
divided by the weighted average rural operating margin; and
  (4) (a) if the quotient resulting  from  the  computation  in  subitem
three  above is less than zero, then the absolute value of such quotient
shall be multiplied by each such hospital's number of inpatient beds for
which such hospital is certified pursuant to the  operating  certificate
issued  for  such hospital in accordance with section two thousand eight
hundred five of this chapter  in  effect  on  June  thirtieth,  nineteen
hundred  ninety,  such  product shall be multiplied by one hundred fifty
dollars, and such resulting amount shall be such  hospital's  adjustment
pursuant to this clause;
  (b)  if  the  quotient resulting from the computation in subitem three
above is zero or greater, such hospital's adjustment  pursuant  to  this
clause shall be zero; and
  (c)  provided,  however,  that if the total of all such adjustments so
computed exceeds the amount to be  allocated  in  accordance  with  this
item, each such hospital's adjustment shall be proportionately reduced.
  (E)  Three million dollars shall be allocated to assist general hospi-
tals involved in a merger, acquisition, or consolidation in meeting  the
costs  associated  with such merger, acquisition, or consolidation on or
after January first,  nineteen  hundred  ninety-four.  The  commissioner
shall make rate adjustments for such allocations.
  (F)  (I)  One million five hundred thousand dollars shall be allocated
for enhanced rates for general hospitals participating  within  a  rural
health  network  as  defined  in  subdivision two of section twenty-nine
hundred fifty-one of this  chapter.  Such  rate  enhancements  shall  be
established  only  for  inpatient  services  provided  by such hospitals
through the written rural health network agreement, where such  services
have been approved for enhanced rates by the commissioner. Notwithstand-
ing  any  inconsistent  provision  of  law, such enhanced rates shall be
subject to the availability of federal financial participation  pursuant
to title XIX of the federal social security act in expenditures made for
eligible  patients,  including  pooling  arrangements and volume adjust-
ments, provided, however that such enhanced rates shall not  affect  the

S. 6980                            16

calculation  for any other general hospital of the group price component
calculated pursuant to subparagraph (i) of paragraph (a) of  subdivision
seven of this section.
  (II)  One million five hundred thousand dollars shall be allocated for
enhanced rates for general  hospitals  participating  within  a  central
services  facility  rural health network as defined in subdivision three
of section twenty-nine hundred fifty-one  of  this  chapter.  Such  rate
enhancements  shall  be established only for inpatient services provided
by such hospitals through  the  network  operational  plan,  where  such
services  have  been  approved  for  enhanced rates by the commissioner.
Notwithstanding any inconsistent provision of law, such  enhanced  rates
shall  be subject to the availability of federal financial participation
pursuant to title XIX of the federal social security act in expenditures
made for eligible patients, including pooling  arrangements  and  volume
adjustments, provided, however that such enhanced rates shall not affect
the calculation for any other general hospital of the group price compo-
nent  calculated pursuant to subparagraph (i) of paragraph (a) of subdi-
vision seven of this section.
  (f) The commissioner and  the  state  director  of  the  budget  shall
consider  providing  a  supplementary increase to general hospital reim-
bursable inpatient operating costs for purposes of  computing  rates  of
payment  for  annual  rate  periods beginning on or after January first,
nineteen hundred eighty-nine in accordance with this section for reason-
able and necessary supplementary  cost  increases  in  general  hospital
operating costs for such rate period or periods based on increased mini-
mum  standards  and  procedures  relating  to general hospital operating
certificates adopted by the council and approved by the commissioner  or
state  initiatives related to recruitment or maintenance of an appropri-
ate level of personnel providing professional services to patients.  Any
such  supplementary  increase  shall  be  allocated  to costs of general
hospitals in accordance with rules and regulations adopted by the  coun-
cil and approved by the commissioner.
  (g)  Hospital discharges for purposes of computing case based payments
per discharge pursuant to this section shall be based on the  number  of
patient  discharges  during the rate period from January first, nineteen
hundred eighty-seven through  December  thirty-first,  nineteen  hundred
eighty-seven excluding discharges of beneficiaries of title XVIII of the
federal  social  security  act  (medicare)  and  adjusted as provided in
specific provisions of this section,  or  the  number  of  such  patient
discharges during a recent twelve month period prior thereto established
by regulation for which data are available subsequently reconciled by an
adjustment to reflect nineteen hundred eighty-seven discharge data.
  (h)  Notwithstanding  any  inconsistent  provision  of  this  section,
commencing April first, nineteen hundred ninety-five:
  (i) rates of payment for patients eligible for payments made by  state
governmental agencies shall be reduced by the commissioner to reflect an
exclusion  from  reimbursable inpatient operating costs commencing April
first, nineteen hundred ninety-five of the special additional  inpatient
operating  costs  determined  and  allocated  among general hospitals in
accordance with clause (C) of  subparagraph  (iii)  and  clause  (C)  of
subparagraph (iv) of paragraph (e) of this subdivision and the factor of
one  quarter of one percent of general hospitals' reimbursable inpatient
operating cost base allocated to costs of general hospitals for technol-
ogy advances in accordance with subparagraph (i)  of  paragraph  (e)  of
this subdivision; and

S. 6980                            17

  (ii)  general hospitals may not request and the commissioner shall not
consider any pending or further appeals for an adjustment  to  rates  of
payment  based  on costs associated with technology advances and changes
in medical practice and such adjustments to reimbursable inpatient oper-
ating costs pursuant to clause (C) of subparagraph (iv) of paragraph (e)
of this subdivision.
  (iii)  Notwithstanding  the  foregoing, or any other provision of this
section, the commissioner may establish pass through payments, or  other
appropriate  methodologies, for the period ending December thirty-first,
two thousand three for innovative medical device advances for which  the
federal  centers  for medicare and medicaid services adopts new codes to
the hospital inpatient prospective payment system prior to  the  federal
food and drug administration's approval of such medical device.
  (i)  For  the rate period July first, two thousand seven through March
thirty-first, two thousand eight and for rates applicable to  the  state
fiscal  year  commencing April first, two thousand eight, and each state
fiscal year thereafter through March thirty-first,  two  thousand  nine,
and for the period April first, two thousand nine through November thir-
tieth,  two  thousand nine, provided, however, that for the period April
first, two thousand nine through November thirtieth, two  thousand  nine
the  aggregate rate adjustments calculated pursuant to subparagraph (ii)
of this paragraph shall not exceed four million dollars, and  contingent
upon the availability of federal financial participation:
  (i)  The  commissioner shall adjust inpatient medical assistance rates
of payment calculated pursuant to  this  section  for  public  hospitals
other  than  non-state  public  hospitals located in a city with a popu-
lation of more than one million persons, that meet the targeted medicaid
discharge percentage in accordance with the  methodology  set  forth  in
subparagraph  (ii)  of  this  paragraph. For purposes of this paragraph,
"targeted medicaid discharge percentage" shall mean that at least seven-
teen and one-half percent of a public hospital's total  discharges  were
patients  eligible  for  payments  under  the medical assistance program
pursuant to title eleven of article five of  the  social  services  law,
including  those  enrolled  in  health  maintenance  organizations,  and
patients eligible for payments under  the  family  health  plus  program
pursuant  to  title eleven-D of article five of the social services law,
based on data reported in  such  hospital's  institutional  cost  report
submitted for the two thousand four period and filed with the department
by  November first, two thousand six. Any hospital that meets the filing
deadline shall have until June  first,  two  thousand  seven  to  submit
revised  and  corrected data schedules in such institutional cost report
which established eligibility for such adjusted rate.
  (ii) The aggregate amount of rate adjustments calculated  pursuant  to
this  paragraph shall not exceed six million dollars for each rate peri-
od. Such amount shall be allocated proportionally based on the  relative
numbers of medicaid discharges among those public hospitals eligible for
rate  adjustments  in accordance with subparagraph (i) of this paragraph
based on each such hospital's reported medical assistance data specified
in subparagraph (i) of this paragraph. Such amounts shall be included as
an add-on to medical assistance inpatient rates  of  payment,  excluding
exempt  unit  rates,  and  shall not be reconciled to reflect changes in
medical assistance utilization between two thousand four and the current
rate year.
  (j) For the rate period July first, two thousand seven  through  March
thirty-first,  two  thousand eight and for rates applicable to the state
fiscal year commencing April first, two thousand eight, and  each  state

S. 6980                            18

fiscal year thereafter through March thirty-first, two thousand nine and
for  the  period April first, two thousand nine through November thirti-
eth, two thousand nine, provided, however, that  for  the  period  April
first,  two  thousand nine through November thirtieth, two thousand nine
the aggregate rate adjustments calculated pursuant to subparagraph  (ii)
of  this  paragraph  shall  not exceed twenty-eight million dollars, and
contingent upon the availability of federal financial participation:
  (i) The commissioner shall adjust inpatient medical  assistance  rates
of  payment  calculated pursuant to this section for voluntary hospitals
other than voluntary hospitals located in a city with  a  population  of
more  than one million persons that meet the targeted medicaid discharge
percentage in accordance with the methodology set forth in  subparagraph
(ii)  of this paragraph. For purposes of this paragraph, "targeted Medi-
caid discharge percentage" shall mean  between  seventeen  and  one-half
percent   and  thirty-five  percent  of  a  voluntary  hospital's  total
discharges were patients eligible for payments under the medical assist-
ance program pursuant to title eleven of  article  five  of  the  social
services  law,  including those enrolled in health maintenance organiza-
tions, and patients eligible for payments under the family  health  plus
program  pursuant  to  title  eleven-D  of  article  five  of the social
services law, based on data reported in  such  hospital's  institutional
cost  report  submitted  for the two thousand four period and filed with
the department by November first, two thousand six.  Any  hospital  that
meets  the  filing  deadline  shall  have until June first, two thousand
seven to submit revised and corrected data schedules  in  such  institu-
tional cost report which established eligibility for such adjusted rate.
  (ii)  The  aggregate amount of rate adjustments calculated pursuant to
this paragraph shall not exceed forty-two million dollars for each  rate
period.  Such amount shall be allocated proportionally based on relative
numbers of medicaid discharges among those voluntary hospitals  eligible
for  rate  adjustments in accordance with subparagraph (i) of this para-
graph based on each such hospital's  reported  medical  assistance  data
specified  in  subparagraph (i) of this paragraph. Such amounts shall be
included as an add-on to medical assistance inpatient rates of  payment,
excluding  exempt  unit  rates,  and  shall not be reconciled to reflect
changes in medical assistance utilization between two thousand four  and
the rate year.
  (k)  Subject  to  the availability of federal financial participation,
the commissioner shall adjust inpatient rates of payment for  non-public
general  hospitals  located in a city with a population of more than one
million persons for the following periods and in the  following  amounts
in  order  to  ensure  meaningful  access to the hospital's services and
reasonable accommodation for all medicaid patients who require  language
assistance:
  (i)  for  the  period  July first, two thousand seven through December
thirty-first, two thousand seven, thirty-eight million dollars shall  be
allocated  proportionally  to  such  hospitals based on fifty percent of
each such hospital's reported general clinic medicaid visits  and  fifty
percent  on each such hospital's reported medicaid inpatient discharges,
as reported in each hospital's  two  thousand  four  institutional  cost
report,  as  submitted  to  the  department prior to November first, two
thousand six, to the total of all such general clinic visits reported by
all such hospitals.
  (ii) for the period April first,  two  thousand  eight  through  March
thirty-first,  two  thousand nine, and each state fiscal year thereafter
through November thirtieth,  two  thousand  nine,  thirty-eight  million

S. 6980                            19

dollars  shall  be  allocated on an annualized basis for such purpose to
such hospitals in accordance with the methodology set forth in  subpara-
graph  (i)  of this paragraph, provided, however, that thirty percent of
such  funds  shall  be  allocated proportionally, based on the number of
foreign languages utilized by one or more percent of  the  residents  in
each hospital total service area population, provided, however, that for
the  period  April  first, two thousand nine through November thirtieth,
two thousand nine, such  allocation  shall  be  reduced  to  twenty-five
million three hundred thirty-three thousand dollars.
  (l)  Effective for periods on and after July first, two thousand seven
through November thirtieth, two thousand nine:
  (i) Subject to the availability of  federal  financial  participation,
the  commissioner  shall  adjust  inpatient  medical assistance rates of
payment calculated  pursuant  to  this  section  for  general  hospitals
located  in  the  counties  of Nassau and Suffolk in accordance with the
methodology set forth  in  subparagraph  (ii)  of  this  paragraph.  For
purposes  of  this paragraph, "medicaid inpatient discharges" shall mean
the total  number  of  such  general  hospital's  discharges  where  the
patients were eligible for payments under the medical assistance program
pursuant  to  title  eleven  of article five of the social services law,
including  those  enrolled  in  health  maintenance  organizations,  and
patients  eligible  for  payments  under  the family health plus program
pursuant to title eleven-D of article five of the social  services  law,
based  on  data  reported  in  such hospital's institutional cost report
submitted for the two thousand four period and filed with the department
by November first, two thousand six.
  (ii) The amount of rate adjustments calculated pursuant to this  para-
graph  shall  not exceed five million dollars in the aggregate annually.
Such amount shall be allocated  proportionally  based  on  the  relative
numbers  of  medicaid  discharges among those general hospitals eligible
for rate adjustments in accordance with subparagraph (i) of  this  para-
graph  based  on  each  such hospital's reported medical assistance data
specified in subparagraph (i) of this paragraph. Such amounts  shall  be
included  as an add-on to medical assistance inpatient rates of payment,
excluding exempt unit rates, and shall  not  be  reconciled  to  reflect
changes  in medical assistance utilization between two thousand four and
the current rate year.
  2. Special payment rate methodology agreements, negotiated rates.  (a)
Any payment rate methodology agreement negotiated between a self-insured
and  self-administered  fund  and  a  specific  general  hospital or its
successor which was in effect on May first, nineteen hundred eighty-five
shall be permitted to continue with such fund,  or  a  self-insured  and
self-administered  fund related in interest to such fund through merger,
consolidation or corporate reorganization subsequent to May first, nine-
teen hundred eighty-five, as long as any revision  to  such  methodology
does  not  provide  more  of  an economic advantage to the fund than the
previous agreement. A general hospital  which  has  any  such  agreement
shall  file with the commissioner information regarding each such agree-
ment, as may be required by  regulations  adopted  by  the  council  and
approved by the commissioner.
  (b)(i)  Nothing  in  this  section shall prohibit the establishment of
special payment  rate  methodologies  in  arrangements  between  general
hospitals  and  health maintenance organizations operating in accordance
with the provisions of article forty-three of the insurance law or arti-
cle forty-four of this chapter, provided the commissioner has been noti-
fied of the proposed arrangement, has reviewed such proposed arrangement

S. 6980                            20

and has issued his written approval of the arrangement. The commissioner
shall not approve such an arrangement if it would result in payments  to
a  general  hospital  for  inpatient services provided to subscribers of
health  maintenance  organizations  which in the aggregate are less than
what otherwise would  have  been  paid  under  the  provisions  of  this
section,  unless  the  health maintenance organization demonstrates that
such lower payments are justified because the arrangement will result in
lower costs to the general hospital, and the payments approximate costs.
Such arrangements may be approved by the commissioner to: integrate  the
medical  delivery  functions of the health maintenance organization with
the medical delivery functions of the hospital, including but not limit-
ed to joint staffing arrangements or pre-admission testing arrangements;
or integrate the method of  payment  and  financial  incentives  to  the
hospital  with  the method of payment and financial incentives to physi-
cians or other providers in  the  health  maintenance  organization;  or
integrate the method of payment and financial incentives to the hospital
with the health maintenance organization, including, but not limited to,
bed  leasing  or  capitation  payments. Notwithstanding any inconsistent
provision of this section, for periods beginning  on  or  after  January
first,  nineteen  hundred  ninety-four,  negotiated  agreements  between
health  maintenance  organizations  and  general  hospitals  which  were
approved  by the commissioner and which were in effect on December thir-
ty-first, nineteen hundred ninety-three, may continue.
  (ii) Notwithstanding any  inconsistent  provisions  of  this  section,
health  maintenance  organizations  operating  in  accordance  with  the
provisions of article  forty-three  of  the  insurance  law  or  article
forty-four  of  this  chapter,  having  enrollees eligible for inpatient
general hospital payments as beneficiaries of title XVIII of the federal
social security act (medicare) shall  reimburse  general  hospitals  for
inpatient services for these enrollees in accordance with the provisions
contained in title XVIII of the federal social security act (medicare).
  (c)  Special  payment  rate  methodology  agreements  other than those
permitted in accordance with the provisions of paragraphs (a) and (b) of
this subdivision shall not be authorized, and no other arrangements with
a general hospital for inpatient  rates  of  payment  other  than  those
established in accordance with this section shall be negotiated.
  (d)  Notwithstanding any inconsistent provision of law, the provisions
of paragraphs (a), (b) and (c) of this subdivision shall  not  apply  to
payments  for  patients  discharged  on or after January first, nineteen
hundred ninety-seven.
  3. Diagnosis-related groups and weights. (a)  The  commissioner  shall
establish  as  a  basis  for case classification for case based rates of
payment the same system of diagnosis-related groups  for  classification
of  hospital  discharges as established for purposes of reimbursement of
inpatient hospital service pursuant to title XVIII of the federal social
security act (medicare) in effect on the first day of July in  the  year
preceding  the  rate  period.  However,  the council may adopt rules and
regulations, subject to the approval of the commissioner, to adjust such
diagnosis-related  groups  or  establish  additional   diagnosis-related
groups  to  reflect subsequent revisions applicable to reimbursement for
discharges of beneficiaries of title XVIII of the federal social securi-
ty act (medicare) effective subsequent to the first day of July  in  the
year  preceding  the  rate  period, or to identify medically appropriate
patterns of health resource use efficiently and  economically  provided.
No  such  regulations,  however,  except  those  to  reflect  subsequent
revisions applicable to reimbursement for discharges of beneficiaries of

S. 6980                            21

title XVIII of the federal social security act (medicare) or for changes
made to diagnosis-related groups for neonatal services and  services  to
acquired  immune  deficiency syndrome (AIDS) patients shall apply to the
rate  period beginning January first, nineteen hundred eighty-eight. For
subsequent rate periods regulations other than those to  reflect  subse-
quent  revisions applicable to reimbursement for discharges of benefici-
aries of title XVIII of the federal social security act  (medicare)  may
in  addition  apply to changes to the diagnosis-related groups for other
services, including but not limited to,  pediatric  services;  provided,
however,  that  psychiatric  and  rehabilitation  services  shall not be
included.
  Notwithstanding section one hundred twelve or one hundred seventy-four
of the state finance law or any other law, rule  or  regulation  to  the
contrary,  the  commissioner  may  contract  with  a  vendor for nominal
consideration to develop the specifications for the  adjusted  or  addi-
tional  diagnosis-related  groups  if  the commissioner certifies to the
comptroller that such contract is in the best interest of the health  of
the  people of the state. Notwithstanding that such specifications shall
be available pursuant to article six of the public  officers  law,  such
contract  may provide that the specifications for such adjusted or addi-
tional diagnosis-related groups provided by the vendor shall be  subject
to copyright protection pursuant to federal copyright law.
  (b)  The methodology for assignment of patient discharges within diag-
nosis-related groups applicable for purposes of determining payments for
discharges of beneficiaries of title XVIII of the federal social securi-
ty act (medicare) in effect on the first day of July in the year preced-
ing the rate period, revised to reflect such adjustments as may be  made
to  the  diagnosis-related group classification system pursuant to para-
graph (a) of this subdivision,  shall  be  applied  to  assign  specific
patient  discharges  within  the  diagnosis-related  groups  established
pursuant to paragraph (a) of this subdivision.  The  council  may  adopt
rules  and  regulations, subject to the approval of the commissioner, to
revise the methodology for the assignment of specific patient discharges
within the diagnosis-related groups to reflect revisions to the  method-
ology  applicable for purposes of determining payments for discharges of
beneficiaries of title XVIII of the federal social security  act  (medi-
care)  effective subsequent to the first day of July in the year preced-
ing the rate period.
  (c) (i) The commissioner  shall  determine  an  appropriate  weighting
factor  for  each  diagnosis-related  group  which reflects the relative
general hospital resources used by all patients,  other  than  benefici-
aries of title XVIII of the federal social security act (medicare), with
respect  to  discharges  classified  within that diagnosis-related group
compared to discharges classified within other diagnosis-related groups.
For rate periods during  the  period  January  first,  nineteen  hundred
eighty-eight through December thirty-first, nineteen hundred ninety, the
appropriate  weighting  factor for each diagnosis-related group shall be
determined using nineteen hundred eighty-five costs and statistics for a
representative sample of general hospitals. For rate periods during  the
period January first, nineteen hundred ninety-one through December thir-
ty-first,  nineteen  hundred  ninety-three,  the  appropriate  weighting
factor for each diagnosis-related group shall be determined using  nine-
teen  hundred  eighty-nine  costs  and  statistics  for a representative
sample of general hospitals. For rate periods during the period  January
first, nineteen hundred ninety-four through December thirty-first, nine-
teen  hundred  ninety-nine  and on and after January first, two thousand

S. 6980                            22

through December  thirty-first,  two  thousand  seven,  the  appropriate
weighting  factor  for  each diagnosis-related group shall be determined
using nineteen hundred ninety-two costs and statistics for  a  represen-
tative  sample of general hospitals. For rate periods on and after Janu-
ary first, two thousand eight, the appropriate weighting factor for each
diagnosis-related group shall be  determined  using  two  thousand  four
costs  and  statistics for a representative sample of general hospitals,
and, further, the computation of the  group  average  arithmetic  inlier
length-of-stays  for  each diagnostic related group, as otherwise deter-
mined in accordance with applicable regulations, shall utilize two thou-
sand four data as reported to the department, and, be based on a  repre-
sentative  sample  of general hospitals, and further, the short-stay and
long-stay length-of-stay trimpoints, as otherwise determined in  accord-
ance  with applicable regulations, shall be computed utilizing two thou-
sand four data as reported to the department and based  on  a  represen-
tative  sample  of  general  hospitals.  Provided  however,  that if the
department does not release updated data and documentation described  in
subparagraph (iii) of this paragraph, the effective rate period shall be
April  1,  2008.  Discharges and costs related to the exceptions to case
payment provided in accordance with  paragraphs  (e),  (g)  and  (i)  of
subdivision  four of this section shall be eliminated from the costs and
statistics used in determining the appropriate weighting factors,  while
the  cost  factor  related to the exception provided in paragraph (h) of
subdivision four of this section shall  be  eliminated.  The  costs  and
statistics  for  the  case  payment modifications calculated pursuant to
paragraphs (a), (b), (c) and (d) of subdivision  four  of  this  section
shall  be eliminated in accordance with paragraph (c) of subdivision six
of this  section.  Costs  related  to  education,  physician,  ambulance
services and organ acquisition identified consistent with the provisions
of  paragraph (c) of subdivision seven of this section and costs related
to malpractice insurance shall also be eliminated. The council may adopt
rules and regulations, subject to the approval of the  commissioner,  to
prospectively  adjust  weighting  factors  determined in accordance with
this paragraph to reflect  changes  in  medical  technology.  After  the
commissioner  issues rate certifications pursuant to subdivision four of
section twenty-eight hundred seven  of  this  article  the  commissioner
shall  expeditiously  make available for inspection by general hospitals
and payors the data, consistent with appropriate  department  procedures
for the release and protection of confidential data, and the methodology
utilized to determine the appropriate weighting factors.
  (ii)  Notwithstanding  any  contrary  provision  of  law, the case mix
adjustment to the operating component of per diem rates of payment  paid
to  general hospitals or units of general hospitals that are exempt from
case based payments, as determined in accordance with  subdivision  four
of  this section and as otherwise computed in accordance with applicable
regulations, shall, for periods on and after January first, two thousand
eight, be computed utilizing the diagnosis-related group  classification
system  in  effect  for  the rate year for inpatient case based medicaid
rates of payment and the related per day cost weights  calculated  using
two  thousand  four  data  as  reported to the department and based on a
representative sample of general hospitals.  For  rate  periods  on  and
after  the  two  thousand  eleven  rate period, such case mix adjustment
shall utilize the same base period data as determined in accordance with
paragraph (e) of this subdivision.
  (iii) The department shall, by no later than June first, two  thousand
seven,  make  available  to  hospital  industry representatives relevant

S. 6980                            23

updated data and documentation that  the  department  will  utilize,  in
accordance with this paragraph, in developing appropriate service inten-
sity weights for each diagnosis-related group for the two thousand eight
rate period. The department will thereafter consult with hospital indus-
try  representatives in developing regulations to implement the utiliza-
tion of such updated service intensity weight data  applicable  to  rate
periods  on and after two thousand eight. If it is deemed appropriate by
the commissioner,  in  consultation  with  hospital  industry  represen-
tatives,  such regulations may provide for the phase-in over a period of
time of the application of such updated  data  in  determining  Medicaid
rates  on  and  after  two  thousand  eight, provided, however, that the
application of such updated data shall be fully reflected in such  rates
by no later than January first, two thousand ten.
  (iv)  By no later than December first, two thousand seven, the commis-
sioner shall issue a report to the governor and the legislature describ-
ing the updated data utilization  applicable,  in  accordance  with  the
provisions of this paragraph, to periods on and after two thousand eight
and setting forth the factors considered in developing it.
  (d)  The  commissioner shall consult with technical advisory groups as
necessary  in  establishing  diagnosis-related  groups  and  weights  in
accordance  with  paragraphs (a), (b) and (c) of this subdivision and in
making adjustments in accordance with paragraphs (b) and (c) of subdivi-
sion six of this section.
  (e) The appropriate weighting factor for each diagnosis-related group,
the group average arithmetic inlier length-of-stays for each  diagnosis-
related  group,  and  the  short-stay and long-stay length-of-stay trim-
points shall, by no later than the two thousand eleven rate  period,  be
based  on  reported costs and statistics from a representative sample of
general hospitals from a base period no earlier than two thousand seven.
Thereafter, the base period reported costs and statistics  utilized  for
such  purposes shall be updated no less frequently than every four years
and the new base periods utilized shall be no more than four years prior
to the applicable rate period.
  3-a. Dispute resolution system. (a) The commissioner shall  establish,
in  accordance  with  rules  and  regulations adopted by the council and
approved by the commissioner, a payment  dispute  resolution  system  to
resolve  disputes  between  payors  of  inpatient  hospital services and
general hospitals for patients discharged on  or  after  January  first,
nineteen hundred ninety-one and prior to January first, nineteen hundred
ninety-seven.  The commissioner shall designate the use of a uniform set
of guidelines for determining the application of  particular  diagnosis-
related group categories to particular patients which may include guide-
lines  published  by  associations, universities or other organizations.
The dispute resolution process shall apply to  all  payors  of  hospital
services  described in paragraphs (a), (b) and (c) of subdivision one of
this section, including patients or payors which pay hospitals'  charges
or  coinsurance,  provided,  however,  such  process  shall  not include
payments made for persons eligible  for  payments  as  beneficiaries  of
title XVIII of the federal social security act (medicare) as a patients'
primary  payor or payments made pursuant to title eleven of article five
of the social services law,  provided  that  this  exception  shall  not
include  payments  for medical assistance participants in health mainte-
nance organizations or prepaid health services plans. A payor of  hospi-
tal  services  included  in  paragraph  (a)  of  subdivision one of this
section may serve as, or designate, the review agent for their subscrib-
ers, beneficiaries or enrolled members  for  an  initial  review  and  a

S. 6980                            24

reconsideration  review  but  the  final step in such dispute resolution
process shall be an independent party unrelated to the payor which party
shall be approved by the commissioner pursuant to this section.
  In  the  event a third party payor or patient desires to challenge the
appropriateness of a bill for hospital services rendered  by  a  general
hospital  for  a  particular patient, or in the event a general hospital
desires to challenge the appropriateness of a payment by a  third  party
payor on behalf of a particular patient, then either the hospital or the
payor  may  submit the question to the dispute resolution process estab-
lished pursuant to this subdivision.  The disputes submitted for  resol-
ution may include the appropriateness of the application of a particular
diagnosis-related  group  category, as described in subdivision three of
this section, to a particular patient;  the  appropriate  classification
and  payment  of  an  inpatient stay as a modification of a case payment
pursuant to paragraph (a), (b), (c), or (d) of subdivision four of  this
section,  including  whether  payment  for  services should be, based on
medical necessity or other reasons, made as a case payment or payment as
a modification of a case payment; whether payment  should  appropriately
be  made pursuant to an alternative reimbursement methodology authorized
in accordance with paragraph (e) or (h)  of  subdivision  four  of  this
section  and the payment for such services; whether payment for services
rendered by a general hospital should be appropriately, based on medical
necessity or other reasons,  made  as  payment  for  inpatient  care  or
payment for outpatient care and the payment for such services; or wheth-
er the hospital stay should be classified as a readmission as defined in
accordance  with regulations adopted pursuant to paragraph (l) of subdi-
vision eleven of this section and the payment for such stay.
  The dispute resolution system established shall provide for an initial
review and a reconsideration review. The council shall  adopt  necessary
rules  and  regulations,  subject  to  the approval of the commissioner,
including but not limited to those for  determining  the  parties  to  a
dispute resolution review and any reconsideration review; the procedures
and time limits to initiate a dispute resolution review or any reconsid-
eration  review; the procedures for notification of all parties involved
in the dispute upon initiation of a dispute  resolution  review  or  any
reconsideration  review;  time limits for resolving disputes; the estab-
lishment of dispute resolution and reconsideration  fees;  and  required
documents to be submitted including the hospital bill in dispute, a copy
of  the  patient  medical record, or so much thereof as may be required,
and a statement of issues including the basis for the dispute. During  a
dispute  resolution  review  or  any reconsideration review, a party may
present documentation or evidence in support of its  position  regarding
the  appropriate  diagnosis-related group to which the patient discharge
should be assigned or the proper payment for the case.  The commissioner
shall approve a statewide utilization review  organization  or  regional
utilization  review  organization  to conduct and determine such dispute
resolution reviews including any reconsideration reviews  in  accordance
with  paragraph  (b)  of this subdivision.   Every general hospital bill
issued for a patient discharged on  or  after  January  first,  nineteen
hundred  ninety-one  other  than for discharges of patients eligible for
medical assistance pursuant to title  eleven  of  article  five  of  the
social  services  law subject to case based payments determined pursuant
to this section based on diagnosis-related  group  assigned  or  maximum
hospital charges for a case determined pursuant to this section based on
diagnosis-related  group  assigned  shall include or be accompanied by a
notice of the payment dispute resolution system; provided, however, that

S. 6980                            25

a general hospital issuing bills to a  payor  for  twenty-five  or  more
patients per year may send such notice to such payor on an annual basis.
The  form  and  content of such notice shall be determined in accordance
with  rules  and  regulations adopted by the council and approved by the
commissioner.
  (b) The commissioner shall  approve  a  statewide  utilization  review
organization or regional utilization review organizations to conduct and
determine dispute resolution reviews, including reconsideration reviews,
pursuant  to  this  subdivision.  To be approved as a utilization review
organization in accordance with this subdivision such organization  must
meet  the following criteria: the organization shall employ or otherwise
secure the services of adequate personnel, including medical  personnel,
qualified  to  review  such disputes, the organization shall demonstrate
the ability to render decisions in a  timely  manner,  the  organization
shall  agree  to  provide  ready access by the commissioner to all data,
records and information it collects and maintains concerning its  review
activities  under  this  subdivision,  the  organization  shall agree to
provide to the commissioner such data, information and  reports  as  the
commissioner   determines  necessary  to  evaluate  the  review  process
provided pursuant to this subdivision, the  organization  shall  provide
assurances  that  review personnel shall not have a conflict of interest
in conducting a review based on payor, hospital or  professional  affil-
iation, and the organization meets such other performance and efficiency
criteria  regarding  the conduct of reviews pursuant to this subdivision
established by the commissioner. The commissioner may withdraw  approval
of  a  utilization  review organization where such organization fails to
continue to meet approval criteria established pursuant  to  this  para-
graph. A utilization review organization approved pursuant to this para-
graph  shall be authorized to receive and review patient medical records
and shall develop  and  implement  appropriate  procedures  to  maintain
confidentiality of such patient medical records.
  (c) Upon resolution of a payment dispute in accordance with this para-
graph,  the  parties  involved  in  the dispute shall be notified of the
reason for the decision and  the  hospital  bill  in  dispute  shall  be
adjusted to reflect such resolution.
  (d)  The  party  initiating a payment dispute resolution review or any
reconsideration review must submit to the utilization  review  organiza-
tion  a  dispute resolution fee established to recover the costs related
to the conduct of the initial dispute resolution reviews or a  reconsid-
eration  review  fee  established  to  recover  the costs related to the
conduct of such reconsideration reviews, except that for payors in para-
graph (a) of subdivision one of this section which serve as or designate
the review agent  for  their  subscribers,  beneficiaries,  or  enrolled
members  a  fee  shall be charged only for the final step in the dispute
resolution process. Upon resolution of a payment dispute  in  accordance
with  this  subdivision  in  favor  of  the payor, the amount due to the
hospital by a payor based upon the hospital bill shall be reduced by the
amount of any fee paid pursuant to this paragraph by such payor.    Upon
resolution  of  a payment dispute in accordance with this subdivision in
favor of the general hospital, the amount due to the hospital based upon
the hospital bill shall be increased by  the  amount  of  any  fee  paid
pursuant to this paragraph by such general hospital.
  (e) Nothing herein shall relieve the responsibilities of the payors as
set  forth  in  paragraphs  (a),  (b) and (c) of subdivision one of this
section.

S. 6980                            26

  (f)(i) Whenever the amount of payment made by a  payor  to  a  general
hospital is less than the amount of payment due determined by a utiliza-
tion  review  organization  in accordance with this subdivision, general
hospitals in accordance with paragraph (d) of subdivision eleven of this
section may include financing or working capital charges on such balance
owed to the general hospital by a payor.
  (ii)  Whenever  the  amount  of  payment  made by a payor to a general
hospital is in excess of the amount  of  payment  due  determined  by  a
utilization  review  organization  in  accordance with this subdivision,
interest shall be due on such excess owed by the general hospital  to  a
payor of two percent for the first thirty days and one percent per month
thereafter  from  the  date  of  payment of such excess amount. Interest
shall not be applied to  excess  amounts  owed  to  third  party  payors
participating in an advance payment system.
  (g) For payment amounts eligible for payment dispute resolution pursu-
ant  to this subdivision, a general hospital shall not bill a patient or
pursue collection efforts against a patient for the difference between a
hospital bill and the payment made on such bill by a  payor  within  the
payor  categories  specified in paragraph (a), (b) or (c) of subdivision
one of this section, except for uncovered services by a  payor,  deduct-
ibles and coinsurance based on maximum hospital charges calculated based
on  the  undisputed amount of the hospital bill, until final decision of
the utilization review organization. Nothing in this  subdivision  shall
be  construed  to  prohibit  a general hospital from issuing an informa-
tional bill to a patient regarding such difference between the  hospital
bill  and  the  payment  made  on such bill to advise the patient of the
amount in dispute.
  (h) The formal written decision of a utilization  review  organization
approved by the commissioner to conduct and determine dispute resolution
reviews  in  accordance  with  paragraph  (b) of this subdivision upon a
reconsideration review, or if there is no reconsideration review upon an
initial review, or for a payor of hospital services  included  in  para-
graph  (a)  of subdivision one of this section which serves as or desig-
nates the review agent for their subscribers, beneficiaries or  enrolled
members  upon the final step in the dispute resolution process as to the
questions of the appropriateness of a bill for hospital services or  the
calculation  of  the  proper payment for such hospital services shall be
admissible in evidence at any subsequent trial upon the request  of  any
party to the action. The decision shall not be binding upon the jury or,
in  a  case  tried  without  a  jury, upon the trial court, but shall be
considered prima facie evidence to establish the facts resolved  by  the
utilization review organization.
  4.]  2. Modifications and exceptions to case payment rates. Case based
rates of payment shall be modified and per diem or other unit of service
payments  shall  be  provided,  or  exceptions  shall  be  made  to case
payments, in accordance with rules and regulations adopted by the  coun-
cil and approved by the commissioner, in the following circumstances:
  (a)  where  a  case  that is eligible for payment under the case based
payment system is transferred between general hospitals,  the  receiving
hospital shall be reimbursed its total case payment amount for the diag-
nosis-related group (including any payments made in accordance with this
subdivision),  and the transferring hospital shall receive reimbursement
on a basis consistent with the methodology developed for the elimination
of transfer patient costs [in accordance with subparagraph (i) of  para-
graph (c) of subdivision six of this section plus additions contained in
subparagraph (ii) of paragraph (a) of subdivision one of this section on

S. 6980                            27

a  per diem basis]. The payment to a transferring general hospital shall
not exceed the case  payment  amount  for  the  diagnosis-related  group
computed in accordance with this section;
  [(b)  where  the cost per case for a patient that does not qualify for
payment pursuant to paragraph (a) or  (d)  of  this  subdivision  is  in
excess  of  the  basic case payment rate for the diagnosis-related group
multiplied by two and the overall  hospital-specific  average  cost  per
case  multiplied by six, the payment to the general hospital in addition
to the basic case payment rate will be  one  hundred  percent,  or  such
percentage as computed in accordance with subparagraph (ii) of paragraph
(c)  of  subdivision  six  of this section, multiplied by the difference
between the general hospital's cost for the case and the greater of  the
basic  case  payment  rate for the diagnosis-related group multiplied by
two or the overall hospital-specific cost per case multiplied by six. In
determining whether a case qualifies for payment under  this  paragraph,
prospective  rate  adjustments  made in accordance with paragraph (c) of
subdivision eleven of this section to reflect the retroactive impact  of
an  adjustment on prior rates, shall be excluded. Where a case qualifies
for payment pursuant to both this paragraph and paragraph  (c)  of  this
subdivision then payment shall be made in accordance with this paragraph
if  such  payment  exceeds  that  which would be made in accordance with
paragraph (c) of this subdivision. The general hospital's costs per case
shall be computed by adjusting the general hospital's actual charges for
the case by the general hospital's inpatient cost to charge ratio;
  (c) where a patient is identified as a long stay patient,  payment  to
the general hospital in addition to the basic case payment rate shall be
on a basis consistent with the methodology developed for the elimination
of  long  stay  patient  costs  in accordance with subparagraph (iii) of
paragraph (c) of subdivision six of this section. Where a case qualifies
for payment pursuant to both this paragraph and paragraph  (b)  of  this
subdivision  then payment shall be made in accordance with paragraph (b)
of this subdivision if such payment exceeds that which would be made  in
accordance  with  this  paragraph.  A long stay patient is defined as an
inpatient whose hospital stay exceeds the long  stay  outlier  threshold
for the diagnosis-related group;
  (d)  where a patient is identified as a short stay patient, payment to
the general hospital shall be on a basis consistent with the methodology
developed for the elimination of short stay patient costs in  accordance
with  subparagraph  (iv)  of  paragraph  (c)  of subdivision six of this
section plus additions contained in subparagraph (ii) of  paragraph  (a)
of  subdivision  one  of  this section on a per diem basis. A short stay
patient is defined as an inpatient discharged from the hospital  on  the
same day of admission, or the day after admission except for those stays
where  the statewide mean length of stay for the diagnosis-related group
is less than three days, or whose hospital  stay  is  not  greater  than
twenty  percent  of the statewide mean length of stay for the diagnosis-
related group with which the patient  is  identified,  excluding  normal
newborn cases and normal deliveries;
  (e)  in  cases  where a general hospital or distinct unit of a general
hospital is not or would not  have  been  reimbursed  on  a  case  based
payment  per  diagnosis-related group for inpatient services provided on
or before December thirty-first, two thousand one, to  beneficiaries  of
title XVIII of the federal social security act (medicare), reimbursement
shall  be  on  a  per diem basis computed for excluded general hospitals
based on the hospital's reimbursable inpatient operating cost  base,  or
for  excluded  distinct units of general hospitals based on the distinct

S. 6980                            28

unit's reimbursable inpatient operating cost base, determined in accord-
ance with paragraph (d) of subdivision one of this section, projected to
the applicable rate period by the trend factor determined in  accordance
with  subdivision  ten of this section, and increased in accordance with
subparagraphs (i), (iii) and (iv) of paragraph (e) of subdivision one of
this section to reflect special additional  inpatient  operating  costs,
and  adjusted  to  exclude  a factor for operating costs of patients who
required an alternate  level  of  care  developed  consistent  with  the
provisions  of  paragraph  (h)  of  this  subdivision, and increased for
excluded general hospitals to reflect the product of the group  category
percentage  amount applicable for purposes of determining group category
average inpatient reimbursable operating cost per discharge  (price)  in
the  rate  period  pursuant to paragraph (b) of subdivision five of this
section for general hospitals reimbursed on a  case  based  payment  per
diagnosis-related  group  applied  to  such  excluded general hospital's
additional cost increases determined  in  accordance  with  subparagraph
(ii)  of  paragraph (e) of subdivision one of this section, and adjusted
on a payor category basis to reflect allocation of malpractice insurance
costs in accordance with the methodology developed pursuant to  subpara-
graph  (ii)  of paragraph (h) of subdivision eleven of this section, for
those  patients  included  in  the  payor  categories  pursuant  to  the
provisions  of  paragraph (a) or (b) of subdivision one of this section;
provided, however, for those patients included in the  payor  categories
pursuant  to  the provisions of paragraph (b) of subdivision one of this
section payment shall be at the per diem  payment  to  the  hospital  or
distinct  unit  of  the hospital for services provided to subscribers of
corporations organized and operating in accordance with  article  forty-
three  of  the  insurance  law,  adjusted  for  uncovered  services, and
increased by thirteen percent or by five percent, as the  case  may  be;
provided  further,  however,  for  those  general hospitals that are not
reimbursed on a case-based payment per diagnosis-related group for inpa-
tient services provided to beneficiaries of title XVIII of  the  federal
social  security  act (medicare) as a result of their designation by the
secretary of health and human services as a comprehensive cancer  hospi-
tal  or  as  a result of their status as an acute care exempt children's
hospital, the base year for determining payments for  services  in  such
facilities  shall  be  nineteen hundred eighty-seven, provided, however,
such hospitals shall be allowed  adjustments  in  rates  of  payment  to
reflect  costs  incurred subsequent to nineteen hundred eighty-seven but
not reflected in such base. Funds received by a general  hospital  based
on the payment differential in accordance with paragraph (b) of subdivi-
sion  one  of  this  section applied pursuant to this paragraph shall be
hospital funds for patient care purposes. For those patients not covered
under the provisions of paragraph (a) or (b) of subdivision one of  this
section, or who are not covered under the provisions of paragraph (a) of
subdivision  two  of  this section, payment shall be on the basis of the
hospital's charge schedule, limited to one hundred twenty percent of the
total per diem payment that would have been made  if  the  patient  were
included in the payor categories pursuant to the provisions of paragraph
(b)  of  subdivision  one of this section. Rates of payment for excluded
general hospitals and excluded distinct units of general hospitals for a
rate period shall be increased on a per  diem  basis  by  additions  and
allowances specified in subparagraphs (ii) and (iii) of paragraph (a) of
subdivision one of this section. In adopting regulations for purposes of
determining  rates  of payment for psychiatric services pursuant to this
paragraph, the council and the commissioner shall consider the advice of

S. 6980                            29

the commissioner of mental health and may include  case  mix  and  other
adjustments for such rates of payment. The commissioner of mental health
shall  study and report on alternative procedures for the development of
rates  of  payment  for inpatient psychiatric care. Such report shall be
submitted to the governor,  the  legislature  and  the  commissioner  of
health  by January first, nineteen hundred ninety-three. Recommendations
for alternative financing  shall  take  into  consideration  methods  to
improve access to inpatient care for seriously mentally ill persons.
  (e-1)]  (B)  Notwithstanding  any inconsistent provision [of paragraph
(e)] of this subdivision or any other  contrary  provision  of  law  and
subject to the availability of federal financial participation, per diem
rates  of  payment  by governmental agencies for a general hospital or a
distinct unit of a general hospital for inpatient  psychiatric  services
[that  would  otherwise be subject to the provisions of paragraph (e) of
this subdivision] shall, with regard to days of service associated  with
admissions  occurring  on and after April first, two thousand ten, be in
accordance with the following:
  (i) For rate periods on and after April first, two thousand  ten,  the
commissioner,  in  consultation  with  the commissioner of the office of
mental health, shall promulgate regulations, and may promulgate emergen-
cy regulations, establishing methodologies for determining the operating
cost components of rates of payments  for  services  described  in  this
paragraph.  Such  regulations  shall utilize two thousand five operating
costs as submitted to the department prior to July first,  two  thousand
nine and shall provide for methodologies establishing per diem inpatient
rates  that  utilize  case  mix  adjustment mechanisms. Such regulations
shall contain criteria for adjustments based on length of stay.
  (ii) Rates of payment established pursuant to subparagraph (i) of this
paragraph  shall  reflect  an  aggregate  net  statewide   increase   in
reimbursement  for such services of up to twenty-five million dollars on
an annual basis.
  (iii) Capital  cost  reimbursement  for  general  hospitals  otherwise
subject  to the provisions of this paragraph shall remain subject to the
provisions of subdivision [eight] THREE of this section.
  [(e-2)] (C) Notwithstanding any inconsistent provision  [of  paragraph
(e)]  of  this  subdivision  or  any other contrary provision of law and
subject to the availability of federal financial participation, per diem
rates  of  payment  by  governmental  agencies  for  inpatient  services
provided  by a general hospital or a distinct unit of a general hospital
for services, as described below, [that would otherwise  be  subject  to
the provisions of paragraph (e) of this subdivision,] shall, with regard
to  days  of service occurring on and after December first, two thousand
nine, be in accord with the following:
  (i) For physical medical  rehabilitation  services  and  for  chemical
dependency rehabilitation services, the operating cost component of such
rates  shall  reflect  the  use of two thousand five operating costs for
each respective category of services as reported by each facility to the
department prior to July first, two thousand nine and  as  adjusted  for
inflation  pursuant  to  paragraph (c) of subdivision [ten] FOUR of this
section, as otherwise modified  by  any  applicable  statute,  provided,
however,  that  such two thousand five reported operating costs, but not
including reported direct medical education cost, shall,  for  rate-set-
ting  purposes,  be  held to a ceiling of one hundred ten percent of the
average of such reported costs in the region in which  the  facility  is
located[,  as determined pursuant to clause (E) of subparagraph (iii) of
paragraph (1) of this subdivision].

S. 6980                            30

  (ii) For services provided by rural hospitals designated  as  critical
access  hospitals  in  accordance with title XVIII of the federal social
security act, the operating cost component of such rates  shall  reflect
the use of two thousand five operating costs as reported by each facili-
ty  to  the  department  prior  to  July first, two thousand nine and as
adjusted for inflation pursuant to paragraph (c)  of  subdivision  [ten]
FOUR  of this section, as otherwise modified by any applicable statutes,
provided, however, that such two thousand five reported operating  costs
shall,  for  rate-setting  purposes, be held to a ceiling of one hundred
ten percent of the average of such reported costs for  all  such  desig-
nated hospitals statewide.
  (iii)  For  inpatient  services  provided by specialty long term acute
care hospitals and for inpatient services provided by  cancer  hospitals
as  so  designated  as of December thirty-first, two thousand eight, the
operating cost component of such rates shall  reflect  the  use  of  two
thousand  five  operating costs for each respective category of facility
as reported by each facility to the department prior to July first,  two
thousand nine and as adjusted for inflation pursuant to paragraph (c) of
subdivision  [ten]  FOUR  of  this section, as otherwise modified by any
applicable statutes.
  (iv) For facilities designated by the federal department of health and
human services as exempt acute care children's hospitals as of  December
thirty-first,  two  thousand  eight,  for which a discrete institutional
cost report was filed for the two  thousand  seven  calendar  year,  and
which  has  reported  Medicaid  discharges greater than fifty percent of
total discharges in such cost report, shall be determined in  accordance
with the following:
  (A)  The  operating cost component of such rates shall reflect the use
of two thousand seven operating costs as reported by  each  facility  to
the  department  prior  to July first, two thousand nine and as adjusted
for the inflation pursuant to paragraph (c) of subdivision [ten] FOUR of
this section, as otherwise modified by any applicable statutes,  and  as
further  adjusted as the commissioner deems appropriate, including tran-
sition adjustments. Such rates shall be determined on a per  case  basis
or  per  diem  basis,  as  set  forth  in regulations promulgated by the
commissioner.
  (B) The operating component of outpatient specialty rates of hospitals
subject to this subparagraph shall reflect the use of two thousand seven
operating costs as reported to the department prior to  December  first,
two  thousand  eight,  and shall include such adjustments as the commis-
sioner deems appropriate.
  (C) The base period reported operating costs used to  establish  inpa-
tient  and  outpatient  rates  determined  pursuant to this subparagraph
shall be updated no less frequently than every two years and  each  such
hospital  shall  submit  such  additional  data  as the commissioner may
require to assist in the development of ambulatory patient groups (APGs)
rates for such hospitals' outpatient specialty services.
  (D) Notwithstanding any other provisions of law to  the  contrary  and
subject  to the availability of federal financial participation, for all
rate periods on and after April first, two thousand fourteen, the  oper-
ating  component  of  outpatient specialty rates of hospitals subject to
this subparagraph shall be determined by the  commissioner  pursuant  to
regulations,  including  emergency regulations, and in consultation with
such specialty outpatient facilities, provided  however,  that  for  the
period  beginning October first, two thousand thirteen through September
thirtieth, two thousand fourteen, services provided to patients enrolled

S. 6980                            31

in medicaid managed care shall be paid  by  the  medicaid  managed  care
plans  at no less than the otherwise applicable medicaid fee-for-service
rates, as computed in accordance with clause (B)  of  this  subparagraph
for  the  period  beginning October first, two thousand thirteen through
March thirty-first, two thousand fourteen and as computed in  accordance
with  this  clause  for  the  period beginning April first, two thousand
fourteen through September thirtieth, two thousand fourteen.
  (v) Rates established pursuant to this paragraph shall  be  deemed  as
excluding  reimbursement  for  physician services for inpatient services
and claims for Medicaid fee payments for  such  physician  services  for
such inpatient care may be submitted separately from the rate in accord-
ance with otherwise applicable law.
  (vi)  Capital  cost  reimbursement  for  general  hospitals  otherwise
subject to the provisions of this paragraph shall remain subject to  the
provisions of subdivision [eight] THREE of this section.
  (vii) The commissioner may promulgate regulations, including emergency
regulations, implementing the provisions of this paragraph.
  (viii)  The  operating  cost component of rates of payment pursuant to
this paragraph for a general hospital or  distinct  unit  of  a  general
hospital without adequate cost experience shall be based on the lower of
the  facility's  or  unit's  inpatient budgeted operating costs per day,
adjusted to actual, or the applicable regional ceiling, if any.
  (ix) The operating cost component of inpatient medicaid rates  subject
to  subparagraphs  (i),  (ii)  and  (iii)  of this paragraph shall, with
regard to alternative level of care (ALC) days of  care  be  subject  to
computation pursuant to paragraph [(h)] (D) of this subdivision[.
  (f)  where  a  general  hospital  having two hundred or less certified
acute care beds, based on the total number of inpatient acute care  beds
for  which  such general hospital is certified pursuant to the operating
certificate issued for such general hospital in accordance with  section
twenty-eight  hundred  five of this article in effect on June thirtieth,
nineteen hundred ninety, is classified as a rural hospital for  purposes
of  determining payment for inpatient services provided to beneficiaries
of title XVIII of the federal social security act  (medicare)  or  under
state  regulations,  such  general  hospital  may at its option have its
reimbursable inpatient operating cost component of case based  rates  of
payment  per  diagnosis-related  group  based one hundred percent on the
general  hospital's  hospital-specific  average  reimbursable  inpatient
operating  cost  per discharge determined in accordance with subdivision
six of this section; provided however, commencing April first,  nineteen
hundred  ninety-six  the reimbursable inpatient operating cost component
of case based rates of payment per diagnosis-related group for  patients
eligible  for  payments  made  by  state  governmental agencies shall be
reduced by five percent to encourage improved productivity and efficien-
cy. Such election shall not alter the calculation  of  the  group  price
component  calculated  pursuant  to subparagraph (i) of paragraph (a) of
subdivision seven of this section;
  (f) where a general hospital having  two  hundred  or  less  certified
acute  care beds, based on the total number of inpatient acute care beds
for which such general hospital is certified pursuant to  the  operating
certificate  issued for such general hospital in accordance with section
twenty-eight hundred five of this article in effect on  June  thirtieth,
nineteen  hundred ninety, is classified as a rural hospital for purposes
of determining payment for inpatient services provided to  beneficiaries
of  title  XVIII  of the federal social security act (medicare) or under
state regulations, such general hospital may  at  its  option  have  its

S. 6980                            32

reimbursable  inpatient  operating cost component of case based rates of
payment per diagnosis-related group based one  hundred  percent  on  the
general  hospital's  hospital-specific  average  reimbursable  inpatient
operating  cost  per discharge determined in accordance with subdivision
six of this section; provided however,
  (i) commencing April first, nineteen hundred ninety-six  through  July
thirty-first,  nineteen  hundred  ninety-six, the reimbursable inpatient
operating cost component of case based rates of payment  per  diagnosis-
related group, excluding any operating cost components related to direct
and indirect expenses of graduate medical education, for patients eligi-
ble for payments made by state governmental agencies shall be reduced by
five percent; and
  (ii)  commencing  August  first,  nineteen  hundred ninety-six through
March thirty-first,  nineteen  hundred  ninety-seven,  the  reimbursable
inpatient  operating  cost  component of case based rates of payment per
diagnosis-related group, excluding any operating cost components related
to direct and indirect  expenses  of  graduate  medical  education,  for
patients eligible for payments made by state governmental agencies shall
be reduced by two and five-tenths percent; and
  (iii)  commencing  April  first, nineteen hundred ninety-seven through
March thirty-first, nineteen hundred  ninety-nine  and  commencing  July
first,  nineteen  hundred  ninety-nine  through  March thirty-first, two
thousand and April first, two thousand through March  thirty-first,  two
thousand  five and for periods commencing April first, two thousand five
through March thirty-first, two thousand six and for periods  commencing
on  and  after April first, two thousand six through March thirty-first,
two thousand seven, and for periods commencing on and after April first,
two thousand seven through March thirty-first, two  thousand  nine,  and
for  periods  commencing  on  and  after  April first, two thousand nine
through March thirty-first, two thousand eleven, the reimbursable  inpa-
tient  operating cost component of case based rates of payment per diag-
nosis-related group, excluding any operating cost components related  to
direct and indirect expenses of graduate medical education, for patients
eligible  for  payments  made  by  state  governmental agencies shall be
reduced by  three  and  thirty-three  hundredths  percent  to  encourage
improved  productivity and efficiency. Such election shall not alter the
calculation of the group price component calculated pursuant to subpara-
graph (i) of paragraph (a) of subdivision seven of this section;
  (g) in cases where general hospitals  or  distinct  units  of  general
hospitals,  other than those specified in paragraphs (e) and (f) of this
subdivision, may be excluded from case  based  payments  or  receive  an
adjustment to case based payment rates. An exclusion or adjustment shall
be  provided  only  where  the  council,  subject to the approval of the
commissioner, determines that the case based rates of payment determined
in accordance with this section would not reflect medically  appropriate
patterns of health resource use for such general hospital services effi-
ciently and economically provided. If an exclusion is provided, then the
reimbursement  provisions contained in paragraph (e) of this subdivision
shall apply. The commissioner shall provide to the council  an  analysis
of  the effect of case based payments on rural general hospitals and the
council, subject to the above criteria and the approval of  the  commis-
sioner,  may  exclude for any of the annual rate periods beginning on or
after January first, nineteen hundred eighty-eight any of these  general
hospitals  from case based payments or provide an adjustment to the case
based payments in addition to that authorized in accordance  with  para-
graph (f) of this subdivision];

S. 6980                            33

  [(h)]  (D)  where  alternate  level of care (ALC) days are provided, a
factor as determined in [subparagraph (i) of]  this  paragraph  for  the
costs  of  these patients in a general hospital shall not be included in
computations relating to the  determination  of  general  hospital  case
based rates of payment pursuant to this section. Alternate level of care
days  shall  be days of care provided by a general hospital to a patient
for whom it has been determined that inpatient hospital services are not
medically necessary, but that post-hospital extended care  services  are
medically  necessary  and  are  being  provided by the general hospital.
Separate rates of payment shall be established for such  patients  based
on  the  level of care required and shall reflect[: (i)] operating costs
based on the nineteen hundred eighty-seven  regional  average  operating
cost component of rates of payment for hospital based residential health
care  facilities  determined  in  accordance  with  section twenty-eight
hundred eight of this article and trended to the rate period[, and  (ii)
additions  contained  in subparagraph (iii) of paragraph (a) of subdivi-
sion one of this section]. In the event that federal  financial  partic-
ipation  in payments made for beneficiaries eligible for medical assist-
ance under title XIX of the federal social security act based  upon  the
rates  calculated  in  accordance with this paragraph is not approved by
the federal government, the council  subject  to  the  approval  of  the
commissioner shall adopt regulations for such payments;
  [(i)  if  diagnosis-related  groups are not adjusted or established in
accordance with paragraph (a) of subdivision three of this  section  for
services  to  acquired  immune deficiency syndrome (AIDS) patients, then
general hospitals shall receive separate  payments  for  these  patients
based  on regulations adopted by the council and approved by the commis-
sioner;
  (j)] (E) where general hospitals or distinct units of  general  hospi-
tals  are  excluded from or receive an adjustment to case based payments
per diagnosis-related group in accordance with [paragraph  (e),  (f)  or
(g)  of] this subdivision, reimbursement shall continue to be calculated
in accordance with [such paragraph] THIS SUBDIVISION until the beginning
of the rate period immediately  following  the  date  when  the  general
hospital  or  the  distinct  unit  of  the general hospital is no longer
excluded from or no longer receives an adjustment to case based payments
per diagnosis-related group for inpatient services provided to benefici-
aries of title XVIII of the federal social security act  (medicare),  or
until  appropriate  diagnosis-related groups have been developed for the
specialized service provided by the general hospital or distinct unit of
the general hospital[, pursuant to paragraph (a) of subdivision three of
this section]; and
  [(k) for facilities designated by the federal department of health and
human services as an exempt  acute  care  children's  hospital,  payment
effective January first, nineteen hundred ninety-four will be based upon
a  hospital specific case payment amount inclusive of high cost and high
length of stay outlier costs. The  nineteen  hundred  eighty-seven  base
year cost, trended, volume adjusted and case mix adjusted where applica-
ble  to  nineteen hundred ninety-two, trended will be utilized to deter-
mine the rate of payment effective January first, nineteen hundred nine-
ty-four.  Commencing  April  first,  nineteen  hundred  ninety-six,  the
operating  cost  component of rates of payment for patients eligible for
payments made by a state governmental agency shall be  reduced  by  five
percent  to encourage improved productivity and efficiency. The facility
will be eligible to receive the financial incentives for  the  physician

S. 6980                            34

specialty  weighting incentive towards primary care pursuant to subpara-
graph (ii) of paragraph (a) of subdivision twenty-five of this section.
  (k)  for facilities designated by the federal department of health and
human services as an exempt  acute  care  children's  hospital,  payment
effective January first, nineteen hundred ninety-four will be based upon
a  hospital specific case payment amount inclusive of high cost and high
length of stay outlier costs. The  nineteen  hundred  eighty-seven  base
year cost, trended, volume adjusted and case mix adjusted where applica-
ble  to  nineteen hundred ninety-two, trended will be utilized to deter-
mine the rate of payment effective January first, nineteen hundred nine-
ty-four.
  (i) Commencing April first, nineteen hundred ninety-six  through  July
thirty-first,  nineteen hundred ninety-six, the operating cost component
of rates of payment, excluding any operating cost components related  to
direct and indirect expenses of graduate medical education, for patients
eligible  for  payments  made  by  a  state governmental agency shall be
reduced by five percent; and
  (ii) commencing August  first,  nineteen  hundred  ninety-six  through
March  thirty-first,  nineteen  hundred  ninety-seven the operating cost
component of rates of payment, excluding any operating  cost  components
related  to  direct and indirect expenses of graduate medical education,
for patients eligible for payments made by a state  governmental  agency
shall be reduced by two and five-tenths percent; and
  (iii)  commencing  April  first, nineteen hundred ninety-seven through
March thirty-first, nineteen hundred  ninety-nine  and  commencing  July
first,  nineteen  hundred  ninety-nine  through  March thirty-first, two
thousand and April first, two thousand through March  thirty-first,  two
thousand  five  and  commencing  April  first, two thousand five through
March thirty-first, two thousand six, and for periods commencing on  and
after  April  first,  two  thousand  six through March thirty-first, two
thousand seven, and for periods commencing on and after April first, two
thousand seven through March thirty-first, two thousand  nine,  and  for
periods  commencing  on and after April first, two thousand nine through
March thirty-first, two thousand eleven, the operating cost component of
rates of payment, excluding any operating  cost  components  related  to
direct and indirect expenses of graduate medical education, for patients
eligible  for  payments  made  by  a  state governmental agency shall be
reduced by  three  and  thirty-three  hundredths  percent  to  encourage
improved  productivity  and efficiency. The facility will be eligible to
receive the financial incentives for the physician  specialty  weighting
incentive  towards  primary  care pursuant to subparagraph (ii) of para-
graph (a) of subdivision twenty-five of this section.
  (l)] (F) Notwithstanding any inconsistent provision  of  this  section
and  subject  to  the  availability  of federal financial participation,
rates of payment by governmental agencies for  general  hospitals  which
are  certified  by the office of alcoholism and substance abuse services
to provide inpatient detoxification and withdrawal  services  and,  with
regard  to  inpatient  services  provided  to patients discharged on and
after December first, two thousand eight and who are determined to be in
diagnosis-related groups as defined by the commissioner and published on
the New York state department of health website, shall be made on a  per
diem basis in accordance with the following:
  (i)  for  the  period December first, two thousand eight through March
thirty-first, two thousand nine, seventy-five percent of  the  operating
cost  component  of  such  rates of payments shall reflect the operating
cost component of rates of payment effective for December  thirty-first,

S. 6980                            35

two  thousand seven, as adjusted for inflation pursuant to paragraph (c)
of subdivision [ten] FOUR of this section, as otherwise modified by  any
applicable statutes, and twenty-five percent of such rates shall reflect
the use of two thousand six operating costs as reported by each facility
to the department prior to two thousand eight and as computed in accord-
ance with the provisions of subparagraph (iv) of this paragraph;
  (ii) for the period April first, two thousand nine through March thir-
ty-first,  two thousand ten, thirty-seven and five tenths percent of the
operating cost component of such rates  of  payment  shall  reflect  the
operating  cost component of rates of payment effective December thirty-
first, two thousand seven, as adjusted for inflation pursuant  to  para-
graph  (c) of subdivision [ten] FOUR of this section, as otherwise modi-
fied by any applicable statutes, and sixty-two and five  tenths  percent
of such rates of payment shall reflect the use of two thousand six oper-
ating  costs as reported by each facility to the department prior to two
thousand eight and as computed in  accordance  with  the  provisions  of
subparagraph (iv) of this paragraph;
  (iii)  for  periods  on  and  after April first, two thousand ten, one
hundred percent of the operating cost component of such rates of payment
shall reflect the use of two thousand six operating costs as reported to
the department prior to two thousand eight and as computed in accordance
with the provisions of subparagraph (iv) of this paragraph.
  (iv) rates of payment computed in accordance with this  paragraph  and
reflecting  the  use of two thousand six base year operating costs shall
be in accord with the following, provided, however that the commissioner
may establish criteria under which  reimbursement  may  be  provided  at
higher percentages and for longer periods.
  (A)  For  each  of the regions within the state as described in clause
(E) of this subparagraph the commissioner shall  determine  the  average
per  diem  cost  incurred by general hospitals in that region subject to
the provisions of this paragraph with  regard  to  inpatients  requiring
medically  managed  detoxification  services,  as  defined by applicable
regulations promulgated by the office of alcoholism and substance  abuse
services.  In  determining such costs the commissioner shall utilize two
thousand six costs and statistics as reported by such hospitals  to  the
department prior to two thousand eight.
  (B) Per diem payments for inpatients requiring medically managed inpa-
tient  detoxification  services shall reflect one hundred percent of the
per diem amounts computed pursuant to clause (A)  of  this  subparagraph
for the applicable region in which the facility is located and as trend-
ed forward to adjust for inflation, provided however, that such payments
shall  be  reduced by fifty percent for any such services provided on or
after the sixth day of services through the tenth day of  services,  and
further  provided  that  no  payments  shall  be  made  for any services
provided on or after the eleventh day.
  (C) Per diem payments for inpatients  requiring  medically  supervised
withdrawal services, as defined by applicable regulations promulgated by
the office of alcoholism and substance abuse services, shall reflect one
hundred  percent of the per diem amounts computed pursuant to clause (A)
of this subparagraph for the applicable region in which the facility  is
located for the period January first, two thousand nine through December
thirty-first,  two  thousand  nine, and as trended forward to adjust for
inflation, and shall reflect  seventy-five  percent  of  such  per  diem
amounts  for  periods  on  and after January first, two thousand ten, as
trended forward to adjust for inflation, provided,  however,  that  such
payments  shall be reduced by fifty percent for any services provided on

S. 6980                            36

or after the sixth day of services through the tenth  day  of  services,
and  further  provided  that  no payments shall be made for any services
provided on and after the eleventh day.
  (D)  Per  diem  payments for inpatients placed in observation beds, as
defined by applicable regulations promulgated by the office of  alcohol-
ism and substance abuse services, shall be at the same level as would be
paid  pursuant  to clause (A) of this paragraph, provided, however, that
such payments shall not apply for more than  two  days  of  care,  after
which  payments  for  such inpatients shall reflect their designation as
requiring either medically managed detoxification services or  medically
supervised  withdrawal  services, and further provided that days of care
provided in such observation beds shall, for reimbursement purposes,  be
fully  reflected  in the computation of the initial five days of care as
set forth in clauses (A) and (B) of this subparagraph.
  (E) For the purposes of this paragraph, the regions of the state shall
be as follows:
  (I) New York city, consisting of the  counties  of  Bronx,  New  York,
Kings, Queens and Richmond;
  (II) Long Island, consisting of the counties of Nassau and Suffolk;
  (III)  Northern  metropolitan, consisting of the counties of Columbia,
Delaware, Dutchess, Orange, Putnam, Rockland, Sullivan, Ulster and West-
chester;
  (IV) Northeast, consisting of the counties of Albany, Clinton,  Essex,
Fulton, Greene, Hamilton, Montgomery, Rensselaer, Saratoga, Schenectady,
Schoharie, Warren and Washington;
  (V) Utica/Watertown, consisting of the counties of Franklin, Herkimer,
Lewis,  Oswego,  Otsego,  St. Lawrence, Jefferson, Chenango, Madison and
Oneida;
  (VI) Central, consisting of the counties of Broome,  Cayuga,  Chemung,
Cortland, Onondaga, Schuyler, Seneca, Steuben, Tioga and Tompkins;
  (VII)  Rochester, consisting of Monroe, Ontario, Livingston, Wayne and
Yates;
  (VIII) Western, consisting of the counties of  Allegany,  Cattaraugus,
Chautauqua, Erie, Genesee, Niagara, Orleans and Wyoming.
  (F) Capital cost reimbursement for general hospitals otherwise subject
to  the  provisions  of  this  paragraph  shall  remain  subject  to the
provisions of subdivision [eight] THREE of this section.
  [5. Reimbursable inpatient operating cost component. (a) The reimburs-
able inpatient operating cost component of case based rates  of  payment
per  diagnosis-related  group  for  general  hospital inpatient hospital
services shall be the product  of  the  average  reimbursable  inpatient
operating cost per discharge determined in accordance with paragraph (b)
of  this  subdivision,  adjusted  by  a  third-party  payor  of hospital
services for uncovered services by such payor, and the weighting factors
determined in accordance with paragraph (c) of subdivision three of this
section.
  (b) (i) For the rate year January first, nineteen hundred eighty-eight
through December thirty-first, nineteen  hundred  eighty-eight,  average
reimbursable inpatient operating cost per discharge shall be a composite
sum  of  no less than ninety percent of the general hospital's hospital-
specific average reimbursable inpatient  operating  cost  per  discharge
determined  in  accordance with paragraph (a) of subdivision six of this
section and a percentage amount not to exceed ten percent of the general
hospital's group category average inpatient reimbursable operating  cost
per  discharge  (price)  determined  in accordance with paragraph (a) of

S. 6980                            37

subdivision seven of this section such that the composite sum equals one
hundred percent.
  (ii)  For  the  rate  year  commencing January first, nineteen hundred
eighty-nine, average reimbursable inpatient operating cost per discharge
shall be a composite sum of no less than  seventy-five  percent  of  the
general  hospital's  hospital-specific  average  reimbursable  inpatient
operating cost per discharge determined in accordance with paragraph (a)
of subdivision six of this section and a percentage amount not to exceed
twenty-five percent of the general  hospital's  group  category  average
inpatient  reimbursable  operating cost per discharge (price) determined
in accordance with paragraph (a) of subdivision seven of  this  section,
such that the composite sum equals one hundred percent.
  (iii) Except as provided in clause (C) of this subparagraph, for annu-
al  rate  years  commencing  on or after January first, nineteen hundred
ninety, average reimbursable  inpatient  operating  cost  per  discharge
shall  be  a  composite  sum  of  no less than forty-five percent of the
general  hospital's  hospital-specific  average  reimbursable  inpatient
operating cost per discharge determined in accordance with paragraph (a)
of subdivision six of this section and a percentage amount not to exceed
fifty-five  percent  of  the  general  hospital's group category average
inpatient reimbursable operating cost per discharge  (price)  determined
in  accordance  with paragraph (a) of subdivision seven of this section,
such that the composite sum equals one hundred percent.
  (A) Except as provided in clause (B) of this subparagraph and subpara-
graph (iv) of this paragraph, for annual rate  years  commencing  on  or
after January first, nineteen hundred ninety, average reimbursable inpa-
tient  operating  cost per discharge shall be a composite sum of no less
than forty-five percent  of  the  general  hospital's  hospital-specific
average  reimbursable  inpatient operating cost per discharge determined
in accordance with paragraph (a) of subdivision six of this section  and
a  percentage  amount  not  to  exceed fifty-five percent of the general
hospital's group category average inpatient reimbursable operating  cost
per  discharge  (price)  determined  in accordance with paragraph (a) of
subdivision seven of this section, such that the  composite  sum  equals
one hundred percent.
  (A) Except as provided in clauses (B) and (C) of this subparagraph and
subparagraphs  (iv),  (v)  and  (vi)  of this paragraph, for annual rate
years commencing on or after January  first,  nineteen  hundred  ninety,
average  reimbursable  inpatient operating cost per discharge shall be a
composite sum of no less than forty-five percent of the  general  hospi-
tal's  hospital-specific  average  reimbursable inpatient operating cost
per discharge determined in accordance with paragraph (a) of subdivision
six of this section and a percentage amount  not  to  exceed  fifty-five
percent of the general hospital's group category average inpatient reim-
bursable  operating  cost per discharge (price) determined in accordance
with paragraph (a) of subdivision seven of this section, such  that  the
composite sum equals one hundred percent.
  (B)  For  discharges on or after April first, nineteen hundred ninety-
five for purposes of reimbursement of inpatient  hospital  services  for
patients  eligible  for  payments  made  by  state governmental agencies
assigned to one of the twenty most common diagnosis-related  groups  for
all general hospitals, the average reimbursable inpatient operating cost
per discharge of a general hospital shall be the lower of (I) the amount
determined  in  accordance  with clause (A) of this subparagraph or (II)
the average amount determined in accordance  with  clause  (A)  of  this
subparagraph  for  all  general hospitals in the group category to which

S. 6980                            38

the hospital is  assigned.  The  twenty  most  common  diagnosis-related
groups  shall  be determined using discharge data for the year two years
prior to the rate year for all general  hospitals,  excluding  benefici-
aries  of  title XVIII of the federal social security act (medicare) and
patients assigned to diagnosis related groups for human immunodeficiency
virus (HIV) infection, acquired immune deficiency syndrome, alcohol/drug
use or alcohol/drug induced organic mental disorders, and exempt unit or
exempt hospital patients.
  (C) (I) For discharges on  or  after  July  first,  two  thousand  six
through  December  thirty-first,  two  thousand  six, and subject to the
availability of federal financial participation,  rates  of  payment  by
state  governmental  agencies  to  Westchester  medical  center shall be
increased by an aggregate  amount  of  twenty-five  million  dollars  to
assist  the  medical  center  to  maintain critically needed health care
services.
  (II) For discharges on or after  January  first,  two  thousand  seven
through  December  thirty-first,  two thousand seven, and subject to the
availability of federal financial participation,  rates  of  payment  by
state  governmental  agencies  to  Westchester  medical  center shall be
increased by an aggregate  amount  of  twenty-five  million  dollars  to
assist  the  medical  center  to  maintain critically needed health care
services.
  (III) For discharges on or after January  first,  two  thousand  eight
through  December  thirty-first,  two thousand eight, and subject to the
availability of federal financial participation,  rates  of  payment  by
state  governmental  agencies  to  Westchester  medical  center shall be
increased by an aggregate  amount  of  twenty-five  million  dollars  to
assist  the  medical  center  to  maintain critically needed health care
services.
  (iv) for discharges on or after April first, nineteen hundred  ninety-
six  for  purposes  of  reimbursement of inpatient hospital services for
patients eligible for payments made by state governmental agencies,  the
average reimbursable inpatient operating cost per discharge of a general
hospital shall be the sum of:
  (A)  the  amount  determined in accordance with clause (B) of subpara-
graph (iii) of this paragraph, excluding the  value  of  direct  medical
education  expenses,  as defined in subparagraph (i) of paragraph (c) of
subdivision seven of this section, reflected in the  general  hospital's
hospital-specific  average  reimbursable  inpatient  operating  cost per
discharge and group category average  inpatient  reimbursable  operating
cost per discharge, and excluding the value of forty-five percent of the
indirect  medical education expenses, as defined in subparagraph (ii) of
paragraph (c) of subdivision seven of this  section,  reflected  in  the
general  hospital's  hospital  specific  average  reimbursable inpatient
operating cost per discharge, and  excluding  the  value  of  fifty-five
percent of the indirect medical education expenses reflected in a gener-
al  hospital's  group  category average inpatient reimbursable operating
cost per discharge in accordance with subdivision  twenty-five  of  this
section as amended;
  (B)  minus  five  percent  of the amount determined in accordance with
clause (A) of this subparagraph;
  (C) plus the value of direct medical education expenses, as defined in
subparagraph (i) of paragraph (c) of subdivision seven of this  section,
reflected in the general hospital's hospital-specific average reimbursa-
ble  inpatient  operating  cost per discharge and group category average
inpatient reimbursable operating cost per discharge;

S. 6980                            39

  (D) minus five percent of  the  costs  of  hospital  based  physicians
reflected  in  the direct medical education amount determined in accord-
ance with clause (C) of this subparagraph;
  (E)  plus  the  value  of  forty-five  percent of the indirect medical
education expenses, as defined in subparagraph (ii) of paragraph (c)  of
subdivision  seven  of this section, reflected in the general hospital's
hospital-specific average  reimbursable  inpatient  operating  cost  per
discharge; and
  (F)  plus  the  value  of  fifty-five  percent of the indirect medical
education expenses reflected in the general  hospital's  group  category
average inpatient operating cost per discharge in accordance with subdi-
vision twenty-five of this section as amended.
  (iv)  for discharges on or after April first, nineteen hundred ninety-
six for purposes of reimbursement of  inpatient  hospital  services  for
patients  eligible for payments made by state governmental agencies, the
average reimbursable inpatient operating cost per discharge of a general
hospital shall to encourage improved productivity and efficiency be  the
sum of:
  (A)  the  amount  determined in accordance with clause (B) of subpara-
graph (iii) of this paragraph, excluding the  value  of  direct  medical
education  expenses,  as defined in subparagraph (i) of paragraph (c) of
subdivision seven of this section, reflected in the  general  hospital's
hospital-specific  average  reimbursable  inpatient  operating  cost per
discharge and group category average  inpatient  reimbursable  operating
cost per discharge, and excluding the value of forty-five percent of the
indirect  medical education expenses, as defined in subparagraph (ii) of
paragraph (c) of subdivision seven of this  section,  reflected  in  the
general  hospital's  hospital  specific  average  reimbursable inpatient
operating cost per discharge, and  excluding  the  value  of  fifty-five
percent of the indirect medical education expenses reflected in a gener-
al  hospital's  group  category average inpatient reimbursable operating
cost per discharge in accordance with subdivision  twenty-five  of  this
section as amended;
  (B)  minus  five  percent  of the amount determined in accordance with
clause (A) of this subparagraph;
  (C) plus the value of direct medical education expenses, as defined in
subparagraph (i) of paragraph (c) of subdivision seven of this  section,
reflected in the general hospital's hospital-specific average reimbursa-
ble  inpatient  operating  cost per discharge and group category average
inpatient reimbursable operating cost per discharge;
  (D) minus five percent of  the  costs  of  hospital  based  physicians
reflected  in  the direct medical education amount determined in accord-
ance with clause (C) of this subparagraph;
  (E) plus the value of  forty-five  percent  of  the  indirect  medical
education  expenses, as defined in subparagraph (ii) of paragraph (c) of
subdivision seven of this section, reflected in the  general  hospital's
hospital-specific  average  reimbursable  inpatient  operating  cost per
discharge; and
  (F) plus the value of  fifty-five  percent  of  the  indirect  medical
education  expenses  reflected  in the general hospital's group category
average inpatient operating cost per discharge in accordance with subdi-
vision twenty-five of this section as amended.
  (iv) for discharges on or after April first, nineteen hundred  ninety-
six  through July thirty-first, nineteen hundred ninety-six for purposes
of reimbursement of inpatient hospital services  for  patients  eligible
for payments made by state governmental agencies, the average reimbursa-

S. 6980                            40

ble  inpatient operating cost per discharge of a general hospital shall,
to encourage improved productivity and efficiency, be the sum of:
  (A)  the  amount  determined in accordance with clause (B) of subpara-
graph (iii) of this paragraph, excluding the  value  of  direct  medical
education  expenses,  as defined in subparagraph (i) of paragraph (c) of
subdivision seven of this section, reflected in the  general  hospital's
hospital-specific  average  reimbursable  inpatient  operating  cost per
discharge and group category average  inpatient  reimbursable  operating
cost per discharge, and excluding the value of forty-five percent of the
indirect  medical education expenses, as defined in subparagraph (ii) of
paragraph (c) of subdivision seven of this  section,  reflected  in  the
general  hospital's  hospital  specific  average  reimbursable inpatient
operating cost per discharge, and  excluding  the  value  of  fifty-five
percent of the indirect medical education expenses reflected in a gener-
al  hospital's  group  category average inpatient reimbursable operating
cost per discharge in accordance with subdivision  twenty-five  of  this
section as amended;
  (B)  minus  five  percent  of the amount determined in accordance with
clause (A) of this subparagraph;
  (C) plus the value of direct medical education expenses, as defined in
subparagraph (i) of paragraph (c) of subdivision seven of this  section,
reflected in the general hospital's hospital-specific average reimbursa-
ble  inpatient  operating  cost per discharge and group category average
inpatient reimbursable operating cost per discharge;
  (D) minus five percent of  the  costs  of  hospital  based  physicians
reflected  in  the direct medical education amount determined in accord-
ance with clause (C) of this subparagraph;
  (E) plus the value of  forty-five  percent  of  the  indirect  medical
education  expenses, as defined in subparagraph (ii) of paragraph (c) of
subdivision seven of this section, reflected in the  general  hospital's
hospital-specific  average  reimbursable  inpatient  operating  cost per
discharge; and
  (F) plus the value of  fifty-five  percent  of  the  indirect  medical
education  expenses  reflected  in the general hospital's group category
average inpatient operating cost per discharge in accordance with subdi-
vision twenty-five of this section as amended.
  (v) for discharges on or after August first, nineteen hundred  ninety-
six  through  March  thirty-first,  nineteen  hundred  ninety-seven  for
purposes of reimbursement of inpatient hospital  services  for  patients
eligible  for  payments made by state governmental agencies, the average
reimbursable inpatient operating cost per discharge of a general  hospi-
tal shall, to encourage improved productivity and efficiency, be the sum
of:
  (A)  the  amount  determined in accordance with clause (B) of subpara-
graph (iii) of this paragraph, excluding the  value  of  direct  medical
education  expenses,  as defined in subparagraph (i) of paragraph (c) of
subdivision seven of this section, reflected in the  general  hospital's
hospital-specific  average  reimbursable  inpatient  operating  cost per
discharge and group category average  inpatient  reimbursable  operating
cost per discharge, and excluding the value of forty-five percent of the
indirect  medical education expenses, as defined in subparagraph (ii) of
paragraph (c) of subdivision seven of this  section,  reflected  in  the
general  hospital's  hospital  specific  average  reimbursable inpatient
operating cost per discharge, and  excluding  the  value  of  fifty-five
percent of the indirect medical education expenses reflected in a gener-
al  hospital's  group  category average inpatient reimbursable operating

S. 6980                            41

cost per discharge in accordance with subdivision  twenty-five  of  this
section as amended;
  (B)  minus  two  and  five-tenths  percent of the amount determined in
accordance with clause (A) of this subparagraph;
  (C) plus the value of direct medical education expenses, as defined in
subparagraph (i) of paragraph (c) of subdivision seven of this  section,
reflected in the general hospital's hospital-specific average reimbursa-
ble  inpatient  operating  cost per discharge and group category average
inpatient reimbursable operating cost per discharge;
  (D) minus two and five-tenths percent of the costs of  hospital  based
physicians  reflected  in the direct medical education amount determined
in accordance with clause (C) of this subparagraph;
  (E) plus the value of  forty-five  percent  of  the  indirect  medical
education  expenses, as defined in subparagraph (ii) of paragraph (c) of
subdivision seven of this section, reflected in the  general  hospital's
hospital-specific  average  reimbursable  inpatient  operating  cost per
discharge; and
  (F) plus the value of  fifty-five  percent  of  the  indirect  medical
education  expenses  reflected  in the general hospital's group category
average inpatient operating cost per discharge in accordance with subdi-
vision twenty-five of this section as amended.
  (vi) for discharges on or after April first, nineteen hundred  ninety-
seven  through  March thirty-first, nineteen hundred ninety-nine and for
discharges on or after July first, nineteen hundred ninety-nine  through
March  thirty-first,  two  thousand and for discharges on or after April
first, two thousand through March thirty-first, two  thousand  five  and
for  discharges on or after April first, two thousand five through March
thirty-first, two thousand six, and for discharges  on  or  after  April
first,  two thousand six through March thirty-first, two thousand seven,
and for discharges on or after April first, two thousand  seven  through
March  thirty-first,  two  thousand nine, and for discharges on or after
April first, two thousand nine through March thirty-first, two  thousand
eleven, for purposes of reimbursement of inpatient hospital services for
patients  eligible for payments made by state governmental agencies, the
average reimbursable inpatient operating cost per discharge of a general
hospital shall, to encourage improved productivity  and  efficiency,  be
the sum of:
  (A)  the  amount  determined in accordance with clause (B) of subpara-
graph (iii) of this paragraph, excluding the  value  of  direct  medical
education  expenses,  as defined in subparagraph (i) of paragraph (c) of
subdivision seven of this section, reflected in the  general  hospital's
hospital-specific  average  reimbursable  inpatient  operating  cost per
discharge and group category average  inpatient  reimbursable  operating
cost per discharge, and excluding the value of forty-five percent of the
indirect  medical education expenses, as defined in subparagraph (ii) of
paragraph (c) of subdivision seven of this  section,  reflected  in  the
general  hospital's  hospital-specific  average  reimbursable  inpatient
operating cost per discharge, and  excluding  the  value  of  fifty-five
percent of the indirect medical education expenses reflected in a gener-
al  hospital's  group  category average inpatient reimbursable operating
cost per discharge in accordance with subdivision  twenty-five  of  this
section as amended;
  (B)  minus  three  and  thirty-three  hundredths percent of the amount
determined in accordance with clause (A) of this subparagraph;
  (C) plus the value of direct medical education expenses, as defined in
subparagraph (i) of paragraph (c) of subdivision seven of this  section,

S. 6980                            42

reflected in the general hospital's hospital-specific average reimbursa-
ble  inpatient  operating  cost per discharge and group category average
inpatient reimbursable operating cost per discharge;
  (D)  minus  three  and thirty-three hundredths percent of the costs of
hospital based physicians reflected  in  the  direct  medical  education
amount determined in accordance with clause (C) of this subparagraph;
  (E)  plus  the  value  of  forty-five  percent of the indirect medical
education expenses, as defined in subparagraph (ii) of paragraph (c)  of
subdivision  seven  of this section, reflected in the general hospital's
hospital-specific average  reimbursable  inpatient  operating  cost  per
discharge; and
  (F)  plus  the  value  of  fifty-five  percent of the indirect medical
education expenses reflected in the general  hospital's  group  category
average inpatient operating cost per discharge in accordance with subdi-
vision twenty-five of this section as amended.
  (c)  Notwithstanding  any  inconsistent  provision  of  this  section,
commencing July first, nineteen hundred ninety-six through  March  thir-
ty-first,  nineteen hundred ninety-nine and July first, nineteen hundred
ninety-nine through March thirty-first, two thousand  and  April  first,
two thousand through March thirty-first, two thousand five and for peri-
ods  on  and  after April first, two thousand five through March thirty-
first, two thousand six, and for periods on and after April  first,  two
thousand  six  through  March  thirty-first, two thousand seven, and for
periods on and after April first, two thousand seven through March thir-
ty-first, two thousand nine, and for periods on and after  April  first,
two thousand nine through March thirty-first, two thousand eleven, rates
of  payment  for  a  general hospital for patients eligible for payments
made by state governmental agencies shall  be  further  reduced  by  the
commissioner  to  encourage  improved  productivity  and  efficiency  by
providers by a factor determined as follows:
  (i) an aggregate reduction shall be calculated for each general hospi-
tal commencing July first, nineteen  hundred  ninety-six  through  March
thirty-first,  nineteen  hundred  ninety-nine  and  July first, nineteen
hundred ninety-nine through March thirty-first, two thousand  and  April
first,  two  thousand  through March thirty-first, two thousand five and
for periods on and after April first, two thousand  five  through  March
thirty-first,  two  thousand  six,  and  for  periods on and after April
first, two thousand six through March thirty-first, two thousand  seven,
and  for  periods  on  and after April first, two thousand seven through
March thirty-first, two thousand nine, and  for  periods  on  and  after
April  first, two thousand nine through March thirty-first, two thousand
eleven, as the result of (A) eighty-nine million dollars on  an  annual-
ized  basis  for  each year, multiplied by (B) the ratio of patient days
for patients eligible for payments made by state  governmental  agencies
provided  in  a  base year two years prior to the rate year by a general
hospital, divided by the total of  such  patient  days  summed  for  all
general hospitals; and
  (ii)  (A)  the  result for each general hospital shall be allocated to
units within such hospital exempt from case based rates of payment based
on the ratio of such patient days provided in the  exempt  unit  to  the
total of such patient days provided by the general hospital, and (B) the
result  divided  by such patient days provided in the exempt unit, for a
per diem unit of service reduction in rates of payment for  such  exempt
unit for patients eligible for payments made by state governmental agen-
cies for such general hospital; and

S. 6980                            43

  (iii)  any  amount  not  allocated to exempt units shall be divided by
case based discharges (or for exempt hospitals by patient days)  in  the
base  year  two  years  prior to the rate year for patients eligible for
payments made by state governmental agencies, for a  per  case  (or  for
exempt  hospitals  a  per  diem)  unit  of service reduction in rates of
payment for patients eligible for payments made  by  state  governmental
agencies for such general hospital.
  6. Operating costs. (a) A general hospital's hospital-specific average
reimbursable  inpatient operating cost per discharge shall be determined
in accordance with rules and regulations  adopted  by  the  council  and
approved  by the commissioner based on the hospital's reimbursable inpa-
tient operating cost base determined in accordance with paragraph (d) of
subdivision one of this section; adjusted in accordance  with  paragraph
(b)  of  this  subdivision  to  reflect exceptions to case payments; and
projected to the applicable rate period by a trend factor determined  in
accordance  with  subdivision  ten  of  this  section;  and increased in
accordance with subparagraphs (i), (iii) and (iv) of  paragraph  (e)  of
subdivision  one of this section to reflect special additional inpatient
operating costs; and adjusted in accordance with subparagraphs (i), (ii)
and (iv) of paragraph (c) of this subdivision to  reflect  modifications
to  case  payments; and standardized to reflect nineteen hundred eighty-
seven hospital case mix. A general hospital's hospital-specific  average
reimbursable inpatient operating cost per discharge shall be adjusted on
a  payor  category  basis to reflect allocation of malpractice insurance
costs in accordance with the methodology developed pursuant to  subpara-
graph (ii) of paragraph (h) of subdivision eleven of this section.
  (b)  In  accordance  with rules and regulations adopted by the council
and approved by the commissioner, the commissioner  shall  adjust  reim-
bursable  inpatient  operating costs and discharges to exclude operating
costs and statistics related to specialized hospital services for  which
an  alternative  reimbursement  methodology is adopted pursuant to para-
graph (e) or (g) of subdivision four of this section, a factor for oper-
ating costs of patients who required  an  alternate  level  of  care  in
accordance  with  paragraph  (h) of subdivision four of this section and
the operating costs and statistics of AIDS patients  pursuant  to  para-
graph (i) of subdivision four of this section if effective.
  (c)  In  accordance  with rules and regulations adopted by the council
and approved by the commissioner, the commissioner shall adjust  weight-
ing  factors developed pursuant to paragraph (c) of subdivision three of
this section and reimbursable inpatient operating costs  and  statistics
on  which  case  payment  rates  are  based  to  take  into  account the
provisions for additional payments in  accordance  with  paragraph  (a),
(b), (c) or (d) of subdivision four of this section. The rules and regu-
lations  are to be designed to identify an estimate of costs and statis-
tics as if the payment methodology effective  for  the  applicable  rate
period  including  payment  based on the higher of high-cost outliers or
long-stay outliers was in effect during the  period  used  to  establish
such costs and statistics to accomplish the following:
  (i)  an  estimate  of  costs for inpatient services to patients trans-
ferred to another general hospital receiving case payment rates pursuant
to paragraph (a) of subdivision four of this section shall be eliminated
from reimbursable  inpatient  operating  costs  considering  a  transfer
patient  cost  conversion  factor  determined  based on nineteen hundred
eighty-five data from a representative sample of  general  hospitals;  a
case mix neutral acute care cost component of a general hospital's reim-
bursable  inpatient operating cost base per day after application of the

S. 6980                            44

trend factor and the addition of special additional inpatient  operating
costs;  transfer patient days incurred by such general hospital in nine-
teen hundred eighty-seven or the number of such  transfer  patient  days
during  a  recent twelve month period prior thereto established by regu-
lation for which  data  are  available  subsequently  reconciled  by  an
adjustment  to  reflect  nineteen  hundred  eighty-seven  data;  and the
specific diagnosis-related groups with which the transfer  patients  are
identified.  Such costs shall be eliminated in accordance with rules and
regulations adopted by the council  and  approved  by  the  commissioner
which  shall contain the specific methodology to adequately identify the
costs related to transfer cases. Transfer cases shall be  eliminated  in
computing  discharges  of  the  transferring  hospital.  The  costs  and
discharges for transfer cases for each general hospital participating in
the determination of the  weighting  factors  shall  be  removed  before
calculating the weighting factors;
  (ii)  an  estimate  of  costs  for  the  outlier  portion of inpatient
services which would qualify for additional payments as cost outliers in
accordance with paragraph (b) of subdivision four of this section  shall
be  eliminated  from  reimbursable  inpatient operating costs based on a
general hospital's high cost percentage outlier factor,  applied  to  an
acute  care cost component of such general hospital's reimbursable inpa-
tient operating cost base after application of the trend factor and  the
addition  of special additional inpatient operating costs. The high cost
percentage outlier factor shall be calculated based on  a  determination
of  the  percentage  of  nineteen  hundred  eighty-seven  discharges  of
patients other than beneficiaries of title XVIII of the  federal  social
security act (medicare) for which the commissioner has complete hospital
bill  submissions or such discharges during a recent twelve month period
prior thereto established by regulation for  which  hospital  bills  are
available,  as  follows,  (a)  for  general hospitals that have complete
hospital  bill  submissions  for  at  least  ninety  percent  of   their
discharges,  a  high  cost percentage outlier factor based on such data,
and  (b)  for  general  hospitals  that  have  complete  hospital   bill
submissions  for at least eighty percent but less than ninety percent of
their discharges, a high cost percentage outlier factor  based  on  such
data  plus an additional one-quarter of one percent, and (c) for general
hospitals that have complete  bill  submissions  for  less  than  eighty
percent  of  their  discharges,  a  high  cost percentage outlier factor
determined based on nineteen hundred eighty-five data from  a  represen-
tative sample of general hospitals plus an additional one-quarter of one
percent.  The  calculation  of  the  high cost percentage outlier factor
shall be  subsequently  reconciled  by  an  adjustment  to  reflect  the
percentage  of such complete hospital bill submissions for such nineteen
hundred eighty-seven discharges as submitted to the  commissioner  prior
to August first, nineteen hundred eighty-eight.
  The  minimum percentage threshold applicable pursuant to clause (a) of
the first paragraph of this subparagraph may be increased to  "at  least
ninety-five  percent"  and the percentage ceiling applicable pursuant to
clause (b) of the first paragraph  of  this  subparagraph  increased  to
"less  than  ninety-five  percent"  pursuant  to  rules  and regulations
adopted by the council and approved by the  commissioner  based  upon  a
study  and  a  report  by  the  commissioner  of  a sample of incomplete
discharge records which showed that there was a  significant  difference
in  the value of high cost outlier cases potentially reflected in incom-
plete records from the value of high cost  outlier  cases  reflected  in

S. 6980                            45

records   for   which   the  commissioner  has  complete  hospital  bill
submissions.
  The  maximum  amount  to  be  eliminated on a statewide basis shall be
three percent of the total of nineteen hundred eighty-eight  acute  care
cost  components  of  general  hospital reimbursable inpatient operating
costs reimbursed on the case payment system. In the event that the total
amount as calculated exceeds three percent, the calculated  amount  will
be  reduced to three percent by the application of a percentage computed
by dividing expected outlier costs based on the three percent by  actual
outlier costs, which shall also be the percentage of outlier costs to be
reimbursed  in  the  payment  year. The costs for the outlier portion of
cost outliers for general hospitals participating in  the  determination
of  the  weighting  factors shall be removed from each diagnosis-related
group before determining the weighting factors;
  (iii) an estimate of inpatient costs which are related to  a  hospital
stay  in  excess  of  the  long stay threshold for long stay patients as
defined in paragraph (c) of subdivision four of this  section  shall  be
eliminated  from  reimbursable  inpatient operating costs in determining
group category average inpatient reimbursable operating costs  consider-
ing  a  long  stay patient cost conversion factor, which shall be estab-
lished at sixty percent provided, however, such long stay  patient  cost
conversion  factor  may  be revised for an annual rate period or periods
beginning on or after January first,  nineteen  hundred  eighty-nine  in
accordance  with  rules  and  regulations  adopted  by  the  council and
approved by the commissioner; a case mix neutral acute care cost  compo-
nent  of a general hospital's reimbursable inpatient operating cost base
per day after application of  the  trend  factor  and  the  addition  of
special  additional  inpatient  operating  costs; long stay patient days
incurred by such general hospital in nineteen  hundred  eighty-seven  or
the  number  of such long stay patient days during a recent twelve month
period prior thereto established by regulation for which data are avail-
able subsequently  reconciled  by  an  adjustment  to  reflect  nineteen
hundred  eighty-seven  data;  and  the specific diagnosis-related groups
with which the long stay patients are identified. The long stay  outlier
thresholds shall be determined by adding a sufficient number of standard
deviations  to  the mean length of stay for each diagnosis-related group
such that it is estimated for rates of payment during the period January
first, nineteen  hundred  eighty-eight  through  December  thirty-first,
nineteen  hundred  ninety  based  upon nineteen hundred eighty-five data
from a representative sample of  general  hospitals  and  for  rates  of
payment  during  the  period  January first, nineteen hundred ninety-one
through December thirty-first, nineteen hundred ninety-three based  upon
nineteen hundred eighty-nine data from a representative sample of gener-
al  hospitals  and for rates of payment during the period January first,
nineteen hundred ninety-four  through  December  thirty-first,  nineteen
hundred ninety-nine and periods on and after January first, two thousand
based upon nineteen hundred ninety-two data from a representative sample
of  general  hospitals  that  the  costs  associated with the portion of
hospital stays in excess of the long  stay  outlier  thresholds  do  not
exceed  three  percent of the total of the acute care cost components of
reimbursable inpatient operating costs related to the  determination  of
case  based  rates  of  payment.  The  costs associated with the outlier
portion of long stay outliers for each general hospital participating in
the determination of the weighting factors shall be  removed  from  each
diagnosis-related group before calculating the weighting factors;

S. 6980                            46

  (iv)  an  estimate  of inpatient costs which are related to short stay
patients as defined in paragraph (d) of subdivision four of this section
shall be eliminated from reimbursable inpatient operating costs  consid-
ering  a  short  stay patient cost conversion factor determined based on
nineteen hundred eighty-five data from a representative sample of gener-
al  hospitals; a case mix neutral acute care cost component of a general
hospital's reimbursable inpatient operating  cost  base  per  day  after
application  of  the trend factor and the addition of special additional
inpatient operating costs; short stay  patient  days  incurred  by  such
general  hospital in nineteen hundred eighty-seven or the number of such
short stay patient days during a recent twelve month period prior there-
to established by regulation for which data are  available  subsequently
reconciled  by  an  adjustment  to reflect nineteen hundred eighty-seven
data; and the specific diagnosis-related groups  with  which  the  short
stay  patients are identified. Such costs shall be eliminated in accord-
ance with rules and regulations adopted by the council and  approved  by
the  commissioner  which  shall  contain  the  specific  methodology  to
adequately identify the costs related to short stay patients. Short stay
cases shall be eliminated in computing discharges of a general hospital.
The costs and discharges for short stay cases for each general  hospital
participating  in  the  determination  of the weighting factors shall be
removed before calculating the weighting factors.
  7. Operating cost group component.  (a)  A  general  hospital's  group
category  average  inpatient  reimbursable  operating cost per discharge
(price) shall be a composite factor determined in accordance with  rules
and  regulations adopted by the council and approved by the commissioner
based on a group price component determined in accordance with  subpara-
graph  (i) of this paragraph, a hospital-specific price component deter-
mined in accordance with subparagraph (ii) of  this  paragraph,  and  an
adjustment in accordance with subparagraph (iii) of this paragraph.
  (i)  The group price component shall be based on the costs and statis-
tics of general hospitals in the group category established pursuant  to
paragraph  (b)  of this subdivision to which the hospital is assigned by
the commissioner to compute a group based average inpatient reimbursable
operating cost per discharge for the group  category.  General  hospital
costs and statistics shall be determined consistent with the methodology
to  determine hospital-specific average reimbursable inpatient operating
cost per discharge pursuant to subdivision six of this section; adjusted
to reflect additional cost increases  in  accordance  with  subparagraph
(ii)  of  paragraph (e) of subdivision one of this section; and adjusted
to exclude the components of  hospital-specific  inpatient  reimbursable
operating  costs related to education, physician, ambulance services and
organ acquisition costs determined in accordance with paragraph  (c)  of
this  subdivision and malpractice insurance costs, and the components of
special additional inpatient operating costs determined and allocated in
accordance with subparagraphs (i), (iii) and (iv) of  paragraph  (e)  of
subdivision  one  of this section associated with cost increases in such
costs; and adjusted to exclude  the  components  of  special  additional
inpatient  operating  costs  determined and allocated in accordance with
clauses (B), (D), (H), and (I) of subparagraph (iii)  and  clauses  (A),
(E)  and (F) of subparagraph (iv) of paragraph (e) of subdivision one of
this section; and adjusted to reflect additional modifications  to  case
payments  in  accordance  with  subparagraph  (iii)  of paragraph (c) of
subdivision six of this section. The group based average inpatient reim-
bursable operating costs  computed  for  a  general  hospital  shall  be
adjusted  to  reflect  the  hospital-specific indirect medical education

S. 6980                            47

costs percentage of such hospital determined in accordance with subpara-
graph (ii) of paragraph (c) of this subdivision.
  Hospital costs shall be standardized for comparison purposes consider-
ing  differences  in  wage  and wage-related costs levels and such other
economic factors, such as a power equalization factor, as may be  deter-
mined  in  accordance  with rules and regulations adopted by the council
and approved by the commissioner.
  (ii) A hospital-specific price component shall be determined for  each
general  hospital  based on such hospital's hospital-specific education,
physician, ambulance services and organ acquisition costs determined  in
accordance  with  subparagraphs  (i), (iii) and (iv) of paragraph (c) of
this subdivision and malpractice insurance costs, and the components  of
special additional inpatient operating costs determined and allocated in
accordance  with  subparagraphs  (i), (iii) and (iv) of paragraph (e) of
subdivision one of this section associated with cost increases  in  such
costs,  and  special additional inpatient operating costs determined and
allocated in accordance with clauses (B), (D), (H) and (I)  of  subpara-
graph  (iii)  and clauses (A), (E) and (F) of subparagraph (iv) of para-
graph (e) of subdivision one of this section, as  excluded  pursuant  to
subparagraph  (i)  of  this  paragraph,  per  discharge, standardized to
reflect nineteen hundred eighty-seven hospital case mix.
  (iii) A general hospital's group category average inpatient reimbursa-
ble operating cost per discharge shall be adjusted on a  payor  category
basis to reflect allocation of malpractice insurance costs in accordance
with  the  methodology  developed pursuant to subparagraph (ii) of para-
graph (h) of subdivision eleven of this section.
  (b) General hospital group categories shall be established in  accord-
ance  with  rules and regulations adopted by the council and approved by
the commissioner for purposes of computing group category average  inpa-
tient  reimbursable  operating  cost  per discharge considering, but not
limited to, factors such as hospital size,  hospital  medical  education
activity, teaching status and geographic divisions of the state.
  (c)  Education,  physician,  ambulance  services and organ acquisition
costs shall include:
  (i) direct medical education expenses,  defined  as  the  reimbursable
costs  of  residents, fellows, and supervising physicians, combined with
the costs of hospital based physicians;
  (ii) indirect medical education expenses, defined as  an  estimate  of
the  costs, other than direct costs, of educational activities in teach-
ing hospitals attributable to  factors  including  but  not  limited  to
increased overhead, more severely ill patients and the tendency of resi-
dents  to  provide  more tests than experienced licensed physicians. For
the rate period beginning January first, nineteen  hundred  eighty-eight
and  ending  December  thirty-first,  nineteen  hundred eighty-eight, an
estimate of indirect medical education  costs  shall  be  determined  in
accordance  with  the methodology applicable for purposes of determining
an estimate of indirect medical education costs  for  reimbursement  for
inpatient hospital service pursuant to title XVIII of the federal social
security  act  (medicare) in effect on the first day of July in the year
preceding the rate period. The council may adopt rules and  regulations,
subject  to  the approval of the commissioner, to revise the methodology
for the determination of an estimate of indirect medical education costs
to reflect revisions to  the  methodology  applicable  for  purposes  of
determining  reimbursement  for  inpatient  hospital service pursuant to
title XVIII of the federal  social  security  act  (medicare)  effective
subsequent to the first day of July in the year preceding the rate peri-

S. 6980                            48

od.  For  annual rate periods beginning on or after January first, nine-
teen hundred eighty-nine an estimate of indirect medical education costs
shall be determined in accordance with rules and regulations adopted  by
the council and approved by the commissioner;
  (iii)  the  reimbursable  costs  of schools of nursing, allied profes-
sional programs and ambulance services; and
  (iv) the reimbursable costs of organ acquisition  services  not  reim-
bursed pursuant to the methodology applicable for purposes of reimburse-
ment  pursuant  to title XVIII of the federal social security act (medi-
care).
  (d) The commissioner shall establish, in  accordance  with  rules  and
regulations adopted by the council and approved by the commissioner, the
methodology to determine the hospital's group category average inpatient
reimbursable  operating  cost  per  discharge (price) and the percentage
amounts, pursuant to subparagraphs (i), (ii) and (iii) of paragraph  (b)
of subdivision five of this section, of the group category average inpa-
tient  reimbursable operating cost per discharge to be used to determine
the inpatient reimbursable operating cost component of case based  rates
for  annual  rate  periods beginning on or after January first, nineteen
hundred eighty-eight.
  8.] 3. Capital related inpatient expenses.  (a) Capital related  inpa-
tient  expenses  including but not limited to straight line depreciation
on buildings and  non-movable  equipment,  accelerated  depreciation  on
major movable equipment if requested by the hospital, rentals and inter-
est on capital debt (or for hospitals financed pursuant to article twen-
ty-eight-B  of  this  chapter,  such expenses, including amortization in
lieu of depreciation, as determined pursuant to the reimbursement  regu-
lations  promulgated  pursuant to such article and THIS article [twenty-
eight of this chapter]), shall be included in rates  of  payment  deter-
mined  pursuant  to  this  section based on a budget for capital related
inpatient expenses and subsequently reconciled to  actual  expenses  and
statistics  through  appropriate  audit  procedures.   General hospitals
shall submit to the commissioner, at least one hundred twenty days prior
to the commencement of each year, a schedule of  capital  related  inpa-
tient  expenses  for the forthcoming year. Any capital expenditure which
requires or  required  approval  pursuant  to  this  article  must  have
received such approval for any capital related expense generated by such
capital  expenditure  to  be included in rates of payment. The basis for
determining capital related inpatient expenses shall be  the  lesser  of
actual   cost   or  the  final  amount  specifically  approved  for  the
construction of the capital asset. The submitted budget may include  the
capital  related  inpatient  expenses for all existing capital assets as
well as estimates of capital  related  inpatient  expenses  for  capital
assets  to be acquired or placed in use prior to the commencement of the
rate year or during the rate year provided all required  approvals  have
been obtained.
  The  council shall adopt, with the approval of the commissioner, regu-
lations to:
  (i) identify by type the eligible capital related inpatient expenses;
  (ii) safeguard the future financial viability of voluntary, non-profit
general hospitals by requiring  funding  of  inpatient  depreciation  on
building and fixed and movable equipment;
  (iii)  provide  authorization  to  adjust inpatient rates by advancing
payment of depreciation as needed, in instances of capital debt  related
financial distress of voluntary, non-profit general hospitals; and
  (iv) provide a methodology for the reimbursement treatment of sales.

S. 6980                            49

  (b) Capital related inpatient expenses shall be included in case based
payments  based  on  the  hospital's  average  capital related inpatient
expenses per discharge. Adjustments shall be  made  to  capital  related
costs and statistics to reflect capital related inpatient expenses reim-
bursed on a per diem basis in accordance with [paragraphs (a), (d), (e),
(g) and (i) of subdivision four] SUBDIVISION TWO of this section.
  (c)  In order to reconcile capital related inpatient expenses included
in rates of payment based on a budget to actual expenses and  statistics
for  the  rate  period  for  a  general hospital, rates of payment for a
general hospital shall be adjusted to reflect the dollar  value  of  the
difference  between  capital  related inpatient expenses included in the
computation of rates of payment for a prior rate period based on a budg-
et and actual capital related inpatient expenses  for  such  prior  rate
period,  each  as  determined  in  accordance with paragraph (a) of this
subdivision, adjusted to reflect increases or  decreases  in  volume  of
service  in  such  prior  rate  period compared to statistics applied in
determining the capital related inpatient expenses component of rates of
payment based on a budget for such prior rate  period.  [Notwithstanding
any  inconsistent  provision  of  subparagraph  (i)  of paragraph (e) of
subdivision nine of this section, capital related inpatient expenses  of
a general hospital included in the computation of rates of payment based
on a budget shall not be included in the computation of a volume adjust-
ment  made in accordance with such subparagraph. Adjustments to rates of
payment for a general hospital made pursuant to this paragraph shall  be
made  in  accordance  with  paragraph  (c) of subdivision eleven of this
section.  Such adjustments shall not be carried forward except for  such
volume  adjustment  as may be authorized in accordance with subparagraph
(i) of paragraph (e) of subdivision nine of this section for such gener-
al hospital.
  (e)] (D) Notwithstanding any inconsistent provision of  this  subdivi-
sion,  commencing  April  first,  nineteen  hundred  ninety-five, when a
factor for reconciliation of budgeted capital related inpatient expenses
to actual capital  related  inpatient  expenses  for  a  prior  year  is
included in the capital related inpatient expenses component of rates of
payment,  such  capital related inpatient expenses component of rates of
payment shall be reduced by the commissioner by the  difference  between
the  reconciled  capital related inpatient expenses included in rates of
payment determined in accordance with paragraphs (a),  (b)  and  (c)  of
this  subdivision  for  such  prior  year  and capital related inpatient
expenses for such prior year calculated based on the hospital's  average
capital related inpatient expenses computed on a per diem basis.
  [(f)]  (E) Notwithstanding any inconsistent provision of this section,
commencing April first, nineteen hundred  ninety-five  for  purposes  of
determining the capital related inpatient expenses component of rates of
payment  for  patients  eligible for payments made by state governmental
agencies for a rate year, the submitted budget for capital related inpa-
tient expenses of a general hospital applicable to the rate  year  shall
be  decreased  by  the  commissioner to reflect the percentage amount by
which the budget for the base year two years prior to the rate year  for
capital  related  inpatient  expenses  of  the  hospital exceeded actual
expenses.
  [(g)] (F) Notwithstanding any inconsistent provision of this  article,
commencing  April  first,  nineteen  hundred  ninety-five  for  rates of
payment for patients eligible for payments made  by  state  governmental
agencies, the capital related inpatient expenses component determined in
accordance  with paragraph (a) of this subdivision [and the capital cost

S. 6980                            50

per visit components determined in accordance with subparagraphs (i) and
(ii) of paragraph (g) of subdivision two of section twenty-eight hundred
seven of this article] shall be adjusted by the commissioner to  exclude
such expenses related to:
  (i) forty-four percent of the costs of major movable equipment; and
  (ii) staff housing.
  [9. Adjustments. For annual rate periods beginning on or after January
first, nineteen hundred eighty-eight:
  (a) The commissioner shall on his own initiative, or on the basis of a
request from a general hospital, adjust an established rate to reflect:
  (i)  the  reduction  of  costs related to the elimination of a general
hospital inpatient service in instances where the costs of such  service
were included in the rate established; and
  (ii) the correction of errors or omissions of data or in computation.
  (b)  General hospitals may request and the commissioner shall consider
an adjustment to an established rate to reflect  increased  expenses  in
excess of costs reported by the general hospital in the nineteen hundred
eighty-five  cost  report,  after  application  of  the trend factor, or
reconsideration of disallowed expenses based on:
  (i) justification of all or a portion of expenses not included in  the
rate  resulting from the cost analysis process contained in subparagraph
(i) of paragraph (a) of this subdivision;
  (ii) additional operational expenses related to approved  construction
or service changes;
  (iii)  the  addition of costs related to a state requirement for addi-
tional services to be provided or additional costs  to  be  incurred  in
meeting state and federal requirements;
  (iv)  additional  operational  expenses to permit a more efficient and
economical method of delivering a service;
  (v) increased costs determined to be needed to recruit or maintain  an
appropriate  level  of  personnel  providing  professional  services  to
patients; and
  (vi) increased costs for compensation of employees.
  (c) In determining the reasonableness or justification of  an  adjust-
ment  to  an  established rate related to subparagraph (vi) of paragraph
(b) of this subdivision, the commissioner shall consider:
  (i) the fiscal capability of the  general  hospital  to  finance  such
increases from its own resources;
  (ii)  the past history of the general hospital with respect to compen-
sation increases and allowed compensation trend factors; and
  (iii) the economy in  the  area  in  which  the  general  hospital  is
located.
  (d)  General hospitals may request and the commissioner shall consider
a change in assignment among the group categories  established  pursuant
to  paragraph  (b)  of  subdivision  seven  of this section to which the
hospital is assigned for purposes of computing  group  category  average
reimbursable inpatient operating cost per discharge.
  (e)  (i)  Volume  adjustments  which would result in revisions in case
payment rates shall not be made to reflect  increases  or  decreases  in
discharges  for  other  than beneficiaries of title XVIII of the federal
social security act (medicare) in rate years beginning on or after Janu-
ary first, nineteen  hundred  eighty-eight,  except  in  those  specific
instances  where a decrease in volume as measured by discharges, includ-
ing discharges of patients for whom reimbursement is provided on  a  per
diem  basis  in  accordance  with paragraph (a) of subdivision eleven of
this section, is equal to or greater than one percent of  discharges  in

S. 6980                            51

nineteen  hundred  eighty-seven  for  those general hospitals having two
hundred or less certified acute care beds  and  classified  as  a  rural
hospital  for  purposes  of  determining  payment for inpatient services
provided  to beneficiaries of title XVIII of the federal social security
act (medicare) or under state regulations, based on the total number  of
inpatient  acute  care beds for which such general hospital is certified
pursuant to the operating certificate issued for such  general  hospital
in  accordance with section twenty-eight hundred five of this article in
effect on June thirtieth, nineteen hundred ninety, or equal to or great-
er than ten percent of discharges in nineteen hundred  eighty-seven  for
all  other  general  hospitals,  and the failure to make such adjustment
seriously impacts on the financial stability of a needed  hospital,  and
except  in those specific instances where an increase in volume as meas-
ured by discharges is equal to or greater than ten percent of discharges
in nineteen hundred eighty-seven. Provided, however, that an  adjustment
for  volume  increases shall not apply to those general hospitals having
two hundred or less certified acute care beds and classified as a  rural
hospital  for  purposes  of  determining  payment for inpatient services
provided to beneficiaries of title XVIII of the federal social  security
act  (medicare) or under state regulations, based on the total number of
inpatient acute care beds for which such general hospital  is  certified
pursuant  to  the operating certificate issued for such general hospital
in accordance with section twenty-eight hundred five of this article  in
effect on June thirtieth, nineteen hundred ninety. For general hospitals
and  distinct  units of general hospitals not reimbursed on a case based
payment per discharge basis, volume adjustments may be made  during  the
above indicated rate years in accordance with regulations adopted by the
council and approved by the commissioner.
  (ii)  The commissioner shall adjust the rates for those general hospi-
tals and units of  general  hospitals  excluded  from  case  payment  in
accordance with paragraph (e) or (g) of subdivision four of this section
for  case mix changes for other than beneficiaries of title XVIII of the
federal social security act (medicare).
  (f) General hospitals that did not qualify for a volume adjustment for
the nineteen hundred eighty-six and nineteen hundred  eighty-seven  rate
periods for rates of payment determined in accordance with section twen-
ty-eight hundred seven-a of this article may request and the commission-
er  shall  consider  an  adjustment to an established case based rate of
payment for nineteen hundred eighty-eight based on increases  in  volume
as  measured  by  discharges,  based  on  a  comparison between nineteen
hundred  eighty-five  and  nineteen  hundred  eighty-seven   discharges,
excluding  in  such  comparison discharges of patients who are benefici-
aries of title XVIII of the federal social security act  (medicare)  and
discharges  related  to transfer cases (transferring hospital) and short
stay cases as defined in this section, provided  such  general  hospital
meets  performance  criteria  established  in  accordance with rules and
regulations adopted by the council and  approved  by  the  commissioner.
Such  criteria shall include but need not be limited to:  maintenance of
like patient occupancy rates  for  the  rate  periods  nineteen  hundred
eighty-five,  nineteen  hundred  eighty-six and nineteen hundred eighty-
seven; a reduction in patient length of stay for  other  than  benefici-
aries of title XVIII of the federal social security act (medicare) based
on  a comparison with nineteen hundred eighty-five data; and an expanded
use of ambulatory surgery by the general hospital based on a  comparison
with  nineteen hundred eighty-five data. Such adjustment shall consider,
but need not be limited to, the variable costs related to volume changes

S. 6980                            52

in accordance with rules and regulations  adopted  by  the  council  and
approved by the commissioner.
  (g) All appeals shall be submitted to the commissioner, who may submit
a  copy of the appeal to interested parties for the purpose of providing
an opportunity for comment within a specified time period.
  (h) The commissioner shall act upon all  properly  documented  appeals
for  adjustments  concerning  base  year  costs by November first of the
calendar year for which the rate is effective provided that all informa-
tion necessary to  determine  whether  an  adjustment  is  justified  is
submitted  by the facility prior to May first of such year. In the event
such an appeal is filed by  May  first,  but  information  necessary  to
determine  whether  an  adjustment  is justified is submitted after such
date, the commissioner shall act on the appeal within six  months  after
receiving the necessary information.
  10.]  4.  Trend  factors. (a) The commissioner, in accordance with the
methodology developed for rate periods through March  thirty-first,  two
thousand,  for  rates  of  payment  for  state governmental agencies and
through December thirty-first, nineteen hundred ninety-six for rates  of
payment  for all other payors pursuant to paragraph (b) of this subdivi-
sion, shall establish trend  factors  to  project  for  the  effects  of
inflation.  The  factors  shall be applied to the appropriate portion of
reimbursable costs. The methodology  for  developing  the  trend  factor
shall  include  the appropriate external price indicators and shall also
include the data from major collective bargaining agreements as reported
quarterly by the federal department of labor, bureau  of  labor  statis-
tics, for non-supervisory employees.
  (b)  The methodology shall be developed for rate periods through March
thirty-first, two thousand, for rates of payment for state  governmental
agencies  and through December thirty-first, nineteen hundred ninety-six
for rates of payment for all other payors by four  independent  consult-
ants  with  expertise in health economics or reimbursement methodologies
for health-related services appointed by the commissioner.  For nineteen
hundred  ninety-six,  through  March  thirty-first,  two  thousand,  the
commissioner  shall  apply the nineteen hundred ninety-five trend factor
methodology. The commissioner shall monitor the actual  price  movements
of the external  price indicators used in the methodology for one inter-
im  adjustment  to the trend factors to reflect such price movements and
one final adjustment to the trend factors to reflect  such  price  move-
ments.  At  the  same  time adjustments are made to the trend factors in
accordance with this paragraph, adjustments shall be made to  all  inpa-
tient rates of payment affected by the adjusted trend factors.
  (c)  (1)  For rate periods on and after April first, two thousand, the
commissioner shall establish trend factors  for  rates  of  payment  for
state  governmental  agencies  to  project  for the effects of inflation
except that such trend factors shall not  be  applied  to  services  for
which  rates  of  payment  are  established  by the commissioners of the
department of mental hygiene. The factors shall be applied to the appro-
priate portion of reimbursable costs.
  (2) In developing trend factors for such rates of payment, the commis-
sioner shall use the most recent Congressional Budget Office estimate of
the rate year's U.S.  Consumer  Price  Index  for  all  urban  consumers
published in the Congressional Budget Office Economic and Budget Outlook
after  June first of the rate year prior to the year for which rates are
being developed.
  (3) After the final U.S. Consumer Price  Index  (CPI)  for  all  urban
consumers  is published by the United States Department of Labor, Bureau

S. 6980                            53

of Labor Statistics, for a particular rate year, the commissioner  shall
reconcile  such  final CPI to the projection used in subparagraph two of
this paragraph and any difference will be included  in  the  prospective
trend factor for the current year.
  (4)  At  the time adjustments are made to the trend factors in accord-
ance with this paragraph, adjustments shall be  made  to  all  inpatient
rates of payment affected by the trend factor adjustment.
  [11.]  5.  Special  provisions.  [(a) Notwithstanding any inconsistent
provision of this chapter or any other law to the contrary, payment  for
inpatient hospital services provided on or after January first, nineteen
hundred  eighty-eight  to a patient admitted to a general hospital prior
to January first, nineteen hundred eighty-eight otherwise  eligible  for
payment  on a case based payment per discharge basis for a diagnosis-re-
lated group shall be at the rate of payment for  such  general  hospital
for  such  patient in effect for December thirty-first, nineteen hundred
eighty-seven provided, however, that the operating  cost  components  of
such  rates  of  payment  for inpatient hospital services provided on or
after January first, nineteen hundred eighty-eight shall be projected to
the rate period by the trend factor determined in accordance with subdi-
vision ten of this section and reconciled on a cumulative  basis  on  or
about  March  thirty-first,  nineteen  hundred eighty-eight and December
thirty-first, nineteen hundred  eighty-eight  for  payment  of  adjusted
rates of payment based on such trend factor adjustment. The component of
such  rates  of  payment  based on the allowances provided in accordance
with paragraphs (e) and (f) of subdivision eight of section twenty-eight
hundred seven-a of this article shall  be  returned  to  the  applicable
regional  pool  created  in  accordance with subdivision fifteen of such
section and distributed in accordance with subdivision sixteen  of  such
section  based  on  needs for the financing of losses resulting from bad
debts and the costs of charity care as determined for purposes of  nine-
teen hundred eighty-seven distributions.
  (b)  The  council  shall  adopt  rules  and regulations subject to the
approval of the commissioner regarding  payor  payment  responsibilities
when  a patient has coverage with more than one payor for general hospi-
tal inpatient services and during  a  hospital  stay  exhausts  benefits
available from the primary payor, or receives services not reimbursed by
the primary payor, so that the hospital shall be reimbursed by a second-
ary  payor  for  services  not  reimbursed by the primary payor that are
included as a benefit of  the  secondary  payor.  A  primary  payor  for
purposes  of this paragraph shall include benefits available pursuant to
title XVIII of the federal social security act (medicare).
  (c)(i) Adjustments to rates made pursuant to  this  section  for  rate
periods  commencing  on or after January first, nineteen hundred ninety-
seven may be made prospectively or retrospectively on the next following
January or July unless otherwise specifically authorized.
  (ii) The commissioner may further  adjust  rates  retrospectively  for
payments  by state governmental agencies upon a finding that the failure
to do so seriously impacts on a general hospital's financial stability.
  (iii) Regardless  of  whether  rates  are  adjusted  prospectively  or
retrospectively  the  authorized dollar value of the adjustment shall be
the same, calculated by including the retroactive impact of such adjust-
ment if such adjustment is made prospectively. A prospective  adjustment
to  reflect the retroactive impact of an adjustment shall be included in
the determination of rates of payment  for  a  prospective  rate  period
based  on  the  methodology  applied in accordance with this section for
calculation of rates of payment for such prospective rate period.    The

S. 6980                            54

allowance  reflected in payments to a general hospital or a pool related
to a prospective adjustment which reflects the retroactive impact of  an
adjustment shall be computed based on the allowance percentage in effect
during  the prospective period such adjustment is in effect. No recalcu-
lation of the basis for distribution of funds from bad debt and  charity
care  regional pools determined in accordance with subdivision seventeen
of this section  shall  be  made  for  a  prospective  adjustment  which
reflects the retroactive impact of an adjustment.
  (d)] (A) Working capital. General hospitals may include as a financing
or  working capital charge an addition of two percent of any valid claim
not paid within thirty days of  submission  or  determination  of  payor
liability,  whichever  is  later,  and one percent per month thereafter.
Financing or working capital charges shall not be  applied  to  hospital
billings  to  third  party  payors  participating  in an advance payment
system. Any payor not participating in  an  advance  payment  system  or
offering  admission  billing  shall  allow interim billing for a patient
whose stay exceeds thirty days.
  [(e)] (B) (i) Except  for  payments  made  pursuant  to  the  workers'
compensation law, the volunteer firefighters' benefit law, or the volun-
teer ambulance workers' benefit law, a two percent discount from general
hospital  payments  shall  be available to all payors whose payments are
calculated in accordance with paragraphs [(b)]  (E)  and  [(c)]  (G)  of
subdivision  one  of  this  section  making payment in full to a general
hospital for covered hospital  services  within  ten  calendar  days  of
receipt  from  the  hospital by the appropriate payor of a bill for such
services.
  (ii) A three percentage point reduction in the  differential  of  five
percent  for  general hospital payments shall be available to all payors
whose payments are calculated in accordance with paragraph [(b)] (E)  of
subdivision one or paragraph [(e)] (B) of subdivision [four] TWO of this
section  which are making payments pursuant to the workers' compensation
law, the volunteer firefighters' benefit law, or the volunteer ambulance
workers' benefit law when such payments are made in full  to  a  general
hospital  for  covered  hospital services within ninety calendar days of
receipt from the hospital by the appropriate payor of a  bill  for  such
services,  and  an  additional  two  percentage point reduction shall be
available for such payors if such  payment  is  made  within  forty-five
calendar days of receipt of such a bill.
  [(f) (i) In order to allow for real increases in general hospital case
mix while limiting the effect of potential case mix changes that are the
result  of  changes in coding practices rather than real changes in case
mix, the commissioner shall annually for rate periods  through  December
thirty-first,  nineteen hundred ninety-six, in accordance with rules and
regulations adopted by the council and  approved  by  the  commissioner,
adjust  individual  general  hospitals' case payment rates determined in
accordance with paragraphs (a)  and  (b)  of  subdivision  one  of  this
section  to  account  for  increases  in the statewide average case mix,
based on increases in statewide average assignment to  diagnosis-related
groups  for  all patients other than beneficiaries of title XVIII of the
federal social security act (medicare), that exceed the allowable state-
wide increase determined  in  accordance  with  this  subparagraph.  The
commissioner  further  shall  adjust  individual general hospitals' case
payment rates determined in  accordance  with  this  section  for  state
governmental  agencies  for  the periods January first, nineteen hundred
ninety-seven through March thirty-first, two thousand and on  and  after
April first, two thousand, in accordance with clause (G) of this subpar-

S. 6980                            55

agraph and to account for increases in statewide average case mix, based
on increases in statewide average assignment to diagnosis-related groups
based on data only for patients that are eligible for medical assistance
pursuant  to  title  eleven  of article five of the social services law,
including such patients enrolled in  health  maintenance  organizations,
that  exceed  the  allowable statewide increase determined in accordance
with clause (B-1) of this subparagraph.
  (A) The increase in the statewide average case  mix  in  a  rate  year
during  the  period January first, nineteen hundred eighty-eight through
December thirty-first, nineteen hundred ninety-three from  the  nineteen
hundred  eighty-seven  statewide  average  case mix shall not exceed two
percent in nineteen hundred eighty-eight compared  to  nineteen  hundred
eighty-seven,  three percent in nineteen hundred eighty-nine compared to
nineteen hundred eighty-seven, four percent in nineteen  hundred  ninety
compared  to  nineteen  hundred  eighty-seven,  five percent in nineteen
hundred ninety-one  compared  to  nineteen  hundred  eighty-seven,  and,
notwithstanding  any  inconsistent  rule  or  regulation,  for  rates of
payment for state governmental agencies six percent in nineteen  hundred
ninety-two  compared  to nineteen hundred eighty-seven and seven percent
in nineteen hundred ninety-three compared to  nineteen  hundred  eighty-
seven, and for rates of payment for payors other than state governmental
agencies  six  and  seven-tenths  percent in nineteen hundred ninety-two
compared to nineteen hundred eighty-seven and seven percent in  nineteen
hundred ninety-three compared to nineteen hundred eighty-seven.
  (B)  The  increase  in  the  statewide average case mix in a rate year
during the period January first, nineteen  hundred  ninety-four  through
December  thirty-first,  nineteen  hundred  ninety-six from the nineteen
hundred ninety-two statewide average case mix, plus  adjustments,  shall
not  exceed:  for  rates  of payment for state governmental agencies two
percent in  the  period  January  first,  nineteen  hundred  ninety-four
through June thirtieth, nineteen hundred ninety-four, and, notwithstand-
ing  any  inconsistent rule or regulation, six and two-tenths percent in
the period July first, nineteen  hundred  ninety-four  through  December
thirty-first,  nineteen hundred ninety-four, three percent in the period
January first, nineteen hundred ninety-five through March  thirty-first,
nineteen  hundred  ninety-five,  two  percent in the period April first,
nineteen hundred ninety-five  through  December  thirty-first,  nineteen
hundred  ninety-five,  and  three  percent  in the period January first,
nineteen hundred  ninety-six  through  December  thirty-first,  nineteen
hundred ninety-six; and for rates of payment for payors other than state
governmental agencies two percent in nineteen hundred ninety-four, three
percent  in nineteen hundred ninety-five, and four percent in the period
January first, nineteen  hundred  ninety-six  through  December  thirty-
first,  nineteen hundred ninety-six. Adjustments to the nineteen hundred
ninety-two statewide average case mix shall mean an adjustment  for  any
increase  in  nineteen  hundred  ninety-two  statewide  average case mix
compared to nineteen hundred eighty-seven statewide average case mix  in
excess of six percent of nineteen hundred eighty-seven statewide average
case  mix  and  a further adjustment to reflect that measurement of case
mix increase from the nineteen hundred ninety-two statewide average case
mix rather than the nineteen hundred eighty-seven statewide average case
mix reflects the increase in statewide average case  mix  from  nineteen
hundred eighty-seven to nineteen hundred ninety-two in order to maintain
the  effective  maximum  rate  of  allowable  statewide average case mix
increases at a percentage per year of the nineteen hundred  eighty-seven
statewide  average  case mix. Nineteen hundred ninety-two case mix shall

S. 6980                            56

be determined based on nineteen hundred ninety-two data received by  the
department by April thirtieth, nineteen hundred ninety-three.
  (B-1)  The  increase  in the statewide average case mix in the periods
January first, nineteen hundred ninety-seven through March thirty-first,
two thousand and on and after April first, two  thousand  through  March
thirty-first,  two  thousand six and on and after April first, two thou-
sand six through March thirty-first, two  thousand  seven,  and  on  and
after  April  first,  two thousand seven through March thirty-first, two
thousand nine, and on and after April first, two thousand  nine  through
March thirty-first, two thousand eleven, from the statewide average case
mix  for  the  period January first, nineteen hundred ninety-six through
December thirty-first, nineteen hundred ninety-six shall not exceed  one
percent  for  nineteen  hundred  ninety-seven,  two percent for nineteen
hundred ninety-eight, three percent for the period January first,  nine-
teen  hundred  ninety-nine through September thirtieth, nineteen hundred
ninety-nine, four percent for the period October first, nineteen hundred
ninety-nine through December thirty-first, nineteen hundred ninety-nine,
and four percent for two thousand plus an  additional  one  percent  per
year  thereafter, based on comparison of data only for patients that are
eligible for medical assistance pursuant to title eleven of article five
of the social services law, including such patients enrolled  in  health
maintenance organizations.
  (C)  Rate  year  case  mix shall be determined based on rate year data
received by the department by April thirtieth next following the end  of
the rate year. Case mix may be determined based on general hospital data
received  or  amended  after  such  due  dates provided, however, that a
general hospital that does not submit the appropriate data in  a  timely
manner  shall  be  subject to the provisions of section twelve-d of this
chapter.
  (D) If in any rate period on an annualized basis the  cumulative  case
mix  increase exceeds the allowable statewide increase, rates of payment
to general hospitals shall be adjusted  in  accordance  with  rules  and
regulations  adopted  by  the  council  and approved by the commissioner
which shall contain the specific methodology to allocate  the  reduction
among  general hospitals, in order to reduce the effect of the statewide
increase  on  rates  of  payment  to  reflect  the  allowable  increase.
Notwithstanding  any  inconsistent  provision  of  this  paragraph, rate
adjustments for purposes of this paragraph shall be made on a six  month
rate  period  basis  for the period July first, nineteen hundred ninety-
four through December thirty-first, nineteen hundred ninety-four.    The
retroactive  impact  of adjustments to rates of payment for payors other
than state governmental agencies based on the amendments to  this  para-
graph  effective  July  first,  nineteen  hundred  ninety-four  shall be
reflected in a prospective adjustment  to  rates  of  payment  for  such
payors  for  the period July first, nineteen hundred ninety-four through
December thirty-first, nineteen hundred ninety-four.
  (E) Such methodology shall take into account past trends of individual
general hospitals' case mix changes, and, within the aggregate allowable
statewide increase in case mix, permit general hospitals  to  appeal  to
the  commissioner  their  proposed allocation of a reduction in rates of
payment related to increases in statewide average case mix based on such
factors as changes in hospital service delivery and referral patterns.
  (F) Case mix changes  due  to  acquired  immune  deficiency  syndrome,
tuberculosis, epidemics or other catastrophes resulting in extraordinary
hospital utilization shall not be subject to this limitation.

S. 6980                            57

  (G)  Adjustments  determined  in  accordance  with  clause (B) of this
subparagraph for the period January first, nineteen  hundred  ninety-six
through  December  thirty-first,  nineteen hundred ninety-six on a final
basis, and in accordance with subparagraph (ii) of this paragraph on  an
interim  basis,  shall  be applied to rates of payment for state govern-
mental agencies during the period January first, nineteen hundred  nine-
ty-seven  through  March  thirty-first,  two thousand and periods on and
after April first, two thousand.
  (ii) (A) The commissioner shall, in accordance with  rules  and  regu-
lations  adopted  by  the  council and approved by the commissioner, for
purposes of payments on an interim basis periodically compute an adjust-
ment to individual general hospitals' case payment rates for prior peri-
ods for the payor categories specified in  paragraphs  (a)  and  (b)  of
subdivision  one  of this section to account for increases in the state-
wide average case mix, based on increases in statewide  average  assign-
ment  to  diagnosis-related groups for all patients other than benefici-
aries of title XVIII of the federal social security act (medicare), that
exceed the allowable statewide increase. The increase in  the  statewide
average  case  mix in a rate year during the period January first, nine-
teen  hundred  eighty-eight  through  December  thirty-first,   nineteen
hundred  ninety-three  from  the nineteen hundred eighty-seven statewide
average case mix and in a rate year during  the  period  January  first,
nineteen  hundred  ninety-four  through  December thirty-first, nineteen
hundred ninety-six from the adjusted nineteen hundred ninety-two  state-
wide  average case mix shall not exceed the allowable statewide increase
as determined in accordance with subparagraph  (i)  of  this  paragraph.
Adjustments may be made on a quarterly basis consistent with this annual
limitation.  If  in any quarter of the rate year the cumulative case mix
increase for the rate year exceeds  the  allowable  statewide  increase,
payment  rates to general hospitals shall be adjusted in accordance with
rules and regulations adopted by the council and approved by the commis-
sioner which shall contain the  specific  methodology  to  allocate  the
reduction  among  general hospitals provided, however, that any funds to
be recovered from hospitals based on such adjustments for prior  periods
shall  be  recovered  by  prospective  adjustment of rates of payment in
accordance with paragraph (c) of this subdivision, in  order  to  reduce
the  effect of the statewide increase on rates of payment to reflect the
allowable increase, taking into consideration the effect of any  adjust-
ment  applicable in the rate period made in accordance with subparagraph
(iii) of this paragraph. Case mix changes due to acquired  immune  defi-
ciency syndrome, tuberculosis, epidemics or other catastrophes resulting
in extraordinary hospital utilization shall not be subject to this limi-
tation,  pursuant  to  rules  and regulations adopted by the council and
approved by the commissioner.
  (B) The commissioner further shall for  purposes  of  payments  on  an
interim  basis  periodically compute an adjustment to individual general
hospitals' case payment rates for prior periods  for  payments  made  by
state  governmental  agencies  to account for increases in the statewide
average case mix, based on increases in statewide average assignment  to
diagnosis-related  groups  for  patients  that  are eligible for medical
assistance pursuant to title  eleven  of  article  five  of  the  social
services  law  eligible for payments made by state governmental agencies
or by health maintenance organizations, that exceed the allowable state-
wide increase as determined in accordance with clause (B-1) of  subpara-
graph (i) of this paragraph.

S. 6980                            58

  (iii) The commissioner shall, in accordance with rules and regulations
adopted  by  the  council and approved by the commissioner, periodically
prospectively adjust for purposes of payments on an interim basis  indi-
vidual  general  hospitals'  case payment rates for the payor categories
specified  in  paragraphs (a) and (b) of subdivision one of this section
to account for increases in statewide average assignment  to  diagnosis-
related  groups  which exceed the allowable statewide increase as deter-
mined in accordance with subparagraph (ii) of this paragraph.
  (iv) Rates of payment of a  general  hospital  shall  be  adjusted  in
accordance with paragraph (c) of this subdivision to reflect the differ-
ence  between  an  individual  general  hospital's  case  payment  rates
adjusted in accordance with subparagraph (i) of  this  paragraph  for  a
rate  period and such rates determined in accordance with paragraphs (a)
and (b) of subdivision one of this section,  taking  into  consideration
any  adjustment  to  case  payment rates applicable for such rate period
made in accordance with subparagraphs (ii) and (iii) and for the periods
beginning on or after July first, nineteen hundred ninety,  subparagraph
(v) of this paragraph.
  (v) Notwithstanding any inconsistent provision of law, for the periods
beginning on or after July first, nineteen hundred ninety and subsequent
annual  rate  periods  beginning  January  first  the commissioner shall
reduce, in accordance with  the  methodology  adopted  for  purposes  of
adjustments  pursuant  to  subparagraph  (ii)  of  this  paragraph,  for
purposes of payments on an interim basis individual  general  hospitals'
case  payment  rates  applicable  to  state  governmental agencies for a
prospective period to reflect an estimate of the cumulative increase  in
statewide average assignment to diagnosis-related groups for prior peri-
ods including prior quarters of the rate period which exceeds the allow-
able  statewide increase specified in subparagraph (i) of this paragraph
for the prospective period. Such adjustment if effected for less than an
annual prospective rate period shall reflect an annualized adjustment.
  (vi) Notwithstanding any inconsistent provision of law, adjustments to
rates of payment pursuant to this paragraph based  on  nineteen  hundred
ninety-three  data  that  reflects an increase in statewide average case
mix compared to nineteen hundred eighty-seven that exceeds the  increase
based  on nineteen hundred ninety-two data in statewide average case mix
compared to nineteen hundred eighty-seven shall not be implemented until
April first, nineteen hundred ninety-five and shall be made prospective-
ly for rates of payment issued effective April first,  nineteen  hundred
ninety-five including the impact of such adjustment for the period Janu-
ary  first,  nineteen hundred ninety-five through March thirtieth, nine-
teen hundred ninety-five.
  (g) Notwithstanding any other provisions of this  section,  all  costs
and  statistics that are related to inpatient services provided to bene-
ficiaries of title XVIII of the federal social security  act  (medicare)
shall not be included in the establishment of any payment rates computed
in accordance with the provisions of this section.
  (i)  Unless provided otherwise in specific provisions included in this
section, the exclusion of costs which are related to  routine  inpatient
services  provided to beneficiaries of title XVIII of the federal social
security act (medicare) and covered by title XVIII of the federal social
security act (medicare) shall be based on the nineteen  hundred  eighty-
five  inpatient  days  actually paid on behalf of beneficiaries of title
XVIII of the federal social security act (medicare) plus  any  days  for
such beneficiaries not paid on the basis of a decision by a review agent
that  the  days  were  unnecessary. Ancillary costs related to inpatient

S. 6980                            59

services provided to beneficiaries of title XVIII of the federal  social
security act (medicare) and covered by title XVIII of the federal social
security  act  (medicare) shall be excluded on the basis of the nineteen
hundred  eighty-five  cost  center ratio of hospital ancillary inpatient
service charges related to such beneficiaries  to  total  hospital  cost
center  inpatient  ancillary  services  charges  applied  to cost center
costs. Inpatient malpractice insurance costs which are  attributable  to
title  XVIII  of  the  federal  social  security act (medicare) shall be
excluded based on the methodology employed by title XVIII of the federal
social security act (medicare) to identify such costs.
  (ii) Costs and statistics related to inpatient  services  provided  to
beneficiaries  of  title XVIII of the federal social security act (medi-
care) and covered by a secondary payor shall be excluded  in  accordance
with  rules  and  regulations adopted by the council and approved by the
commissioner in the determination of  case  payment  rates  computed  in
accordance with the provisions of this section.
  (h)(i) Any malpractice insurance costs which are the result of general
hospitals  having  to  purchase  or provide excess malpractice insurance
coverage for physicians in accordance with section nineteen  of  chapter
two  hundred  ninety-four of the laws of nineteen hundred eighty-five or
section eighteen of chapter two hundred sixty-six of the laws  of  nine-
teen  hundred eighty-six as amended shall not be included in calculating
malpractice insurance costs for purposes of paragraph (e) of subdivision
one of this section.
  (ii) The component of general hospital reimbursable inpatient  operat-
ing  costs  based on the general hospital's inpatient malpractice insur-
ance costs plus the component of special additional inpatient  operating
costs determined in accordance with subparagraphs (i) and (iii) of para-
graph  (e)  of  subdivision  one of this section specifically related to
inpatient malpractice insurance costs used to  determine  payment  rates
for  annual  rate  periods beginning on or after January first, nineteen
hundred eighty-eight shall be allocated among the payors  in  accordance
with  regulations adopted by the council and approved by the commission-
er.
  (i) For patients discharged during the period  April  first,  nineteen
hundred  ninety-two through March thirty-first, nineteen hundred ninety-
three insured under a commercial insurer licensed to do business in this
state and authorized to write accident and health  insurance  and  whose
policy  provides  inpatient  hospital  coverage  on  an expense incurred
basis, the payment rate shall be increased in addition  to  the  payment
rate  conversion  factor  of thirteen percent by a supplementary payment
rate conversion factor of eleven percent for a total  conversion  factor
of  twenty-four  percent.  This  paragraph  shall  not apply to payments
pursuant to the workers' compensation law, the  volunteer  firefighters'
benefit  law,  the volunteer ambulance workers' benefit law, the compre-
hensive motor vehicle  insurance  reparations  act,  the  terms  of  any
personal  injury  liability  insurance  policy, marine and inland marine
insurance policy or marine protections and indemnity insurance policy.
  (j) No operating cost  ceilings  or  disallowances  other  than  those
applicable  for  purposes  of  the determination of a general hospital's
reimbursable inpatient operating cost base in accordance with  paragraph
(d)  of  subdivision  one  of  this  section shall be applied to general
hospitals, except for any cost ceilings  or  disallowances  applied  for
purposes  of  subdivision twenty-four of this section and cost disallow-
ances for general hospitals with rates based on budgeted costs.

S. 6980                            60

  (k) Notwithstanding any inconsistent provision of this  section,  case
based  rates  of payment per discharge may, in accordance with rules and
regulations adopted by the council and  approved  by  the  commissioner,
reflect incorporation of severity of illness considerations in the meth-
odology to determine such rates of payment.
  (l)  Notwithstanding any inconsistent provision of this section, noth-
ing in this section shall preclude a modification to case based rates of
payment per discharge in accordance with rules and  regulations  adopted
by  the  council and approved by the commissioner to reflect readmission
of an individual or unnecessary multiple admissions of an individual  to
a general hospital or general hospitals.
  (m)  Notwithstanding  any  inconsistent  provision  of this section, a
general hospital that exceeded maximum charge limitations as  determined
by  the  commissioner  in  the rate periods nineteen hundred eighty-four
through nineteen hundred eighty-seven may be  authorized  in  accordance
with  rules  and  regulations adopted by the council and approved by the
commissioner to reduce payments determined pursuant to this  section  in
order  to  effect  a  reduction  equivalent to such amount by which such
general hospital exceeded maximum charge limitations.
  (n) (i) For a patient discharged from a general hospital on  or  after
August  first,  nineteen  hundred  eighty-eight  and  covered by a payor
included in the payor categories specified in paragraph (a)  or  (b)  of
subdivision  one  of this section that provides for a percentage coinsu-
rance responsibility by or on behalf of such patient for covered  hospi-
tal  services:  (A)  the  dollar  value  of  such percentage coinsurance
responsibility by or on behalf of such patient shall  be  determined  by
multiplying  such  coinsurance  percentage by the hospital's charges for
such patient, determined in accordance with paragraph (c) of subdivision
one of this section or paragraph (e) of subdivision four of this section
for a general hospital or distinct unit of a general hospital not  reim-
bursed  on  case  based payments, for the services covered by the payor,
considering any applicable deductibles, and (B) the  payment  due  to  a
general  hospital  for  reimbursement  of inpatient hospital services by
such payor shall be determined by multiplying the  payment  rate  deter-
mined  in  accordance  with  this  section  for such patient for covered
hospital services by the coinsurance percentage for which such payor  is
responsible, considering any applicable deductibles.
  (ii)  A  patient  covered  by a payor included in the payor categories
specified in paragraph (a) or (b) of subdivision  one  of  this  section
shall  be  deemed  liable  for  the  payment rate for inpatient hospital
services for such patient for covered services determined in  accordance
with this section based on the rate of payment for such payor, provided,
however,  that  for  a  patient discharged from a general hospital on or
after August first, nineteen hundred eighty-eight a  percentage  coinsu-
rance  responsibility  by  or  on behalf of such patient shall be deemed
satisfied by payment of the dollar value of such percentage  coinsurance
responsibility  determined in accordance with clause (A) of subparagraph
(i) of this paragraph.
  (o)] (C) No general hospital shall refuse to provide hospital services
to a person presented or proposed to be presented for admission to  such
general  hospital  by  a  representative of a correctional facility or a
local correctional facility  as  defined  respectively  in  subdivisions
four,  fifteen  and  sixteen  of section two of the correction law based
solely on the grounds such person is  an  inmate  of  such  correctional
facility  or local correctional facility. No general hospital may demand
or request any charge for hospital services provided to such  person  in

S. 6980                            61

addition  to  the  charges  or  rates authorized in accordance with this
article, except for charges for identifiable additional  hospital  costs
associated with or reasonable additional charges associated with securi-
ty arrangements for such person.
  [(p)]  (D)  (i)  Notwithstanding  any inconsistent provision of law, a
general hospital that provides an inpatient component  of  hospice  care
for  persons  eligible  for payments to a hospice by a government agency
made in accordance with subdivisions two and three of section four thou-
sand twelve of this chapter  shall  be  reimbursed  for  such  inpatient
services  by or on behalf of the hospice at a rate of payment no greater
than the applicable rate of payment determined in accordance with subdi-
visions two and three of section four thousand twelve  of  this  chapter
for  such  hospice and no general hospital may charge for such inpatient
services rendered an  amount  in  excess  of  such  applicable  rate  of
payment.
  (ii)  Notwithstanding  any  inconsistent  provision  of law, a general
hospital that  provides  in  accordance  with  contractual  arrangements
between  a  hospice  and such general hospital an inpatient component of
hospice care for persons who  are  not  eligible  for  payments  to  the
hospice  by a government agency made in accordance with subdivisions two
and three of section four thousand twelve of this chapter or as  benefi-
ciaries  of  title  XVIII  of the federal social security act (medicare)
shall be reimbursed for such inpatient services by or on behalf  of  the
hospice in accordance with such contractual arrangements.
  [(q)  A  third-party  payor  specified in paragraph (a), (b) or (c) of
subdivision one of this section,  with  the  exception  of  governmental
agencies, shall provide the general hospital with a remittance advice at
the  time payment or adjustment to such payment is made. Such remittance
advice shall include the patient's name, date of service,  admission  or
financial  control number if available and diagnosis-related group clas-
sification number if applicable and if different than that billed by the
hospital. Such remittance advice shall also include (i)  the  amount  or
percentage  payable  under  the policy or certificate after deductibles,
co-payments and any other  reduction  of  the  amount  billed  including
deductions  for  prompt  payment; and (ii) a specific explanation of any
denial, reduction, or other reason including any other third-party payor
coverage, for not providing full reimbursement of the amount claimed.
  (r) Notwithstanding any inconsistent provision of  this  section,  for
purposes of establishing rates of payment by state governmental agencies
for  general  hospital  inpatient services provided for discharges on or
after April first, nineteen hundred ninety-five, the  reimbursable  base
year  inpatient  administrative and general costs of a general hospital,
which shall include but not be limited to  reported  administrative  and
general,  data processing, non-patient telephone, purchasing, admitting,
and credit and collection costs, excluding a provider reimbursed  on  an
initial  budget  basis,  shall not exceed the statewide average of total
reimbursable base year inpatient administrative and general  costs.  For
the  purposes  of  this paragraph, reimbursable base year administrative
and general costs shall mean those base year administrative and  general
costs  remaining  after  application  of all other efficiency standards,
including, but not limited to, peer group cost ceilings  or  guidelines.
The  limitation on reimbursement for provider administrative and general
expenses provided by this paragraph shall be expressed as  a  percentage
reduction of the operating cost component of the rate promulgated by the
commissioner for each general hospital.

S. 6980                            62

  (s)  Notwithstanding  any inconsistent provisions of this section, for
the period July first, nineteen hundred ninety-six through  March  thir-
ty-first, nineteen hundred ninety-seven, the commissioner shall increase
rates  of  payment  for  patients  eligible  for  payments made by state
governmental  agencies  by  an  amount  not to exceed forty-five million
dollars in the aggregate to be allocated among those voluntary  non-pro-
fit  and  private proprietary general hospitals which qualified for rate
adjustments pursuant to this paragraph as in effect for the period  July
first,  nineteen  hundred  ninety-five  through June thirtieth, nineteen
hundred ninety-six proportionally based on each such general  hospital's
proportional  share  of the total funds allocated pursuant to this para-
graph as in effect for the period of July first, nineteen hundred  nine-
ty-five through June thirtieth, nineteen hundred ninety-six.
  (s-1)  To the extent funds are available pursuant to the provisions of
paragraph (s-2) of this subdivision and  otherwise  notwithstanding  any
inconsistent  provision  of  law  to  the contrary, for the rate periods
September first, nineteen hundred  ninety-seven  through  March  thirty-
first,  nineteen hundred ninety-eight, and April first, nineteen hundred
ninety-eight through March thirty-first, nineteen  hundred  ninety-nine,
the  commissioner  shall increase rates of payment for patients eligible
for payments made by state governmental agencies by  an  amount  not  to
exceed  forty-eight  million dollars in the aggregate for each such rate
period, allocated among those voluntary non-profit and private  proprie-
tary  general hospitals which qualified for rate adjustments pursuant to
paragraph (s) of this subdivision as  in  effect  for  the  period  July
first,  nineteen  hundred  ninety-five  through June thirtieth, nineteen
hundred ninety-six proportionally based on each such general  hospital's
proportional share of total funds allocated pursuant to paragraph (s) of
this  subdivision  as  in  effect for the period of July first, nineteen
hundred ninety-five through June thirtieth, nineteen hundred ninety-six.
The rate adjustments calculated in accordance with this paragraph  shall
be  subject to retrospective reconciliation to ensure that each hospital
receives in the aggregate its proportionate  share  of  the  full  allo-
cation, to the extent allowable under federal law, provided however that
the department shall not be required to reconcile payments made pursuant
to  paragraph  (s)  of  this  subdivision applicable to periods prior to
September first, nineteen hundred ninety-seven.
  (s-2) (i) Notwithstanding any inconsistent provision  of  law  to  the
contrary,  the  following  funds  heretofore  or hereinafter accumulated
shall be transferred by the commissioner and credited to the  credit  of
the state general fund medical assistance local assistance account in an
aggregate amount equal to the non-federal share of the costs of the rate
adjustments authorized pursuant to paragraph (s-1) of this subdivision:
  (A)  from  pool reserves from statewide and regional pools established
pursuant to sections twenty-eight hundred seven-a, twenty-eight  hundred
seven-c, and twenty-eight hundred eight-c of this article;
  (B)  from  unobligated  monies  available pursuant to paragraph (b) of
subdivision nineteen of section twenty-eight  hundred  seven-c  of  this
article;
  (C)  from  interest  income derived from pools established pursuant to
sections twenty-eight hundred seven-k, twenty-eight hundred seven-l  and
twenty-eight hundred seven-s of this article.
  (ii)  To the extent that funds available pursuant to the provisions of
subparagraph (i) of this paragraph are insufficient to meet the non-fed-
eral share of the costs of the rate adjustments authorized  pursuant  to
paragraph (s-1) of this subdivision, the following funds hereto or here-

S. 6980                            63

inafter  accumulated may be transferred by the commissioner to the state
general  fund  medical  assistance  local  assistance  account  for  the
purposes set forth in subparagraph (i) of this paragraph:
  (A)  from  unobligated monies available pursuant to paragraphs (g) and
(j) of subdivision 1 of section twenty-eight  hundred  seven-l  of  this
article;
  (B)  from  unobligated  monies  available  pursuant  to  clause (D) of
subparagraph (ii) of paragraph (b) of subdivision one of  section  twen-
ty-eight hundred seven-l of this article.
  (iii) Notwithstanding any inconsistent provision of law to the contra-
ry,  the  commissioner  shall  transfer  up to an additional two million
dollars from the funding sources identified in subparagraph (i) of  this
paragraph to the state general fund. To the extent monies available from
the  funding  sources  identified  in subparagraph (i) of this paragraph
total less than two million dollars,  the  commissioner  shall  transfer
monies  from  funding  sources  identified  in subparagraph (ii) of this
paragraph to the state general fund so that the total amount transferred
pursuant to this provision equals two million dollars.
  (s-3) To the extent funds are available pursuant to the provisions  of
paragraph  (s-4)  of  this subdivision and otherwise notwithstanding any
inconsistent provision of law to the contrary, for the rate period  July
first,  nineteen  hundred  ninety-nine  through  March thirty-first, two
thousand, the commissioner shall increase rates of payment for  patients
eligible  for  payments made by state governmental agencies by an amount
not to exceed thirty-six million dollars in the aggregate.  Such  amount
shall be allocated among those voluntary non-profit and private proprie-
tary  general  hospitals which continue to provide inpatient services as
of July first, nineteen hundred ninety-nine under a previous or new name
and which qualified for rate adjustments pursuant to  paragraph  (s)  of
this  subdivision  as  in  effect  for  the  period July first, nineteen
hundred ninety-five through June thirtieth, nineteen hundred  ninety-six
proportionally  based on each such general hospital's proportional share
of total funds allocated pursuant to paragraph (s) of  this  subdivision
as  in effect for the period of July first, nineteen hundred ninety-five
through June thirtieth, nineteen hundred ninety-six,  provided  however,
that  amounts  allocable to previously but no longer qualified hospitals
shall be proportionally reallocated to the  remaining  qualified  hospi-
tals.  The rate adjustments calculated in accordance with this paragraph
shall be subject to retrospective reconciliation  to  ensure  that  each
hospital  receives  in the aggregate its proportionate share of the full
allocation, to the extent allowable under federal law, provided  however
that  the  department  shall  not be required to reconcile payments made
pursuant to paragraph (s) of  this  subdivision  applicable  to  periods
prior to September first, nineteen hundred ninety-seven.
  (s-4) Notwithstanding any inconsistent provision of law to the contra-
ry, funds available pursuant to section 32-c of part F of the chapter of
the laws of nineteen hundred ninety-nine which adds this paragraph shall
be  transferred  by  the  commissioner and credited to the credit of the
state general fund medical assistance local  assistance  account  in  an
aggregate amount equal to the non-federal share of the costs of the rate
adjustments authorized pursuant to paragraph (s-3) of this subdivision.
  (s-5)  To  the extent funds are available pursuant to paragraph (s) of
subdivision one of section twenty-eight hundred seven-v of this  article
and  otherwise  notwithstanding  any  inconsistent provision of law, for
rate periods April first, two thousand through March  thirty-first,  two
thousand  three,  the  commissioner  shall increase rates of payment for

S. 6980                            64

patients eligible for payments made by state governmental agencies by an
amount not to exceed forty-eight million dollars annually in the  aggre-
gate.  Such  amount  shall be allocated among those voluntary non-profit
and  private  proprietary  general  hospitals  which continue to provide
inpatient services as of July first, nineteen hundred ninety-nine  under
a previous or new name and which qualified for rate adjustments pursuant
to  paragraph  (s)  of this subdivision as in effect for the period July
first, nineteen hundred ninety-five  through  June  thirtieth,  nineteen
hundred  ninety-six proportionally based on each such general hospital's
proportional share of total funds allocated pursuant to paragraph (s) of
this subdivision as in effect for the period  of  July  first,  nineteen
hundred ninety-five through June thirtieth, nineteen hundred ninety-six,
provided  however,  that  amounts  allocable to previously but no longer
qualified hospitals shall be proportionally reallocated to the remaining
qualified hospitals. The rate adjustments calculated in accordance  with
this  paragraph  shall  be  subject  to  retrospective reconciliation to
ensure that each hospital receives in the  aggregate  its  proportionate
share of the full allocation, to the extent allowable under federal law,
provided  however that the department shall not be required to reconcile
payments made pursuant to paragraph (s) of this  subdivision  applicable
to periods prior to September first, nineteen hundred ninety-seven.
  (s-6)  To the extent funds are available otherwise notwithstanding any
inconsistent provision of law to the contrary, for  rate  periods  April
first, two thousand three through March thirty-first, two thousand five,
the  commissioner  shall increase rates of payment for patients eligible
for payments made by state governmental agencies by  an  amount  not  to
exceed  forty-eight  million  dollars  annually  in  the aggregate. Such
amount shall be allocated among those voluntary non-profit  and  private
proprietary  general  hospitals  which  continue  to  provide  inpatient
services as of July first, nineteen hundred ninety-nine under a previous
or new name and which qualified for rate adjustments pursuant  to  para-
graph  (s)  of  this subdivision as in effect for the period July first,
nineteen hundred ninety-five through June  thirtieth,  nineteen  hundred
ninety-six  proportionally based on each such general hospital's propor-
tional share of total funds allocated pursuant to paragraph (s) of  this
subdivision  as in effect for the period of July first, nineteen hundred
ninety-five  through  June  thirtieth,  nineteen   hundred   ninety-six,
provided  however,  that  amounts  allocable to previously but no longer
qualified hospitals shall be proportionally reallocated to the remaining
qualified hospitals. The rate adjustments calculated in accordance  with
this  paragraph  shall  be  subject  to  retrospective reconciliation to
ensure that each hospital receives in the  aggregate  its  proportionate
share of the full allocation, to the extent allowable under federal law,
provided  however that the department shall not be required to reconcile
payments made pursuant to paragraph (s) of this  subdivision  applicable
to  periods  prior  to  September  first, nineteen hundred ninety-seven.
These payments may be added to rates of payment  or  made  as  aggregate
payments to eligible hospitals.
  (s-7)  To the extent funds are available otherwise notwithstanding any
inconsistent provision of law to the contrary, for  rate  periods  April
first, two thousand five through March thirty-first, two thousand seven,
the  commissioner  shall increase rates of payment for patients eligible
for payments made by state governmental agencies by  an  amount  not  to
exceed  forty-eight  million  dollars  annually  in  the aggregate. Such
amount shall be allocated among those voluntary non-profit  and  private
proprietary  general  hospitals  which  continue  to  provide  inpatient

S. 6980                            65

services as of April first, two thousand five under a  previous  or  new
name  and which qualified for rate adjustments pursuant to paragraph (s)
of this subdivision as in effect for the  period  July  first,  nineteen
hundred  ninety-five through June thirtieth, nineteen hundred ninety-six
proportionally based on each such general hospital's proportional  share
of  total  funds allocated pursuant to paragraph (s) of this subdivision
as in effect for the period of July first, nineteen hundred  ninety-five
through  June  thirtieth, nineteen hundred ninety-six, provided however,
that amounts allocable to previously but no longer  qualified  hospitals
shall  be  proportionally  reallocated to the remaining qualified hospi-
tals. The rate adjustments calculated in accordance with this  paragraph
shall  be  subject  to  retrospective reconciliation to ensure that each
hospital receives in the aggregate its proportionate share of  the  full
allocation,  to the extent allowable under federal law, provided however
that the department shall not be required  to  reconcile  payments  made
pursuant  to  paragraph  (s)  of  this subdivision applicable to periods
prior to September first, nineteen hundred ninety-seven.
  (s-8) To the extent funds are available and otherwise  notwithstanding
any  inconsistent  provision of law to the contrary, for rate periods on
and after April first, two thousand seven  through  November  thirtieth,
two  thousand nine, the commissioner shall increase rates of payment for
patients eligible for payments made by state governmental agencies by an
amount not to exceed sixty million dollars annually  in  the  aggregate.
Such  amount shall be allocated among those voluntary non-profit general
hospitals which continue to  provide  inpatient  services  as  of  April
first, two thousand seven through March thirty-first, two thousand eight
and  which  have  medicaid  inpatient discharges percentages equal to or
greater than thirty-five percent.  This  percentage  shall  be  computed
based  upon data reported to the department in each hospital's two thou-
sand four institutional cost report, as submitted to the  department  on
or before January first, two thousand seven. The rate adjustments calcu-
lated  in  accordance  with  this  paragraph  shall be allocated propor-
tionally based on each eligible hospital's total reported medicaid inpa-
tient discharges in two thousand four, to the  total  reported  medicaid
inpatient  discharges  for  all  such eligible hospitals in two thousand
four, provided, however, that such rate adjustments shall be subject  to
reconciliation  to  ensure  that each hospital receives in the aggregate
its proportionate share of the full allocation to the  extent  allowable
under  federal  law.  Such  payments may be added to rates of payment or
made as aggregate payments to  eligible  hospitals,  provided,  however,
that  subject to the availability of federal financial participation and
solely for the period April first,  two  thousand  seven  through  March
thirty-first,  two  thousand eight, six million dollars in the aggregate
of this sixty million dollars shall be allocated to voluntary non-profit
hospitals which continue to  provide  inpatient  services  as  of  April
first, two thousand seven through March thirty-first, two thousand eight
and  which  have  Medicaid  inpatient discharge percentages of less than
thirty-five percent and which had previously qualified for distributions
pursuant to paragraph (s-7) of this  subdivision.  The  rate  adjustment
calculated  in accordance with this paragraph shall be allocated propor-
tionally based on the amount of money the hospital had received  in  two
thousand six.
  12.  Provisions for article forty-three insurance law corporations and
article forty-four of this chapter organizations.  Except as provided in
paragraphs (a) and (b) of this subdivision, general hospital charges for
inpatient  and  outpatient  services  to subscribers or beneficiaries of

S. 6980                            66

contracts entered into pursuant to the provisions of article forty-three
of the insurance law or to members of a  comprehensive  health  services
plan  operating pursuant to the provisions of article forty-four of this
chapter  for  patient  services  rendered  shall not exceed the rates of
payment approved by  the  commissioner  for  payments  by  such  article
forty-three  insurance  law corporations or article forty-four organiza-
tions.  No general hospital may demand or request any  charge  for  such
covered  services in addition to the charges or rates authorized by this
article.
  (a) Any general hospital which terminated its contract with an article
nine-c insurance law corporation or a comprehensive health services plan
after October first, nineteen  hundred  seventy-six  and  prior  to  May
first,  nineteen  hundred  seventy-eight,  may not charge subscribers or
beneficiaries of contracts entered into pursuant to  the  provisions  of
article  forty-three of the insurance law, or members of a comprehensive
health services plan operating pursuant to  the  provisions  of  article
forty-four  of  this  chapter,  amounts in excess of the payments estab-
lished by such hospital for patient  services  in  accordance  with  the
provisions  of  paragraph  (c) of subdivision one of this section, or in
the event the article forty-three insurance law corporation  or  compre-
hensive  health  services  plan  operating pursuant to the provisions of
article forty-four of this chapter  provides  for  reimbursement  on  an
expense  incurred  basis and makes payment directly to such hospital for
patient services for its  subscribers  or  beneficiaries,  such  article
forty-three  insurance  law corporation or comprehensive health services
plan shall be an additional category  of  payor  of  inpatient  hospital
services  whose rates of payment are determined in accordance with para-
graph (b) of subdivision one of this section based on an imputed rate of
payment determined in accordance with paragraph (a) of  subdivision  one
of  this  section  for an article forty-three insurance law corporation,
adjusted for uncovered services, and increased by thirteen percent.
  (b) Any general hospital which had  notified  in  writing  an  article
nine-c corporation or a comprehensive health services plan prior to June
first,  nineteen hundred seventy-eight of its intention to terminate its
contract with such corporation or plan in accordance with the  terms  of
such  contract,  except  a general hospital subject to the provisions of
paragraph (a) of this subdivision may not charge a subscriber or benefi-
ciary of a contract entered into pursuant to the provisions  of  article
forty-three  of the insurance law, or a member of a comprehensive health
services plan operating pursuant to the provisions of article forty-four
of this chapter,  after  the  effective  date  of  termination  of  such
contract, amounts in excess of the payments established by such hospital
for  patient services in accordance with the provisions of paragraph (c)
of subdivision one of this section, or in the event the  article  forty-
three  insurance  law  corporation or comprehensive health services plan
operating pursuant to the provisions of article forty-four of this chap-
ter provides for reimbursement on an expense incurred  basis  and  makes
payment directly to such hospital for patient services for its subscrib-
ers or beneficiaries, such article forty-three insurance law corporation
or comprehensive health services plan shall be an additional category of
payor  of  inpatient hospital services whose rates of payment are deter-
mined in accordance with  paragraph  (b)  of  subdivision  one  of  this
section  based  on  an  imputed rate of payment determined in accordance
with paragraph (a) of subdivision one of this  section  for  an  article
forty-three  insurance law corporation, adjusted for uncovered services,
and increased by thirteen percent.

S. 6980                            67

  (c) No general hospital shall refuse to provide  patient  services  to
such  subscribers  or  beneficiaries  solely  on  the  grounds  of  such
subscription or membership.
  (d) The provisions of this subdivision shall also apply to payments to
general hospitals by a corporation organized and operating in accordance
with  article  forty-three of the insurance law for inpatient and outpa-
tient services on behalf of subscribers of a foreign  corporation  which
performs  similar  functions  in  another  state  or  which belongs to a
national association comprised of  similar  corporations  to  which  the
article  forty-three  corporation  also  belongs; provided, however, the
foreign corporation or the laws of the state in which the foreign corpo-
ration is organized extends to article forty-three  corporations  organ-
ized  and operating in this state a reciprocal right to have the foreign
corporation make payments to hospitals in that other state on behalf  of
subscribers  of the article forty-three corporations at the same rate of
payment as that foreign corporation pays for its own subscribers.
  (e) The provisions of this subdivision shall  not  apply  to  patients
discharged on or after January first, nineteen hundred ninety-seven.
  13. Restitution authorization. In enforcing the provisions of subdivi-
sions  one and twelve of this section, the commissioner may, in addition
to the penalties and injunctions set forth in  section  twelve  of  this
chapter,  order  that  any  general hospital provide restitution for any
overpayments made by any party. Any hospital may request a formal  hear-
ing  pursuant  to  the provisions of section twelve-a of this chapter in
the event the hospital objects to any order of  the  commissioner  here-
under.  The  commissioner may direct that such a hearing be held without
any request by a hospital.
  14. Bad debt and charity care allowance. (a)  With  the  exception  of
rates  of  payment for services provided to beneficiaries of title XVIII
of the federal social security act (medicare),  all  rates  and  general
hospital  charges,  including  rates  of  payment for state governmental
agencies provided all federal approvals necessary  by  federal  law  and
regulation  for  federal  financial  participation  in payments made for
beneficiaries eligible for medical assistance under  title  XIX  of  the
federal  social security act based upon the allowance provided herein as
a component of such payments are granted, established for  rate  periods
commencing  on or after January first, nineteen hundred eighty-eight and
prior to January first, nineteen hundred ninety-seven in accordance with
this section shall include the allowance specified in paragraph  (c)  of
this  subdivision.  The  allowance shall be computed on the basis of the
operating and capital related components of such rates after trending of
the operating portion. For the purposes of this subdivision and subdivi-
sion seventeen of this  section,  major  public  general  hospitals  are
defined  as  all state operated general hospitals, all general hospitals
operated by the New York city health and hospitals corporation as estab-
lished by chapter one thousand sixteen of the laws of  nineteen  hundred
sixty-nine  as  amended  and  all  other public general hospitals having
annual inpatient  operating  costs  in  excess  of  twenty-five  million
dollars.
  (b)  The  allowance shall be a percentage to reflect the needs for the
financing of losses resulting from bad debts and the  costs  of  charity
care  of  general  hospitals  within  article  forty-three insurance law
regions, or such  other  regions  as  adopted  pursuant  to  subdivision
sixteen  of this section, and within a statewide determination of finan-
cial resources to be committed for this purpose.

S. 6980                            68

  Need shall be defined as inpatient losses from bad  debts  reduced  to
cost and the inpatient costs of charity care increased by any deficit of
such  hospital from providing ambulatory services, excluding any portion
of such deficit resulting from governmental payments below average visit
costs,  and  revenues  and expenses related to the provision of referred
ambulatory services. Funds received by major  public  general  hospitals
pursuant to article forty-one of the mental hygiene law shall be consid-
ered  to  have  been provided for inpatient hospital deficits only.  The
council shall adopt rules and regulations, subject to  the  approval  of
the  commissioner, to establish uniform reporting and accounting princi-
ples designed to enable hospitals to fairly and accurately determine and
report losses from bad debts and the costs of charity care.
  (c) The regional amounts to be included in rates approved for the rate
year commencing January first, nineteen hundred  eighty-eight  shall  be
equal  to  the  sum of the following two components divided by the total
reimbursable inpatient costs for the general hospitals  located  in  the
region,  excluding  inpatient  costs  related  to beneficiaries of title
XVIII of the federal social security act (medicare), and after  applica-
tion of the trend factor. The first component shall be the result of the
ratio  between the total nominal payment amount in dollars as determined
in subparagraph (i) of this paragraph that would be allocated to  volun-
tary  non-profit, private proprietary and public general hospitals other
than major public general hospitals in the region based  on  a  targeted
need  formula  applied  in accordance with subparagraphs (i) and (ii) of
this paragraph and the statewide sum of such nominal payment amounts  to
voluntary  non-profit,  private proprietary and public general hospitals
other than major public general hospitals applied to the total statewide
resources committed for this purpose to regional pools in the rate year,
excluding the total statewide amount allocated in the rate year for this
purpose to major public general hospitals in  accordance  with  subpara-
graph  (iii) of this paragraph. The second component shall be the dollar
amount allocated to major public general  hospitals  in  the  region  in
accordance  with  subparagraph  (iii)  of  this  paragraph. The regional
amount to be included in the rates approved for the rate years  commenc-
ing  on  or  after  January first, nineteen hundred eighty-nine shall be
computed in the same manner except that the base year for  the  targeted
need  as  specified  in  subparagraph (i) of this paragraph shall be the
calendar year which is two years prior to the rate year. For each annual
rate period commencing on  or  after  January  first,  nineteen  hundred
eighty-eight, the statewide amount to be available in regional pools for
this  purpose shall equal five and forty-eight hundredths percent of the
total hospital reimbursable inpatient costs, excluding  inpatient  costs
related  to  services  provided  to  beneficiaries of title XVIII of the
federal social security act (medicare), computed  without  consideration
of  inpatient  uncollectible amounts, and after application of the trend
factor.
  (i) Targeted need shall be defined as the relationship of need to  net
patient  service  revenue expressed as a percentage. Net patient service
revenue shall be defined as net patient revenue  attributable  to  inpa-
tient  and  outpatient  services excluding referred ambulatory services.
For the rate year beginning January first, nineteen hundred eighty-eight
and ending December  thirty-first,  nineteen  hundred  eighty-eight  the
scale specified in subparagraph (ii) of this paragraph shall be utilized
to  calculate individual hospital's nominal payment amounts on the basis
of the percentage relationship between their nineteen hundred eighty-six
need and nineteen hundred eighty-six net patient service  revenues.  The

S. 6980                            69

nominal  payment  amount  shall  be  defined  as  the sum of the dollars
attributable to the application of an incrementally  increasing  propor-
tion  of reimbursement for percentage increases in targeted need accord-
ing  to  the scale specified in subparagraph (ii) of this paragraph. The
sum of the nominal payment amounts for all hospitals in a  region  shall
be the region's total nominal payment amount.
  (ii)  The  scale  utilized  for development of each hospital's nominal
payment amount shall be as follows:

                                        Percentage of Reimbursement
                                        Attributable to that Portion
 Targeted Need Percentage                     of Targeted Need
         0     -1%                                  35%
         1+    -2%                                  50%
         2+    -3%                                  65%
         3+    -4%                                  85%
         4+    -5%                                  90%
         5%+                                        95%

  (iii) The dollar amount allocated to major public general hospitals in
a region in the  rate  years  nineteen  hundred  eighty-eight,  nineteen
hundred  eighty-nine  and in that portion of the nineteen hundred ninety
rate year beginning on January first and ending on June thirtieth  shall
be  one  hundred two percent and in that portion of the nineteen hundred
ninety rate year beginning on July first and ending on December  thirty-
first,  and in subsequent rate years shall be one hundred ten percent of
the result of the application of the ratio of the major  public  general
hospitals'  inpatient  reimbursable  costs  within  the  region to total
statewide general hospital inpatient reimbursable costs, as computed  on
the  basis  of  nineteen  hundred  eighty-five financial and statistical
reports and excluding costs related  to  services  to  beneficiaries  of
title XVIII of the federal social security act (medicare), to the state-
wide  resources  committed  for this purpose to regional pools, computed
without consideration of inpatient uncollectible amounts.
  (iv) Notwithstanding  any  inconsistent  provision  of  this  section,
commencing  April  first,  nineteen  hundred  ninety-five  the allowance
pursuant to this subdivision  shall  be  a  uniform  regional  allowance
percentage of five and forty-eight hundredths percent for all regions.
  (d)  In  the  event  the regional percentage bad debt and charity care
allowances for general hospitals for a  rate  period  commencing  on  or
after  January first, nineteen hundred ninety-four determined in accord-
ance with paragraph (c) of this subdivision to be submitted to bad  debt
and  charity  care  regional  pools  established pursuant to subdivision
sixteen of this section and deposited  in  accordance  with  subdivision
seventeen  of this section do not qualify for waiver pursuant to federal
law and regulation related to such  regional  allowance  variations,  in
order  for  such allowances to be qualified as a broad-based health care
related tax for purposes of the revenues received by the state from such
allowances not reducing the amount expended  by  the  state  as  medical
assistance  for  purposes  of  federal  financial participation, but the
regional percentage allowances for  the  nineteen  hundred  ninety-three
rate year do so qualify, then the regional percentage allowances for the
regions  for  the  nineteen hundred ninety-three rate year determined in
accordance with paragraph (c)  of  this  subdivision  shall  be  further
continued for such period for such regions.

S. 6980                            70

  14-a. Supplementary bad debt and charity care adjustment. (a) Notwith-
standing  any  inconsistent  provision of this section, rates of payment
for inpatient hospital services for persons eligible for  payments  made
by  state  governmental  agencies  for  the period April first, nineteen
hundred  eighty-nine  to December thirty-first, nineteen hundred eighty-
nine and for each annual period  commencing  January  first  during  the
period  January first, nineteen hundred ninety to December thirty-first,
nineteen hundred ninety-three applicable to patients eligible for feder-
al financial participation under title XIX of the federal social securi-
ty act in medical assistance provided pursuant to title eleven of  arti-
cle  five  of the social services law determined in accordance with this
section for a major public general hospital, as defined in paragraph (a)
of subdivision fourteen of this section, shall include  a  supplementary
bad debt and charity care adjustment determined in accordance with para-
graph  (b) of this subdivision provided the state governmental agency or
the county government in which such general hospital is located, or  the
city  of  New  York for a general hospital operated by the New York city
health and hospitals corporation, files in such time and manner  as  may
be  specified  by  the  commissioner an election for such adjustment for
such hospital for each period provided that such election is subject  to
the approval of the state director of the budget and provided all feder-
al  approvals necessary by federal law and regulation for federal finan-
cial participation in  payments  made  for  beneficiaries  eligible  for
medical  assistance  under  title XIX of the federal social security act
based upon the  adjustment  provided  herein  as  a  component  of  such
payments are granted.
  (b)(i)  A  supplementary  bad debt and charity care adjustment for the
period April first, nineteen hundred  eighty-nine  to  December  thirty-
first,  nineteen hundred eighty-nine and for each annual period commenc-
ing January first during the  period  January  first,  nineteen  hundred
ninety  to  December  thirty-first, nineteen hundred ninety-three for an
eligible major public general hospital  shall  be  determined  for  each
period  in  accordance with rules and regulations adopted by the council
and approved by the commissioner based upon  the  amount  calculated  by
subtracting  the amount projected to be distributed to such major public
general hospital pursuant to paragraph (a) of subdivision  seventeen  of
this section for such period from an amount calculated as the product of
the  projected bad debt and charity care nominal payment amount coverage
ratio for such period for voluntary non-profit, private proprietary  and
public  general  hospitals  other  than  major  public general hospitals
multiplied by the base year bad debt and charity  care  imputed  nominal
payment  amount  for  such  major  public general hospital determined in
accordance with the methodology provided in paragraph (c) of subdivision
fourteen of this section for calculation of a nominal payment amount for
voluntary non-profit, private proprietary and public  general  hospitals
other  than  major public general hospitals. The coverage ratio shall be
computed as the ratio between the sum of the dollar value of the  amount
committed  to  the  regional  pools  in accordance with paragraph (c) of
subdivision fourteen of this section and paragraph  (a)  of  subdivision
nineteen  of this section for the rate period that would be allocated to
voluntary non-profit, private proprietary and public  general  hospitals
other  than  major public general hospitals in accordance with paragraph
(b) of subdivision seventeen of this section and the base  year  nominal
payment amount for such hospitals.
  (ii)  A supplementary bad debt and charity care adjustment provided in
accordance with subparagraph (i) of this paragraph shall be adjusted  to

S. 6980                            71

reflect actual distributions pursuant to paragraph (a) and (b) of subdi-
vision seventeen of this section.
  (c)  Notwithstanding any inconsistent provision of this subdivision, a
supplementary bad debt and charity care adjustment shall  be  determined
and  provided  for  each  of  the nineteen hundred ninety-four, nineteen
hundred  ninety-five  and  nineteen  hundred  ninety-six  rate  periods,
provided that the election pursuant to paragraph (a) of this subdivision
is  continued for such period, for a major public general hospital equal
to the higher of such adjustment for  the  nineteen  hundred  ninety-one
rate  period  or  for the nineteen hundred ninety-three rate period. The
adjustment may be made to rates of payment or as aggregate  payments  to
an eligible hospital.
  (d)  Notwithstanding any inconsistent provision of law, the provisions
of paragraphs (a), (b) and (c) of this subdivision shall  not  apply  to
payments  for  patients  discharged  on or after January first, nineteen
hundred ninety-seven.
  14-b. General health care services allowance. (a) With  the  exception
of  rates  of  payment  for  services provided to beneficiaries of title
XVIII of the federal social  security  act  (medicare),  all  rates  and
general  hospital  charges established for rate periods commencing on or
after January first, nineteen hundred ninety-one in accordance with this
section shall include a percentage allowance of the  general  hospital's
reimbursable  inpatient  costs,  excluding  inpatient  costs  related to
services provided to beneficiaries of title XVIII of the federal  social
security  act  (medicare),  computed  without consideration of inpatient
uncollectible amounts, and after application of  the  trend  factor,  as
follows:
  (i)  for  the nineteen hundred ninety-one, nineteen hundred ninety-two
and nineteen hundred ninety-three rate periods, an allowance of  twenty-
three hundredths of one percent;
  (ii) for the nineteen hundred ninety-four rate period, an allowance of
six hundred fourteen thousandths of one percent;
  (iii) for the January first, nineteen hundred ninety-five through June
thirtieth, nineteen hundred ninety-five rate period, an allowance of six
hundred thirty-seven thousandths of one percent
  (iv) for the July first, nineteen hundred ninety-five through December
thirty-first,  nineteen hundred ninety-five rate period, an allowance of
one and forty-two hundredths percent; and
  (v) for the January first, nineteen hundred ninety-six through  Decem-
ber  thirty-first, nineteen hundred ninety-six rate period, an allowance
of one and nine hundredths percent.
  (b) For rate periods beginning on or  after  January  first,  nineteen
hundred  ninety-one but prior to January first, nineteen hundred ninety-
four, funds will be accumulated and made  available  in  regional  pools
created  by  the  commissioner  for regional distributions in accordance
with section twenty-eight hundred seven-bb of this chapter  through  the
submission  by  or  on  behalf  of  general  hospitals  of the allowance
included in rates and charges in accordance with paragraph (a)  of  this
subdivision.  Such  regions shall be those established pursuant to para-
graph (b) of subdivision sixteen of this section. The regional pools may
be administered in accordance with the provisions of  paragraph  (c)  of
subdivision  sixteen  of this section applicable to bad debt and charity
care regional pools. Payments by or on behalf of  general  hospitals  to
regional  pools  shall be due and arrearages shall be treated in accord-
ance with the provisions of subdivision twenty of this section  applica-
ble to bad debt and charity care regional pools.

S. 6980                            72

  (c) If on September thirtieth, nineteen hundred ninety-four, any funds
accumulated  over  the period January first, nineteen hundred ninety-one
through December thirty-first, nineteen hundred ninety-three are  unused
or  uncommitted  for  the  allocations provided for in this subdivision,
such unused or uncommitted funds shall be reallocated for use in accord-
ance with the provisions of subdivision seventeen of this section.
  (d)  For  the rate periods commencing on or after January first, nine-
teen hundred ninety-four, funds will be accumulated in a statewide  pool
created  by  the  commissioner through the submission by or on behalf of
general hospitals of the allowance included  in  rates  and  charges  in
accordance  with paragraph (a) of this subdivision, for distributions in
accordance with subdivision nineteen-a of this section.
  (e) The commissioner is authorized to contract with a pool administra-
tor designated in accordance with paragraph (c) of  subdivision  sixteen
of  this  section or, if not available, such other administrators as the
commissioner shall designate, to receive funds  for  the  pools  created
pursuant  to this subdivision and to distribute funds in accordance with
this subdivision and subdivision nineteen-a of this section. If  a  pool
administrator  is designated, the commissioner shall conduct or cause to
be conducted an annual audit of the receipt  and  distribution  of  pool
funds.  The  reasonable  costs  and  expenses of a pool administrator as
approved by the commissioner, not to exceed for personnel services on an
annual basis two hundred thousand dollars, shall be paid from the pooled
funds.
  (f) (i) Payments to the pools by or on behalf of general hospitals  of
funds  due  based  on  the  allowances  provided in accordance with this
subdivision shall be due in accordance with the provisions  of  subdivi-
sion twenty of this section in the same manner as applicable to bad debt
and  charity  care  regional  pools.  Arrearages  in payments due may be
collected and interest and penalties due shall be determined and may  be
collected  by  the  commissioner  in  accordance  with the provisions of
subdivision twenty of this section in the same manner as  applicable  to
bad debt and charity care regional pools.
  (ii)  Notwithstanding  any  inconsistent provision of this section, as
shall be necessary to obtain federal financial participation in  medical
assistance  expenditures  in  accordance  with  title XIX of the federal
social security act, the allowances included in rates of payment  pursu-
ant  to  this  subdivision  on  behalf  of patients eligible for medical
assistance pursuant to title  eleven  of  article  five  of  the  social
services  law  shall  be  withheld  from  medical assistance payments to
general hospitals and paid to pools on behalf of the  general  hospitals
where a general hospital elects such withholding in such time and manner
as  specified  by  the commissioner, and in the event a general hospital
does not elect such withholding, payments by such general hospital to  a
pool  based  on  an  allowance  received for medical assistance patients
shall be due within five days of receipt of such funds.  Funds  withheld
by  a  payor and paid to a pool on behalf of a general hospital shall be
considered received by such general hospital and paid  to  the  pool  by
such general hospital for all purposes.
  (g) The allowances provided pursuant to paragraph (a) of this subdivi-
sion  shall  be  effective  and  implemented for purposes of determining
rates of payment for state governmental agencies contingent  on  receipt
of  all  federal  approvals  necessary by federal law or regulations for
federal financial  participation  in  payments  made  for  beneficiaries
eligible  for  medical  assistance under title XIX of the federal social
security act based upon such allowances as a component of such payments.

S. 6980                            73

If such federal approvals are not granted for such allowances or  compo-
nents thereof, rates of payment for state governmental agencies shall be
determined  in  accordance  with  the provisions of this section without
consideration  of  such allowances or such components plus an adjustment
not subject to federal financial participation equal to one-half of  the
difference  between  such  rates of payment determined without consider-
ation of such allowances or components and a rate of payment  determined
based  on  such allowances or components. The pools established pursuant
to this subdivision shall refund to the state governmental  agency  from
pool reserves, current funds or future receipts any overpayment received
based  on  a  retroactive  reduction  pursuant  to this paragraph in the
allowances.
  (h) The allowances provided pursuant to paragraph (a) of this subdivi-
sion or components thereof shall be of no force and effect and shall  be
deemed  to have been null and void as of January first, nineteen hundred
ninety-four in the event the secretary of the department of  health  and
human services determines that such allowances or such components there-
of  are  an  impermissible  health  care related tax for purposes of the
federal medicaid voluntary contribution and provider-specific tax amend-
ments of nineteen hundred ninety-one for purposes of such funds reducing
the amount deemed expended  by  the  state  as  medical  assistance  for
purposes of federal financial participation.
  14-c.  Bad  debt and charity care allowance for financially distressed
hospitals. (a) With the exception  of  rates  of  payment  for  services
provided  to beneficiaries of title XVIII of the federal social security
act (medicare), all rates and general hospital charges  established  for
rate  periods  commencing  on  or  after January first, nineteen hundred
ninety-one but prior to January first, nineteen hundred  ninety-four  in
accordance  with  this section shall include an allowance of two hundred
thirty-five thousandths of one percent; and for the rate periods  during
the  period January first, nineteen hundred ninety-four through December
thirty-first, nineteen hundred ninety-six an allowance of three  hundred
twenty-five  thousandths  of one percent of the general hospital's reim-
bursable inpatient costs, excluding inpatient costs related to  services
provided  to beneficiaries of title XVIII of the federal social security
act (medicare), computed without consideration of  inpatient  uncollect-
ible amounts, and after application of the trend factor.
  (b) A statewide pool shall be created through the submissions by or on
behalf  of  general  hospitals  of  the  allowance included in rates and
charges in accordance with paragraph  (a)  of  this  subdivision.  Funds
accumulated in the statewide pool, including income from invested funds,
shall  be deposited by the commissioner and credited to a special reven-
ue-other fund to be established by the comptroller.  To  the  extent  of
funds  appropriated therefor, funds shall be made available for distrib-
utions by or on behalf of the state, as payments under the state medical
assistance program provided pursuant to title eleven of article five  of
the  social  services law, from the statewide pool in the same manner as
distributions made in accordance with paragraph (c) of subdivision nine-
teen of this section. The statewide pools may be administered in accord-
ance with the provisions of paragraph (c) of subdivision sixteen of this
section applicable to bad debt and charity care regional pools. Payments
by or on behalf of general hospitals to statewide pools shall be due and
arrearages, interest and penalties shall be treated in  accordance  with
the  provisions  of subdivision twenty of this section applicable to bad
debt and charity care regional pools.

S. 6980                            74

  (c) Notwithstanding any inconsistent provision of law, the commission-
er may allocate and distribute funds accumulated in the  statewide  pool
created pursuant to this subdivision and funds accumulated in the state-
wide  pool  created  by  the  assessments  authorized in accordance with
subdivision  eighteen  of this section and available for distribution in
accordance with paragraphs (c) and (d) of subdivision nineteen  of  this
section  for  contracts for independent management audits of financially
distressed hospitals, provided,  however,  that  the  total  amount  for
audits  pursuant  to  this  paragraph  shall not exceed two million five
hundred thousand dollars over the period January first, nineteen hundred
ninety-four through December thirty-first, nineteen hundred ninety-five.
Copies of management audit reports of financially  distressed  hospitals
shall  be  provided  by the commissioner to the chairs of the senate and
assembly health committees.
  14-d. Supplementary low income patient adjustment. (a) Notwithstanding
any inconsistent provision of this section, payment for inpatient hospi-
tal services for persons eligible for payments  made  by  state  govern-
mental  agencies for rate periods during the period January first, nine-
teen hundred ninety-one through December thirty-first, nineteen  hundred
ninety-six applicable to patients eligible for federal financial partic-
ipation  under  title  XIX of the federal social security act in medical
assistance provided pursuant to title eleven  of  article  five  of  the
social  services  law  determined  in accordance with this section shall
include for  eligible  general  hospitals  a  supplementary  low  income
patient  adjustment  determined in accordance with paragraph (b) of this
subdivision, provided all federal approvals necessary by federal law and
regulation for federal financial  participation  in  payments  made  for
beneficiaries  eligible  for  medical  assistance under title XIX of the
federal social security act based upon the adjustment provided herein as
a component of such payments are granted. The adjustment may be made  to
rates of payment or as aggregate payments to an eligible hospital.
  (b) A supplementary low income patient adjustment for the period Janu-
ary  first,  nineteen  hundred ninety-one through December thirty-first,
nineteen hundred  ninety-three  shall  be  determined,  subject  to  the
provisions  of  subparagraph  (iv) of this paragraph, and for the period
January first, nineteen hundred  ninety-four  through  December  thirty-
first, nineteen hundred ninety-six shall be determined for each eligible
hospital  according to the scale specified in subparagraph (iii) of this
paragraph based upon the amount calculated by multiplying the applicable
supplemental percentage coverage of need amount for the hospital by  the
hospital's  need  as defined in paragraph (b) of subdivision fourteen of
this section; provided, however, that  for  the  period  January  first,
nineteen  hundred  ninety-four  through  December thirty-first, nineteen
hundred ninety-six if the sum of the adjustments pursuant to clause  (C)
of  subparagraph (iii) of this paragraph would exceed thirty-six million
dollars for a rate year on an annualized basis the supplemental percent-
age coverage of need scale pursuant to clause (C) of subparagraph  (iii)
of  this  paragraph shall be reduced on a pro rata basis so that the sum
of such adjustments provided for the rate year on  an  annualized  basis
shall not exceed thirty-six million dollars.
  (i)  The  low income patient percentage of a general hospital shall be
defined as the ratio of the sum  of  inpatient  discharges  of  patients
eligible for medical assistance pursuant to title eleven of article five
of  the  social  services  law  plus  inpatient  discharges  of self-pay
patients plus inpatient discharges of charity care patients  divided  by
total  inpatient  discharges  expressed  as a percentage. For the period

S. 6980                            75

January first, nineteen  hundred  ninety-one  through  December  thirty-
first,  nineteen  hundred  ninety-three, the percentages shall be calcu-
lated based on base year nineteen hundred eighty-nine, received  by  the
department  no  later than November first, nineteen hundred ninety, data
from the statewide planning and research cooperative  system  consistent
with  data  submitted  in  accordance  with section twenty-eight hundred
five-a of this article. For the period January first,  nineteen  hundred
ninety-four  through December thirty-first, nineteen hundred ninety-six,
the percentages shall be calculated based on base year nineteen  hundred
ninety-one,  received  by  the  department no later than November first,
nineteen hundred ninety-three, data  from  the  statewide  planning  and
research cooperative system consistent with data submitted in accordance
with  section  twenty-eight hundred five-a of this article.  In order to
be eligible for an adjustment pursuant to this subdivision,  a  hospital
must  maintain  its  collection  efforts  to obtain payment in full from
self-pay patients.
  (ii) For the period January first, nineteen hundred ninety-one through
December thirty-first,  nineteen  hundred  ninety-three,  hospital  need
shall  be  calculated  based  on  base year nineteen hundred eighty-nine
data. For the period January first, nineteen hundred ninety-four through
December thirty-first, nineteen hundred ninety-six, hospital need  shall
be calculated based on base year nineteen hundred ninety-one data.
  (iii)(A) The scale utilized for development of a hospital's supplemen-
tary  low  income  patient adjustment shall be as follows for the period
January first, nineteen hundred ninety-one through June thirtieth, nine-
teen hundred ninety-one:
         Low Income                 Supplemental Percentage
    Patient Percentage                 Coverage of Need
         50+  55%                               5%
         55+  60%                              10%
         60+  65%                              15%
         65+  70%                              22.5%
         70+  75%                              30%
         75+  80%                              37.5%
         80+                                   45%
  (B) The scale utilized for development of a  hospital's  supplementary
low  income  adjustment  shall  be as follows for the period July first,
nineteen hundred ninety-one for a public general hospital through Decem-
ber thirty-first, nineteen hundred ninety-six and for a  voluntary  non-
profit or a private proprietary general hospital through September thir-
tieth, nineteen hundred ninety-two:
        Low Income                   Supplemental Percentage
    Patient Percentage                 Coverage of Need
         35+  55%                              20%
         55+  60%                              25%
         60+  65%                              30%
         65+  70%                              37.5%
         70+                                   45%
  (C)  The  scale  utilized for development of a voluntary non-profit or
private proprietary general hospital's supplementary low income  patient
adjustment  shall  be  as follows for the period October first, nineteen
hundred ninety-two through March thirty-first, nineteen hundred  ninety-
three  and  for  the  period January first, nineteen hundred ninety-four
through December thirty-first, nineteen hundred ninety-six:
        Low Income                   Supplemental Percentage
    Patient Percentage                 Coverage of Need

S. 6980                            76

         35+  50%                              10%
         50+  55%                              20%
         55+  60%                              25%
         60+  65%                              30%
         65+  70%                              37.5%
         70+                                   45%
  (D)  The  scale  utilized for development of a voluntary non-profit or
private proprietary general hospital's supplementary low income  patient
adjustment  for  the period May fifteenth, nineteen hundred ninety-three
through December thirty-first, nineteen hundred ninety-three shall be at
one hundred twenty percent of the supplemental  percentage  coverage  of
need scale specified in clause (C) of this subparagraph.
  (iv)  A supplementary low income patient adjustment determined accord-
ing to the scale specified in subparagraph (iii) of this paragraph shall
be limited for rate periods during the period  January  first,  nineteen
hundred ninety-one through December thirty-first, nineteen hundred nine-
ty-three  such that the amount of such adjustment for an eligible hospi-
tal, plus the amount committed to the regional pools in accordance  with
paragraph  (c) of subdivision fourteen of this section and paragraph (a)
of subdivision nineteen of this section for the rate period  that  would
be allocated to such hospital, plus, if applicable, any distribution for
the  rate  period  pursuant  to paragraph (d) of subdivision nineteen of
this section for such hospital, and plus  for  a  major  public  general
hospital  the  amount  of  any  supplementary  bad debt and charity care
adjustment provided pursuant to subdivision fourteen-a of  this  section
for the rate period shall not exceed ninety percent of need.
  (v)  The  provisions  of this subdivision shall not apply to a general
hospital eligible for distributions made pursuant to  paragraph  (c)  of
subdivision nineteen of this section.
  (c)  A supplementary low income patient adjustment provided in accord-
ance with this subdivision for rate periods during  the  period  January
first,  nineteen hundred ninety-one through December thirty-first, nine-
teen hundred ninety-three shall be adjusted to reflect  actual  distrib-
utions  pursuant  to  paragraphs (a) and (b) of subdivision seventeen of
this section and paragraph (d) of subdivision nineteen of  this  section
and  adjustments  provided  pursuant  to  subdivision fourteen-a of this
section.
  (d) Notwithstanding any inconsistent provision  of  law,  a  voluntary
non-profit  or proprietary general hospital where the low income patient
percentage, as determined in accordance with provisions of this subdivi-
sion, is between thirty-five and sixty-five percent shall be charged  an
assessment  which for the period July first, nineteen hundred ninety-one
through December thirty-first, nineteen hundred ninety-one  shall  equal
five percent of the general hospital's bad debt and charity care need as
determined  in  accordance with paragraph (b) of subdivision fourteen of
this section and for the period January first, nineteen hundred  ninety-
two through September thirtieth, nineteen hundred ninety-two shall equal
seven and one-half percent of the general hospital's bad debt and chari-
ty  care need as determined in accordance with paragraph (b) of subdivi-
sion fourteen of this section. Such assessment  shall  be  paid  to  the
commissioner  or  his  designee prior to October first, nineteen hundred
ninety-two in accordance with a schedule established by the  commission-
er.   The  assessments  may  be  administered  in  accordance  with  the
provisions of paragraph (c)  of  subdivision  sixteen  of  this  section
applicable to bad debt and charity care regional pools.  Payments of the
assessments  shall  be due and arrearages shall be treated in accordance

S. 6980                            77

with the provisions of subdivision twenty of this section applicable  to
bad  debt  and  charity  care regional pools. Funds accumulated shall be
deposited by the commissioner and credited to the department  of  social
services  medical  assistance  program  general  fund - local assistance
account appropriation.
  (e) Notwithstanding any inconsistent provision of law, the  provisions
of  paragraphs  (a)  and  (b)  of  this  subdivision  shall not apply to
payments for patients discharged on or  after  January  first,  nineteen
hundred ninety-seven.
  14-f.]  6. Public general hospital indigent care adjustment.  Notwith-
standing any inconsistent provision of this section and subject  to  the
availability  of  federal financial participation, payment for inpatient
hospital services for  persons  eligible  for  payments  made  by  state
governmental  agencies  for  the period [January first, nineteen hundred
ninety-seven through December thirty-first, nineteen hundred ninety-nine
and periods on and after January first, two thousand] ON AND AFTER JANU-
ARY FIRST, TWO THOUSAND THIRTEEN applicable  to  patients  eligible  for
federal  financial  participation  under title XIX of the federal social
security act in medical assistance provided pursuant to title eleven  of
article  five  of  the social services law determined in accordance with
this section shall include for  eligible  public  general  hospitals  [a
public  general hospital indigent care adjustment equal to the aggregate
amount of the adjustments provided for such public general hospital  for
the  period  January first, nineteen hundred ninety-six through December
thirty-first, nineteen hundred ninety-six pursuant to subdivisions four-
teen-a and fourteen-d of this section on an annualized basis,  provided,
however, that for periods on and after January first, two thousand thir-
teen] an annual amount of four hundred twelve million dollars [shall be]
allocated  to  eligible  major public hospitals based on each hospital's
proportionate share of medicaid and uninsured losses to  total  medicaid
and uninsured losses for all eligible major public hospitals, net of any
disproportionate  share  hospital payments received pursuant to sections
twenty-eight hundred seven-k and twenty-eight hundred  seven-w  of  this
article.  The adjustment may be made to rates of payment or as aggregate
payments to an eligible hospital.
  [15. Special provisions for payments by governmental agencies. In  the
event  that federal financial participation in payments made for benefi-
ciaries eligible for medical assistance under title XIX of  the  federal
social  security act based upon the allowance specified in paragraph (c)
of subdivision fourteen of this section as a component of such  payments
is  not  approved by the federal government, rates of payment by govern-
mental agencies for the operating cost  component  of  general  hospital
inpatient  services  shall  be  increased  for each hospital by the same
percentage allowance as each hospital's  federal  fiscal  year  nineteen
hundred  eighty-seven  disproportionate  share payment adjustment factor
for revenues received from services provided to beneficiaries  of  title
XVIII  of  the  federal  social security act (medicare) as determined in
accordance with the provisions of section eighteen hundred  eighty-six-d
of  title XVIII of the federal social security act (medicare). Increased
amounts received by general hospitals in accordance with  the  provision
of this subdivision shall be offset against distributions to such hospi-
tals  that  were  made  or  would  be  made  pursuant  to the provisions
contained in subdivisions seventeen and nineteen of this section. In the
event that distributions had been made to  such  hospitals  pursuant  to
such  subdivisions,  the hospital shall, on a proportional basis, return
to the pool from which the distributions were made an  amount  equal  to

S. 6980                            78

the increased amounts received under this subdivision to the extent that
such  increased  amounts  do not exceed distributions made. Funds in the
statewide pool created in accordance with subdivision  sixteen  of  this
section,  which would have been distributed in accordance with paragraph
(c) of subdivision nineteen of this section if the  provisions  of  this
subdivision  were not in effect, less any amounts not distributed as the
result of the offset provisions of this subdivision shall be distributed
to regional pools to the extent that such funds are available and neces-
sary to maintain regional pool distributions, with consideration of  the
offset  provisions  in  this  subdivision,  at  the levels that would be
available pursuant to the provisions of  subdivision  fourteen  of  this
section if the provisions of this subdivision did not apply.
  16.  Bad debt and charity care regional pools and bad debt and charity
care and capital statewide pool, general. (a) Funds will be made  avail-
able  in bad debt and charity care regional pools created by the commis-
sioner for distributions in accordance  with  subdivision  seventeen  of
this  section  through the submissions by or on behalf of general hospi-
tals of the allowance included in rates and charges in  accordance  with
paragraph  (c)  of  subdivision fourteen of this section and through the
transfer of funds available from the bad debt and charity care and capi-
tal statewide pool in accordance with paragraph (a) of subdivision nine-
teen of this section. Funds will be made available for distributions  in
accordance with subdivision nineteen of this section from a bad debt and
charity  care  and  capital  statewide  pool created by the commissioner
through the submissions by  general  hospitals  of  the  amount  of  the
assessments  authorized  in accordance with subdivision eighteen of this
section.
  (b) The regions are established as the article  forty-three  insurance
plan  regions,  with  the  exception  that the southern sixteen counties
shall be divided into three regions for  the  purposes  of  subdivisions
fourteen  and seventeen of this section with separate regions consisting
of Richmond, Manhattan, Bronx, Queens and  Kings  counties;  Nassau  and
Suffolk  counties;  and  Delaware,  Columbia,  Ulster, Sullivan, Orange,
Dutchess, Putnam, Rockland and Westchester counties. Such regions  shall
be  the  same  regions established and in effect January first, nineteen
hundred eighty-five. The council with the approval of  the  commissioner
may  combine  regions, with the exception of the above specified regions
for the southern sixteen  counties,  upon  application  of  the  article
forty-three  insurance  law  plans  involved  and  a  demonstration that
significant inequities would not occur.
  (c) For periods prior to January first, two thousand five, the commis-
sioner and  the  commissioner  of  social  services  are  authorized  to
contract  with  the  article  forty-three insurance law plans, or if not
available such other administrators as the commissioner and the  commis-
sioner  of social services shall designate, to receive funds for the bad
debt and charity care regional pools and/or the  bad  debt  and  charity
care and capital statewide pool and distribute funds from such pools. In
the  event contracts with the article forty-three insurance law plans or
other commissioners' designees are effectuated, the commissioner and the
commissioner of social services shall jointly conduct  or  cause  to  be
conducted  annual  audits  of the receipt and distribution of the pooled
funds. The reasonable costs and expenses  of  a  pool  administrator  as
approved  by  the  commissioner and the commissioner of social services,
not to exceed for personnel services on an  annual  basis  four  hundred
thousand  dollars  for  all  pools, shall be paid from the pooled funds.
Such pool administrator or pool administrators shall be acting on behalf

S. 6980                            79

of the state medical assistance program provided pursuant to title elev-
en of article five of the social services law  in  the  distribution  to
hospitals  pursuant to subdivisions fourteen-c, seventeen and paragraphs
(c) and (d) of subdivision nineteen of this section of pooled funds.
  (d) In order for a general hospital to participate in the distribution
of  funds from the pools, the general hospital must implement collection
policies and procedures approved by the  commissioner  and  must  be  in
compliance  with bad debt and charity care reporting requirements estab-
lished pursuant to this article.
  (e)] 7. In order for a general hospital to be  eligible  for  distrib-
ution  of  funds  from  the  pools, such general hospital if it provides
obstetrical care and services must agree to  participate  in  a  program
approved by the department for the provision of prenatal care to persons
eligible  for  medical  assistance  or  medically  indigent  persons  if
requested by such a program.  Nothing  stated  herein  shall  require  a
hospital  to  grant  admitting  privileges to a physician solely because
such person is part of an approved program. The participation of  hospi-
tals in an approved program shall include, but not be limited to:
  [(i)]  (A)  arrangements  with  designated prenatal care providers for
prebooking pregnant women for approximate delivery time,  and  provision
of  staff  and facilities for the delivery and necessary postpartum care
for women and infants involved in such programs;
  [(ii)] (B) a system for medical record transfer from a  prenatal  care
provider  to hospital staff participating in delivery and for the trans-
fer of information regarding hospital delivery  and  care  back  to  the
prenatal care provider for postpartum follow-up; and
  [(iii)]  (C)  an  agreement with designated prenatal care providers to
accept the care of high risk patients on  a  referral  basis  and/or  to
provide  special tests and procedures which are not ordinarily available
to prenatal care clinics if such hospital is capable of caring for  high
risk patients and/or providing special tests and procedures.
  [(f)  The council may adopt regulations subject to the approval of the
commissioner to allow advanced  distributions  from  these  pools  to  a
general  hospital  qualifying for distributions in accordance with para-
graph (c) of subdivision nineteen of this section,  based  on  a  demon-
stration  by  the hospital that there is an inability to finance current
obligations and obtain needed working capital.
  (g) Notwithstanding any inconsistent provision of law to the contrary,
from interest heretofore earned or hereinafter earned on  funds  in  bad
debt  and  charity care regional pools and the bad debt and charity care
and capital statewide pool established pursuant to  this  section,  such
amounts  as  shall  be  necessary, within amounts appropriated, shall be
reallocated to, and the  state  comptroller  is  hereby  authorized  and
directed  to  receive  for  deposit  to, the credit of the department of
health's special revenue fund - other,  hospital  based  grants  program
account, for purposes of services and expenses related to general hospi-
tal  based  grant  programs for the period April first, nineteen hundred
ninety-four through June thirtieth, nineteen hundred ninety-six and  for
the  period  July first, nineteen hundred ninety-six through March thir-
ty-first, nineteen hundred ninety-seven.
  16-a. Pool administration, general. (a) If a general hospital fails to
timely file a report with the department of funds due to a regional pool
or a statewide pool established pursuant to this  section,  the  commis-
sioner may estimate the amount due from such hospital based on available
financial and statistical data and may collect in accordance with subdi-
vision twenty of this section any amount due based on such estimate as a

S. 6980                            80

deficiency  in  payments  to  such  regional pool or statewide pool with
interest and penalties. The commissioner shall provide a general  hospi-
tal with notice of any estimate of the amount due pursuant to this para-
graph  at  least  three  days prior to collection of a deficiency by the
commissioner. Such notice shall contain  the  financial  basis  for  the
commissioner's estimate.
  (b)  Notwithstanding any inconsistent provision of section one hundred
twelve or one hundred seventy-four of the state finance law or any other
law, at the discretion of  the  commissioner  and  the  commissioner  of
social  services without a competitive bid or request for proposal proc-
ess, regional pool and statewide pool administration contracts in effect
for rate year nineteen hundred ninety-three may be extended for adminis-
tration of regional pools and statewide pools established for rate years
nineteen hundred ninety-four and nineteen hundred ninety-five and  nine-
teen  hundred  ninety-six  to  provide  an uninterrupted continuation of
services and may be amended as may be necessary.
  17. Bad debt and charity care regional pool distributions. Funds accu-
mulated in bad debt and charity care regional  pools,  including  income
from  invested  funds,  from the allowance specified in paragraph (c) of
subdivision fourteen of this section and funds accumulated in  bad  debt
and  charity  care regional pools, including income from invested funds,
from the transfer of funds available from the bad debt and charity  care
and  capital statewide pool in accordance with paragraph (a) of subdivi-
sion nineteen of this section shall be deposited by the commissioner and
credited to a special revenue-other fund to be established by the  comp-
troller.  To  the  extent of funds appropriated therefor, funds shall be
made available for distribution  by  or  on  behalf  of  the  state,  as
payments under the state medical assistance program provided pursuant to
title  eleven  of article five of the social services law, from bad debt
and charity care regional pools in accordance with the following method-
ology and sequence:
  (a) For the nineteen hundred eighty-eight,  nineteen  hundred  eighty-
nine  and  for  that  portion  of  the nineteen hundred ninety rate year
beginning on January first and ending on June thirtieth,  each  eligible
major  public  general  hospital shall receive a portion of its bad debt
and charity care need equal to one hundred two percent of the result  of
the  application  of  its percentage of statewide inpatient reimbursable
costs excluding costs related to services provided to  beneficiaries  of
title  XVIII of the federal social security act (medicare), developed on
the basis of nineteen  hundred  eighty-five  financial  and  statistical
reports,  to  the  total  of all regional pools. For that portion of the
nineteen hundred ninety rate year beginning on July first and ending  on
December thirty-first and in the annual rate years beginning on or after
January  first,  nineteen hundred ninety-one, each eligible major public
general hospital shall receive a portion of its  bad  debt  and  charity
care need equal to one hundred ten percent of the result of the applica-
tion of its percentage of statewide inpatient reimbursable costs exclud-
ing  costs  related to services provided to beneficiaries of title XVIII
of the federal social security act (medicare), developed on the basis of
nineteen hundred eighty-five financial and statistical reports,  to  the
total of all regional pools.
  (b)  (i)  Funds  remaining in the regional pools after distribution in
accordance with paragraph (a) of this subdivision shall  be  distributed
to  voluntary  non-profit, private proprietary and public general hospi-
tals, other than major public general hospitals, on the  basis  of  each
hospital's  targeted  need  share.  For  the rate year beginning January

S. 6980                            81

first, nineteen hundred eighty-eight, an individual hospital's  targeted
need  share shall be defined as the relationship between each hospital's
nineteen hundred eighty-six nominal payment amount as defined in subpar-
agraph  (i)  of paragraph (c) of subdivision fourteen of this section to
the nineteen hundred eighty-six nominal payment amounts for  all  hospi-
tals in the region other than major public general hospitals.  For annu-
al  rate  years  beginning  on  or after January first, nineteen hundred
eighty-nine, the base need shall be the calendar year which is two years
prior to the rate year. The amount of funds to be distributed in accord-
ance with this paragraph and paragraph (a) of this subdivision shall  be
limited to the amount of funds accumulated in the pools.
  (ii)  Notwithstanding  any  inconsistent  provision  of  this section,
commencing April first, nineteen hundred ninety-five funds remaining  in
the  regional  pools after distribution in accordance with paragraph (a)
of this subdivision shall be aggregated on a statewide basis and treated
as a common pool for statewide distributions and distributed  to  volun-
tary non-profit, private proprietary and public general hospitals, other
than  major  public  general  hospitals, on the basis of each hospital's
targeted need share defined as the relationship between each  hospital's
base year nominal payment amount as defined in subparagraph (i) of para-
graph (c) of subdivision fourteen of this section to the base year nomi-
nal  payment amounts for all hospitals statewide other than major public
general hospitals.
  (d) The department may provide for interim payments to general  hospi-
tals of funds available for distribution from regional pools pursuant to
this  subdivision,  subject  to  reasonable  retainage  for adjustments,
subsequently reconciled to amounts due  determined  in  accordance  with
this subdivision.
  (e) Notwithstanding any inconsistent provision of this section, in the
event  funds  available pursuant to paragraph (b-1) of subdivision nine-
teen of this section for programs to provide health  care  coverage  for
uninsured or underinsured children are inadequate to provide coverage to
all  eligible  children  for  whom application for coverage is made in a
rate period, such additional amounts not to exceed  twenty-five  million
dollars  for  nineteen  hundred  ninety-four  as  shall  be necessary to
provide such coverage shall be reserved by  the  commissioner  from  the
amount  to  be available in bad debt and charity care regional pools for
such rate period for additional  distributions  to  such  programs.  Ten
million  dollars of the amount reserved for nineteen hundred ninety-four
shall not result in a decrease to  disproportionate  share  payments  to
hospitals.
  18.]  8. Bad debt and charity care and capital statewide pool funding.
The commissioner shall create a bad debt and charity  care  and  capital
statewide  pool  which shall be funded [by a transfer of funds, which is
hereby authorized, for the period January first, nineteen hundred  nine-
ty-five through December thirty-first, nineteen hundred ninety-five, the
period  January  first, nineteen hundred ninety-six through June thirti-
eth, nineteen hundred ninety-six and the  period  July  first,  nineteen
hundred ninety-six through December thirty-first, nineteen hundred nine-
ty-six  equal  to  seven  million  five hundred thousand dollars for the
nineteen hundred ninety-five period, three million seven  hundred  fifty
thousand  dollars  for  the  January  first, nineteen hundred ninety-six
through June thirtieth, nineteen hundred  ninety-six  period  and  three
million  seven  hundred fifty thousand dollars for the July first, nine-
teen hundred ninety-six through December thirty-first, nineteen  hundred
ninety-six  period to be submitted to a statewide pool, as designated by

S. 6980                            82

the commissioner, from the  medical  malpractice  insurance  association
pursuant  to  section five thousand five hundred sixteen-c of the insur-
ance law and] through an assessment which shall be  charged  to  general
hospitals.  [In  the  event  that  the  transfers of funds authorized by
section five thousand five hundred sixteen-c of the insurance law do not
occur by January first, nineteen  hundred  ninety-five,  January  first,
nineteen  hundred  ninety-six and August first, nineteen hundred ninety-
six respectively, the commissioner for each period for which such trans-
fer from the medical malpractice insurance association has not  occurred
shall transfer seven million five hundred thousand dollars for the nine-
teen hundred ninety-five period, three million seven hundred fifty thou-
sand  dollars for the January first, nineteen hundred ninety-six through
June thirtieth, nineteen hundred ninety-six  period  and  three  million
seven  hundred  fifty  thousand  dollars  for  the  July first, nineteen
hundred ninety-six through December thirty-first, nineteen hundred nine-
ty-six period from regional or statewide pool reserves for pools  estab-
lished pursuant to this section and section twenty-eight hundred eight-c
or  twenty-eight  hundred  seven-a  of  this article to the bad debt and
charity care and capitol statewide pool  established  pursuant  to  this
subdivision.]  Such assessment shall be submitted to a statewide pool as
designated by the commissioner and distributed on  a  monthly  basis  in
accordance with subdivision [twenty] TEN of this section.
  (A) The assessment shall be[:
  (a)  one  and  seventy-five thousandths percent of each general hospi-
tal's gross revenue received for inpatient  hospital  services  provided
during  the  period January first, nineteen hundred eighty-eight through
December thirty-first,  nineteen  hundred  eighty-eight;  one  and  five
hundredths percent of each general hospital's gross revenue received for
inpatient  hospital  services  provided during the period January first,
nineteen hundred eighty-nine  through  December  thirty-first,  nineteen
hundred  eighty-nine;  and] one percent of each general hospital's gross
revenue received for inpatient hospital services provided during  annual
periods  beginning  on  or  after January first, nineteen hundred ninety
through December thirty-first, nineteen hundred ninety-nine  and  on  or
after January first, two thousand[,].
  [(b)  provided, however, subject to the provisions of paragraph (e) of
this subdivision there shall be no assessment  against  those  voluntary
non-profit  and  private proprietary general hospitals which qualify for
distributions made in accordance with paragraph (c) of subdivision nine-
teen of this section, or for the annual assessment period January first,
nineteen hundred ninety-seven through  December  thirty-first,  nineteen
hundred  ninety-seven  which qualified for distributions made in accord-
ance with paragraph (c) of subdivision nineteen of this  section  as  of
December thirty-first, nineteen hundred ninety-five, and
  (c)  provided further, however, subject to the provisions of paragraph
(e) of this subdivision the assessment against those voluntary  non-pro-
fit  and  private  proprietary  general  hospitals  which  qualified for
distributions made in accordance with paragraph (c) of subdivision nine-
teen of this section as of December thirty-first, nineteen hundred nine-
ty-five shall for the annual assessment period January  first,  nineteen
hundred  ninety-eight  through  December  thirty-first, nineteen hundred
ninety-eight be abated in the amount of three-quarters of one percent of
gross revenue received and for  the  annual  assessment  period  January
first, nineteen hundred ninety-nine through December thirty-first, nine-
teen  hundred  ninety-nine be abated in the amount of one-quarter of one
percent of gross revenue received.

S. 6980                            83

  (d)] (B) Gross revenue received shall mean all moneys received for  or
on  account  of  inpatient  hospital  service,  provided,  however, that
subject to the provisions of paragraph [(e)]  (C)  of  this  subdivision
gross revenue received shall not include distributions from bad debt and
charity  care  regional  pools, health care services pools, bad debt and
charity care for financially distressed hospitals  statewide  pools  and
bad debt and charity care and capital statewide pools created in accord-
ance  with this section or distributions from funds allocated in accord-
ance with section twenty-eight  hundred  seven-l,  twenty-eight  hundred
seven-k, twenty-eight hundred seven-v or twenty-eight hundred seven-w of
this  article  [and shall not include the components of rates of payment
or charges related to the allowances provided in accordance with  subdi-
visions fourteen, fourteen-b and fourteen-c of this section, the adjust-
ment provided in accordance with subdivision fourteen-a of this section,
the  adjustment  provided  in  accordance with subdivision fourteen-d of
this  section],  the  adjustment  for  health  maintenance  organization
reimbursement rates provided in accordance with former subdivision two-a
of  this section, payments made pursuant to paragraph (i) of subdivision
[thirty-five] SEVENTEEN of this section or[, if effective,  the  adjust-
ment  provided  in accordance with subdivision fifteen of this section],
the adjustment provided in accordance with section eighteen  of  chapter
two  hundred  sixty-six  of  the  laws of nineteen hundred eighty-six as
amended, revenue received from physician practice  or  faculty  practice
plan discrete billings for private practicing physician services, reven-
ue  from  affiliation  agreements or contracts with public hospitals for
the delivery of health care services at such public  hospitals,  revenue
received  as disproportionate share hospital payments in accordance with
title nineteen of the federal  social  security  act,  or  revenue  from
government  deficit financing, provided, however, that funds received as
medical assistance payments which include state share amounts authorized
pursuant to section twenty-eight hundred seven-v of  this  article  that
are not disproportionate share hospital payments shall be included with-
in the meaning of gross revenue for purposes of this subdivision.
  [(e)]  (C)  Each  exclusion  of  hospitals or sources of gross revenue
received from the assessments effective on or after October first, nine-
teen hundred ninety-two established pursuant to this  subdivision  shall
be  contingent  upon  either:  (i)  qualification of the assessments for
waiver pursuant to federal law and regulation; or, (ii) consistent  with
federal  law  and regulation, not requiring a waiver by the secretary of
the department of health and human services related to  such  exclusion;
in  order  for  the  assessments under this section to be qualified as a
broad-based health  care  related  tax  for  purposes  of  the  revenues
received  by  the  state  pursuant  to  the assessments not reducing the
amount expended by the state  as  medical  assistance  for  purposes  of
federal  financial  participation.  The  commissioner  shall collect the
assessments relying on such exclusions, pending any contrary  action  by
the  secretary  of  the  department of health and human services. In the
event the secretary of the  department  of  health  and  human  services
determines  that  the  assessments  do  not so qualify based on any such
exclusion, then the exclusion shall be deemed to have been null and void
as of October first, nineteen hundred ninety-two  and  the  commissioner
shall  collect  any retroactive amount due as a result, without interest
or penalty provided the hospital pays the retroactive amount due  within
ninety  days  of  notice  from the commissioner to the hospital that the
exclusion is null and void. Interest and  penalties  shall  be  measured

S. 6980                            84

from  the due date of ninety days following notice from the commissioner
to the hospital.
  [(f)]  (D)  Payments  of  assessments  and  allowances  required to be
submitted by general hospitals pursuant to this subdivision and  [subdi-
visions  fourteen  and  fourteen-b of this section and] paragraph (a) of
subdivision two of section twenty-eight hundred seven-d of this  article
shall  be subject to audit by the commissioner for a period of six years
following the close of the calendar year in which such payments are due,
after which such payments shall be  deemed  final  and  not  subject  to
further  adjustment  or reconciliation, including through offset adjust-
ments or reconciliations made by general hospitals with regard to subse-
quent  payments,  provided,  however,  that  nothing  herein  shall   be
construed as precluding the commissioner from pursuing collection of any
such assessments and allowances which are identified as delinquent with-
in  such  six  year  period,  or which are identified as delinquent as a
result of an audit commenced within such six year audit period, or  from
conducting an audit of any adjustment or reconciliation made by a gener-
al  hospital within such six year period, or from conducting an audit of
payments made prior to such six  year  period  which  are  found  to  be
commingled  with  payments  which  are otherwise subject to timely audit
pursuant to this section.   General hospitals which, in  the  course  of
such an audit, fail to produce data or documentation requested in furth-
erance  of  such  an  audit,  within  thirty days of such request may be
assessed a civil penalty of up to ten thousand  dollars  for  each  such
failure, provided, however, that such civil penalty shall not be imposed
if the hospital demonstrates good cause for such failure. The imposition
of  such  civil  penalties shall be subject to the provisions of section
twelve-a of this chapter.
  [(g)] (E) If a general hospital fails to produce data or documentation
requested in furtherance of an audit for a month to which an  assessment
applies, the commissioner may estimate, based on available financial and
statistical  data  as determined by the commissioner, the amount due for
such month. If the impact of exemptions permitted pursuant to  paragraph
[(d)]  (B)  of this subdivision cannot be determined from such available
financial and statistical data the estimated amount due  may  be  calcu-
lated  on  the basis of the general hospital's aggregate gross inpatient
revenue amount, as determined from such available financial and  statis-
tical data for the year subject to audit. Estimated amounts due pursuant
to  this paragraph shall be paid by a general hospital within sixty days
or within such other time period as agreed to by  the  commissioner  and
the facility. Thereafter the commissioner shall take all necessary steps
to collect amounts owed pursuant to this paragraph, including by offset-
ting,  or by directing the state comptroller to offset, such amounts due
from any other payments made  by  state  governmental  agencies  to  the
general hospital pursuant to this article.  Interest and penalties shall
be  applied  to  such  amounts  due in accordance with the provisions of
paragraph (c) of subdivision [twenty] TEN of this section.
  [(h)] (F) The commissioner shall take all necessary steps  to  collect
delinquent  amounts  owed  pursuant  to  this  subdivision, including by
recoupment or offsetting, or  by  directing  the  state  comptroller  to
offset,  such  amounts due from any other payments made by state govern-
mental agencies to  the  general  hospital  pursuant  to  this  article.
Interest  and  penalties shall be applied to such amounts due in accord-
ance with the provisions of paragraph (c) of subdivision [twenty] TEN of
this section. Delinquent amounts which have been referred for recoupment
or offset pursuant to this paragraph, or which have been referred to the

S. 6980                            85

office of the attorney general for collection, shall be deemed final and
not subject to further revision or reconciliation  by  the  commissioner
based  on  any  additional reports or other information submitted by the
hospital,  provided,  however,  that  such  delinquencies  shall  not be
referred for such recoupment or for such collection based  on  estimated
amounts  unless  the  hospital has received written notification of such
delinquencies and has been given no less than thirty days  in  which  to
submit delinquent reports.
  [(i)]  (G)  The  commissioner  may  enter into agreements with general
hospitals subject to this subdivision, in regard to which audit findings
or prior settlements  have  been  made  pursuant  to  this  subdivision,
extending  and  applying  such  audit findings or prior settlements or a
portion thereof, in  settlement  and  satisfaction  of  potential  audit
liabilities  for  subsequent  un-audited  periods.  The commissioner may
reduce or waive payment of interest and penalties  otherwise  applicable
to  such subsequent un-audited periods when such amounts due as a result
of such agreement, other than reduced or waived penalties and  interest,
are  paid  in  full  to  the commissioner or the commissioner's designee
within sixty days of execution of such agreement by all parties  to  the
agreement.  Any  payments  made  pursuant  to agreements entered into in
accordance with this paragraph shall be deemed to be in  full  satisfac-
tion  of  any liability arising under this subdivision, as referenced in
such agreements and for the time periods  covered  by  such  agreements,
provided,  however,  that  the commissioner may audit future retroactive
adjustments to payments made for such periods based on reports filed  by
hospitals subsequent to such agreements.
  [19.  Bad  debt  and  charity care and capital statewide pool distrib-
ution.  Funds accumulated in the statewide pool created by  the  assess-
ment  authorized in accordance with subdivision eighteen of this section
for periods through December thirty-first, nineteen hundred  ninety-six,
including  income  from invested funds, shall be distributed or retained
in accordance with the following sequence:
  (a) Funds shall be distributed by the commissioner  to  bad  debt  and
charity  care regional pools established pursuant to subdivision sixteen
of this section to provide additional funds for distribution  from  such
bad  debt and charity care regional pools in accordance with subdivision
seventeen of this section equal to the amount computed as the difference
between the amount that would be available in such regional pools  based
on  a  statewide determination of financial resources to be committed to
regional pools in each year in accordance with paragraph (c) of subdivi-
sion fourteen of this section based upon a percentage  factor  equal  to
five  and ninety-three hundredths percent and the amount to be available
in such regional pools based on a statewide determination  of  financial
resources  to  be committed to regional pools in each year in accordance
with paragraph (c) of subdivision fourteen of this section based upon  a
percentage factor equal to five and forty-eight hundredths percent.
  (b) An amount not to exceed seventeen million dollars on an annualized
basis  from  the  assessment  through  December  thirty-first,  nineteen
hundred ninety-six may annually be placed  in  a  statewide  account  in
accordance  with  rules  and  regulations  adopted  by  the  council and
approved by the commissioner for the purpose of  securing  financing  of
capital  improvement  projects  for  general  hospitals  qualifying  for
distributions made in accordance with paragraph (c) of this subdivision.
Any reserved funds available on September first, nineteen hundred  nine-
ty-seven and not obligated, in accordance with section twelve of chapter
nine  hundred thirty-four of the laws of nineteen hundred eighty-five as

S. 6980                            86

amended, for the purpose of securing financing  of  capital  improvement
projects  for  general  hospitals and any reserved funds that thereafter
become available may be transferred by the commissioner, in consultation
with  the  director  of  the  budget and the dormitory authority, to the
health facility restructuring pool established pursuant to section twen-
ty-eight hundred fifteen of this article  or  to  the  general  hospital
indigent  care pool established pursuant to section twenty-eight hundred
seven-k of this article.
  (b-1) An amount equal to: twenty  million  dollars  annually  for  the
period January first, nineteen hundred ninety-one through December thir-
ty-first,  nineteen hundred ninety-three; thirty million dollars for the
period January first,  nineteen  hundred  ninety-four  through  December
thirty-first,  nineteen  hundred  ninety-four; thirty-seven million five
hundred thousand dollars for the period January first, nineteen  hundred
ninety-five through December thirty-first, nineteen hundred ninety-five;
eighteen  million  seven  hundred  fifty thousand dollars for the period
January first, nineteen hundred ninety-six through June thirtieth, nine-
teen hundred ninety-six; and eighteen million seven hundred fifty  thou-
sand  dollars  for  the  period  July first, nineteen hundred ninety-six
through December thirty-first, nineteen hundred ninety-six shall annual-
ly be reserved and accumulated from year to year by the commissioner for
distributions to programs to provide health care coverage for  uninsured
or  underinsured  children. Such accumulated funds shall not be used for
any other purpose other than those  authorized  in  section  twenty-five
hundred  ten and twenty-five hundred eleven of this chapter. If on March
thirty-first,  nineteen  hundred  ninety-eight,  any  funds  accumulated
during  the  period  January  first, nineteen hundred ninety-one through
December thirty-first,  nineteen  hundred  ninety-seven  are  unused  or
uncommitted  for  such  distributions,  such unused or uncommitted funds
shall be immediately transferred by the commissioner to the health  care
initiatives  pool  established by the commissioner to provide additional
funds for distribution to programs to provide health care  coverage  for
uninsured  or  underinsured  children  pursuant  to sections twenty-five
hundred ten and twenty-five hundred eleven of  this  chapter.  For  cash
flow  purposes,  the  commissioner may borrow from regional or statewide
pool reserves for pools established pursuant to this section such  funds
as shall be necessary not to exceed the amount authorized to be reserved
annually  to  meet premium requirements pursuant to sections twenty-five
hundred ten and twenty-five hundred eleven of this chapter  for  a  rate
year  and  shall  refund  such  moneys  when pool funds become available
pursuant to this paragraph for such rate year.
  (b-2) Funds available for distribution in accordance  with  paragraphs
(c)  and  (d) of this subdivision shall be deposited by the commissioner
and credited to a special revenue-other fund to be  established  by  the
comptroller.  To  the extent of funds appropriated therefor, funds shall
be made available for distributions by or on behalf  of  the  state,  as
payments under the state medical assistance program provided pursuant to
title  eleven  of  article  five of the social services law from the bad
debt and charity care and capital statewide pool pursuant to  paragraphs
(c) and (d) of this subdivision.
  (c)  Funds  shall  be made available on a statewide basis for distrib-
ution by the commissioner  in  accordance  with  rules  and  regulations
adopted by the council and approved by the commissioner to assist volun-
tary  non-profit  and private proprietary general hospitals experiencing
severe fiscal hardship because  of  insufficient  resources  to  finance
losses  resulting  from bad debts and the costs of charity care. Amounts

S. 6980                            87

to be distributed for bad debt and charity care purposes shall be deter-
mined after consideration of amounts to  be  distributed  from  regional
pools in accordance with subdivision seventeen of this section and shall
result  in  up  to  one  hundred  percent as defined in paragraph (b) of
subdivision fourteen of this section being financed  for  these  general
hospitals.
  (d)  Funds  shall  be made available on a statewide basis for distrib-
ution by the commissioner  in  accordance  with  rules  and  regulations
adopted by the council and approved by the commissioner to assist volun-
tary  non-profit  and private proprietary general hospitals which quali-
fied for distributions made in accordance with paragraph (b) of subdivi-
sion sixteen of section twenty-eight hundred  seven-a  of  this  article
during  the  nineteen  hundred eighty-seven rate period or qualified for
distributions made in accordance with paragraph (c) of this  subdivision
during a rate period or rate periods but which do not continue to quali-
fy  for  distributions  made  in  accordance  with paragraph (c) of this
subdivision during a rate period or rate periods. Amounts to be distrib-
uted to a general hospital pursuant to this paragraph  for  the  initial
rate  period in which such general hospital does not continue to qualify
for distributions made in accordance with paragraph (c) of this subdivi-
sion shall be two-thirds of the amount such general hospital would  have
received  in  accordance with paragraph (c) of this subdivision for such
initial rate period if the hospital had continued  to  be  eligible  for
such  distribution  and  for the next succeeding annual rate period one-
third of the amount such general hospital would have received in accord-
ance with paragraph (c) of this subdivision  for  such  succeeding  rate
period.
  (e) There shall be set aside within a transition account in the state-
wide  pool, from accumulated funds, from the total allocation to the bad
debt and charity care and capital statewide pool of  the  assessment  of
one  and  seventy-five  thousandths percent of gross revenue received in
accordance with paragraph (a) of subdivision eighteen  of  this  section
for  the  rate period commencing January first, nineteen hundred eighty-
eight and the assessment of one and five  hundredths  percent  of  gross
revenue  received  in accordance with paragraph (a) of subdivision eigh-
teen of this section for the rate period commencing January first, nine-
teen hundred eighty-nine an amount equal to seventy-five thousandths  of
one percent of gross revenue received and five hundredths of one percent
of  gross  revenue  received respectively to be distributed to voluntary
non-profit, private proprietary and public general  hospitals  receiving
less  bad  debt  and  charity  care  funds  under the provisions of this
section than if the provisions of section twenty-eight  hundred  seven-a
of  this article had applied using the same base year need as calculated
in accordance with subdivision fourteen of this section.  Rules for such
distribution shall be those adopted by the council and approved  by  the
commissioner.
  (f)  Any balance in the statewide pool shall be distributed in accord-
ance with the following:
  (i) Fifty percent of the balance shall  be  reserved  and  accumulated
from  year  to  year  by  the commissioner for distributions to regional
pilot projects to provide health care coverage under insurance or equiv-
alent mechanisms for uninsured or underinsured individuals and  families
and  to  provide health care coverage for catastrophic expenses provided
legislation is enacted before July fifteenth, nineteen  hundred  eighty-
eight authorizing such regional pilot projects and including an authori-
zation  for such regional pilot projects, notwithstanding any inconsist-

S. 6980                            88

ent provision of law, to negotiate special  payment  rate  methodologies
with general hospitals for inpatient hospital services.
  (ii) The remaining balance shall be reserved and accumulated from year
to  year  by  the  commissioner for priority distributions in accordance
with rules and regulations adopted by the council and  approved  by  the
commissioner:  (A) to assist general hospitals in offsetting losses from
bad debt and the costs of charity care in providing existing or expanded
priority health services to the medically indigent or  medically  under-
served  in urban and rural areas including, but not limited to, services
for pregnant women, services for children under  the  age  of  six,  and
services related to acquired immune deficiency syndrome; (B) for quality
assurance  demonstration  projects; (C) for severity of illness measure-
ment demonstration projects; (D) for cost analyses  and  evaluations  of
health  care  provider  services;  (E)  for  quality improvement program
grants and contracts pursuant to  subdivision  fifteen  of  section  two
hundred  six  of  this  chapter  and department of health administrative
costs related thereto; and (F) for initiatives to improve public  health
and to expand the availability of health care services.
  Notwithstanding  any  provision  of  law to the contrary, a sum not to
exceed three million five hundred thousand dollars from funds  available
for  distribution  pursuant  to  this  subparagraph may be allocated and
distributed to regional pilot projects to provide health  care  coverage
under  insurance  or equivalent mechanisms for uninsured or underinsured
individuals and families pursuant to chapter seven hundred three of  the
laws of nineteen hundred eighty-eight.
  Notwithstanding  any  inconsistent  provision  of  section one hundred
twelve or one hundred seventy-four of the state finance law or any other
law, funds available for distribution pursuant to this subparagraph  may
be  allocated  and  distributed without a competitive bid or request for
proposal process.
  (iii) Any unused funds from the allocations provided for in  paragraph
(b)  and  paragraph (e) of this subdivision and subparagraph (i) of this
paragraph  and  any  funds  contingently  allocated  to  regional  pilot
projects  pursuant  to subparagraph (i) of this paragraph if authorizing
legislation is not enacted as required by  such  subparagraph  shall  be
reallocated  for  use  in accordance with the provisions of subparagraph
(ii) of this paragraph.
  (iv) Notwithstanding any inconsistent provision of this  section,  the
commissioner  shall enter into agreements with one or more persons, not-
for-profit corporations, or other  organizations,  other  than  a  state
employee,  official or agency, for the purposes of an independent evalu-
ation of the implementation and effectiveness  of  primary  care  initi-
atives, including preferred primary care provider designations, applica-
ble   to   general  hospitals,  diagnostic  and  treatment  centers  and
participating practitioners and may allocate and distribute funds other-
wise available for distribution in accordance with subparagraph (ii)  of
this  paragraph  for  the costs of such evaluation. The evaluation shall
assess factors including but not limited to:
  (A) the overall effect of such primary care initiatives on  access  to
and utilization of health care services;
  (B)  the  extent  to  which such initiatives have fostered cooperative
working relationships between various providers of health care services;
  (C) the impact  of  such  initiatives  on  the  cost  of  health  care
services.
  An initial evaluation pursuant to this subparagraph shall be submitted
to  the  governor and the legislature on or before April first, nineteen

S. 6980                            89

hundred ninety-two and a further evaluation shall be submitted by  April
first, nineteen hundred ninety-three.
  19-a.  Health  care  services  allowance  statewide pool distribution.
Funds accumulated in the statewide pool created by the allowance author-
ized in accordance with subparagraphs (ii) and (iii) of paragraph (a) of
subdivision fourteen-b of this section, including income  from  invested
funds,  shall  be distributed or retained in accordance with the follow-
ing:
  (a) Funds  shall  be  transferred  to  primary  health  care  services
regional  pools  created  by  the  commissioner, and shall be available,
including income from invested funds, for  distributions  in  accordance
with  section  twenty-eight hundred seven-bb of this article. Such funds
shall be transferred to each regional pool so  that  the  regional  pool
receives,  for  the rate periods January first, nineteen hundred ninety-
four through December thirty-first, nineteen hundred ninety-four  fifty-
one and five-tenths percent, January first, nineteen hundred ninety-five
through  December  thirty-first, nineteen hundred ninety-five forty-nine
and six-tenths percent, and January first, nineteen  hundred  ninety-six
through  December  thirty-first,  nineteen hundred ninety-six forty-nine
and six-tenths percent of the total  funds  to  be  accumulated  in  the
statewide pool from the allowance submitted by or on behalf of hospitals
in  that region. Such regions shall be those established for purposes of
section two thousand nine hundred four-b of this chapter.
  (b) A fixed percentage of the total funds accumulated in the statewide
pool, including income from  invested  funds,  shall  be  available  for
primary care education and training. For the rate periods January first,
nineteen  hundred  ninety-four  through  December thirty-first, nineteen
hundred ninety-four, such percentage shall be twenty-two  and  one-tenth
percent,  and January first, nineteen hundred ninety-five through Decem-
ber thirty-first, nineteen hundred ninety-five, such percentage shall be
twenty and four-tenths percent,  and  January  first,  nineteen  hundred
ninety-six  through  December  thirty-first, nineteen hundred ninety-six
such percentage shall be twenty and four-tenths percent.  Funds shall be
available for distributions as follows:
  (i) up to four million  dollars  annually  plus  income  thereon  from
invested  funds  shall  be set aside and reserved from accumulated funds
and may be accumulated for the following year for  distribution  by  the
commissioner for primary care undergraduate medical education in accord-
ance with section nine hundred two of this chapter;
  (ii)  up  to  four  million  dollars annually plus income thereon from
invested funds shall be set aside and reserved  from  accumulated  funds
and  may  be  accumulated for the following year for distribution by the
commissioner for the primary care physician loan  repayment  program  in
accordance with section nine hundred three of this chapter;
  (iii)  up  to  two  million  dollars annually plus income thereon from
invested funds shall be set aside and reserved  from  accumulated  funds
and  may  be  accumulated for the following year for distribution by the
commissioner for the primary care practitioner  scholarship  program  in
accordance with section nine hundred four of this chapter;
  (iv)  up  to  two  million  dollars  annually plus income thereon from
invested funds shall be set aside and reserved  from  accumulated  funds
and  may  be  accumulated for the following year for distribution by the
commissioner for the primary  care  practitioner  education  program  in
accordance with section nine hundred five of this chapter;
  (v)  the  balance remaining annually plus income thereon from invested
funds shall be set aside and reserved from accumulated funds and may  be

S. 6980                            90

accumulated  from year to year for distributions by the commissioner for
health care development in accordance with section nine hundred  six  of
this chapter; and
  (vi) provided, however, that the commissioner in the absence of quali-
fied  recipients within a category may reallocate any funds remaining or
unallocated within such a category for distribution by the  commissioner
for the primary care practitioner scholarship program in accordance with
section  nine  hundred four of this chapter and the primary care practi-
tioner education program in accordance with section nine hundred five of
this chapter.
  (c) A fixed percentage of the total funds accumulated in the statewide
pool, including income from invested funds, shall be  deposited  by  the
commissioner  into  the miscellaneous special revenue fund - 339, health
care planning account, which is established for  services  and  expenses
for  health  planning, for purposes of: (i) per capita support of health
systems agencies, provided no health systems agency shall  receive  less
than  two  hundred  fifty  thousand dollars annually from the per capita
allocation, and provided further that a health systems agency  receiving
the  minimum  level of funding provided pursuant to a per capita formula
shall also be  entitled  to  receive  matching  support;  (ii)  matching
support for other contributions received by health systems agencies from
qualified  sources as determined by the commissioner; (iii) five hundred
thousand dollars for global budgeting demonstrations  grants  authorized
pursuant  to  section twenty-eight hundred fourteen of this article; and
(iv) five hundred thousand dollars for health networks grants authorized
pursuant to section twenty-eight hundred fourteen of this  article.  For
the  rate  period  January  first,  nineteen hundred ninety-four through
December thirty-first,  nineteen  hundred  ninety-four  such  percentage
shall be eight and eight-tenths percent, and for the rate period January
first, nineteen hundred ninety-five through December thirty-first, nine-
teen  hundred  ninety-six  such percentage shall be eight and two-tenths
percent.
  (c-1) Notwithstanding any other provision of law to the contrary,  any
unspent  funds  available for programs and services pursuant to subpara-
graphs (iii) and (iv) of paragraph (c) of this subdivision as  of  April
first,  nineteen  hundred ninety-five and any additional funds available
for programs and services pursuant to subparagraphs (iii)  and  (iv)  of
paragraph  (c)  of this subdivision for the period April first, nineteen
hundred ninety-five  through  December  thirty-first,  nineteen  hundred
ninety-five  shall  be transferred by the commissioner and deposited and
credited to the medical assistance program general fund - local  assist-
ance account.
  (c-2)  Notwithstanding  any  other  provision  of law to the contrary,
funds accumulated for programs and services  pursuant  to  subparagraphs
(i)  and  (ii) of paragraph (c) of this subdivision for nineteen hundred
ninety-five shall be transferred by the commissioner and  deposited  and
credited to the general fund - local assistance account.
  (d) A fixed percentage of the total funds accumulated in the statewide
pool,  including  income  from invested funds, shall be deposited by the
commissioner and credited to the  emergency  medical  services  training
account  established for purposes of section ninety-seven-q of the state
finance law for services  and  expenses  related  to  emergency  medical
services training and administration. For the rate period January first,
nineteen  hundred  ninety-four  through  December thirty-first, nineteen
hundred ninety-four, such percentage shall be seventeen  and  six-tenths
percent, for the rate period January first, nineteen hundred ninety-five

S. 6980                            91

through   December  thirty-first,  nineteen  hundred  ninety-five,  such
percentage shall be twenty-one and eight-tenths  percent,  and  for  the
rate  period January first, nineteen hundred ninety-six through December
thirty-first,  nineteen  hundred  ninety-six,  such  percentage shall be
twenty-one and eight-tenths percent.
  (f) Distributions from the  pools  created  in  accordance  with  this
subdivision  and  subdivision fourteen-b of this section, and the compo-
nents of rates of payment or charges related to the allowances  provided
in  accordance  with subdivision fourteen-b of this section shall not be
included in gross revenue  received  for  purposes  of  the  assessments
pursuant  to  subdivision  eighteen  of  this  section,  subject  to the
provisions of paragraph (e) of subdivision eighteen of this section, and
shall not be included in gross receipts received  for  purposes  of  the
assessments  pursuant  to  section  twenty-eight hundred seven-d of this
article, subject to the provisions  of  subdivision  twelve  of  section
twenty-eight hundred seven-d of this article.
  (g)  Notwithstanding  any  inconsistent provisions of law, the commis-
sioner may borrow from regional or statewide  pool  reserves  for  pools
established  pursuant  to sections twenty-eight hundred eight-c, twenty-
eight hundred seven-a or this section of  this  article  such  funds  as
shall  be necessary, not to exceed the amounts projected to be available
pursuant to paragraph (d) of subdivision  fourteen-b  of  this  section,
annually  for distributions in accordance with paragraphs (a), (b), (c),
(d) and (h) of this subdivision for a rate year and  shall  refund  such
moneys when pool funds become available pursuant to paragraphs (a), (b),
(c), (d) and (h) of this subdivision for such rate year.
  (h)  Notwithstanding  any  inconsistent provision of this subdivision,
prior to allocation of funds in accordance with paragraphs (a), (b), (c)
and (d) of this subdivision from  the  allowance  for  the  period  July
first, nineteen hundred ninety-five through December thirty-first, nine-
teen  hundred  ninety-five and from the allowance for the period January
first, nineteen hundred  ninety-six  through  June  thirtieth,  nineteen
hundred  ninety-six,  thirty-nine  million five hundred thousand dollars
from the nineteen hundred ninety-five pool and forty-four  million  five
hundred  thousand  dollars  from  the  nineteen  hundred ninety-six pool
respectively shall be reserved by the commissioner from the amount accu-
mulated in the statewide pool, proportionally based on the total  amount
of funds projected to be accumulated in the pool for the year, for addi-
tional  distributions  in accordance with paragraph (b-1) of subdivision
nineteen of this section to programs to provide health care coverage for
uninsured or underinsured children, and the balance of funds accumulated
in the statewide pool shall be proportionally  allocated  in  accordance
with paragraphs (a), (b), (c) and (d) of this subdivision.
  19-b.]  9.  Funds  accumulated  in  the  statewide pool created by the
assessment authorized in accordance with subdivision [eighteen] EIGHT of
this section for a period during  the  period  January  first,  nineteen
hundred  ninety-seven  through  December  thirty-first, nineteen hundred
ninety-nine and periods  on  and  after  January  first,  two  thousand,
including  income  from  invested  funds,  shall  be  transferred by the
commissioner and consolidated with funds accumulated from the  allowance
pursuant  to  subdivision two of section twenty-eight hundred seven-j of
this article for such period and allocated in accordance  with  subdivi-
sion nine of section twenty-eight hundred seven-j of this article.
  [20.]  10. Payments to pools. (a) [Payments by or on behalf of general
hospitals to bad debt and charity care regional pools of funds due based
on the allowance included in rates and charges in accordance with  para-

S. 6980                            92

graph  (c) of subdivision fourteen of this section and to regional pools
created pursuant to paragraph (b) of subdivision  fourteen-b  and  to  a
statewide  pool  created  pursuant to paragraph (b) of subdivision four-
teen-c  of  this section shall be made on a time schedule established by
the council, subject to the approval of the commissioner, by regulation;
provided, however, that estimated payments of amounts due  for  patients
discharged  in  a  calendar  month commencing on or after October first,
nineteen hundred ninety-one must be made within sixty days of the end of
each month unless payments of  actual  amounts  due  for  such  calendar
months have been made within such sixty day time period. Upon receipt of
notification  from the commissioner, the comptroller, or a fiscal inter-
mediary designated by the director of the budget, or the commissioner of
social services, or a corporation organized and operating in  accordance
with article forty-three of the insurance law or an organization operat-
ing in accordance with article forty-four of this chapter shall withhold
from  the  amount of any payment to be made by the state or such article
forty-three corporation or article forty-four organization to a  general
hospital  the amount of any arrearage resulting from such general hospi-
tal's failure to make a timely payment to the pools of funds  due  based
on the allowances included in rates and charges in accordance with para-
graph  (c)  of  subdivision fourteen, paragraph (a) of subdivision four-
teen-b and paragraph (a) of  subdivision  fourteen-c  of  this  section.
Upon  withholding  such  amount, the comptroller, or a designated fiscal
intermediary, or the commissioner of social services, or  a  corporation
organized  and  operating  in accordance with article forty-three of the
insurance law or an organization operating in  accordance  with  article
forty-four  of this chapter shall pay the commissioner, or his designee,
such amount withheld for deposit into the applicable pool.  Any  general
hospital in arrears resulting from failure to make a timely payment to a
pool shall not be eligible for a distribution from a bad debt and chari-
ty  care  regional pool in accordance with subdivision seventeen of this
section until such arrearage is satisfied.
  (b)] (i) Payments by or on behalf of general  hospitals  to  the  [bad
debt  and  charity  care and capital statewide] APPLICABLE pool of funds
due from the assessments pursuant to  subdivision  [eighteen]  EIGHT  of
this  section shall be made on a time schedule established by [the coun-
cil, subject to the approval  of]  the  commissioner[,  by  regulation];
provided,  however, that estimated payments of amounts due [for patients
discharged in a calendar month commencing on  or  after  October  first,
nineteen  hundred  ninety-one] must be made within sixty days of the end
of each month unless payments of actual amounts due  for  such  calendar
months have been made within such sixty day time period. Upon receipt of
notification  from the commissioner, the comptroller, or a fiscal inter-
mediary designated by the director of  the  budget,  [or  a  corporation
organized  and  operating  in accordance with article forty-three of the
insurance law or an organization operating in  accordance  with  article
forty-four  of  this  chapter]  shall  withhold  from  the amount of any
payment to be made by the state [or such article forty-three corporation
or article forty-four organization] to a general hospital the amount  of
any  arrearage  resulting from such general hospital's failure to make a
timely payment to the [bad debt and charity care and capital  statewide]
APPLICABLE pool of funds due from the assessments. Upon withholding such
amount,  the  comptroller,  or  a  designated fiscal intermediary, [or a
corporation organized and operating in accordance  with  article  forty-
three  of  the  insurance law or an organization operating in accordance
with article forty-four of this chapter] shall pay the commissioner,  or

S. 6980                            93

his designee, such amount withheld for deposit into the applicable pool.
[Any general hospital in arrears resulting from failure to make a timely
payment  to  the  bad  debt  and charity care and capital statewide pool
shall  not  be eligible for a distribution from the bad debt and charity
care regional pools in accordance with  subdivision  seventeen  of  this
section  or  the bad debt and charity care and capital statewide pool in
accordance with subdivision nineteen of this section until such  arrear-
age is satisfied.]
  (ii)  For  periods  on  and  after  January  first, two thousand five,
reports submitted by general hospitals to implement the  assessment  set
forth in subdivision [eighteen] EIGHT of this section shall be submitted
electronically  in  a  form  as  may  be  required  by the commissioner;
provided, however, general hospitals are not prohibited from  submitting
reports  electronically  on  a  voluntary  basis prior to such date, and
provided further, however, that all such electronic submissions  submit-
ted  on and after July first, two thousand twelve shall be verified with
an electronic signature as prescribed by the commissioner.
  [(c)] (B) (i) Interest shall be due and payable to the commissioner by
a general hospital or by a payor  paying  directly  to  a  pool  on  the
difference  between the amount paid to a pool and the amount due to such
pool by the hospital or payor from the day of the month the payment  was
due  until  the  date  of  payment. The rate of interest shall be twelve
percent per annum or at the rate of interest set by the commissioner  of
taxation  and  finance  with respect to underpayments of tax pursuant to
subsection (e) of section one thousand ninety-six of the tax  law  minus
four  percentage points. Interest under this paragraph shall not be paid
if the amount thereof is less than one dollar. Interest may be collected
by the commissioner in the same manner as an arrearage pursuant to  this
subdivision.
  (ii)  If a payment by a general hospital or by a payor paying directly
to a pool is less than seventy percent of the amount due to such pool by
the hospital or payor, a penalty shall be due and payable to the commis-
sioner by the hospital or  payor  of  five  percent  of  the  difference
between the amount paid to the pool and the amount due to such pool when
the  failure  to  pay is for a duration of not more than one month after
the due date of the payment with an additional  five  percent  for  each
additional  month  or fraction thereof during which such failure contin-
ues, not exceeding twenty-five percent in the aggregate. A  penalty  may
be  collected  by  the  commissioner  in the same manner as an arrearage
pursuant to this subdivision.
  [21.] 11. Maximum distributions. (a) [No general hospital may  receive
in total from the distributions made in accordance with paragraph (b) of
subdivision  fourteen-c, paragraphs (a) and (b) of subdivision seventeen
and paragraphs (c), (d) and (e) of subdivision nineteen of this  section
an  amount  which  exceeds  its need for financing losses related to bad
debts and the costs of charity care  as  defined  in  paragraph  (b)  of
subdivision fourteen of this section.
  (b)](i)   No  public  general  hospital  may  receive  in  total  from
disproportionate share payment distributions [made  in  accordance  with
subdivision seventeen of this section and adjustments in accordance with
subdivisions  fourteen-a  and  fourteen-d of this section for the period
April first, nineteen hundred ninety-four through December thirty-first,
nineteen hundred ninety-four or for annual  rate  periods  beginning  on
January  first  on  or after January first, nineteen hundred ninety-five
through December thirty-first, nineteen hundred ninety-six, or] made  in
accordance with section twenty-eight hundred seven-k of this article and

S. 6980                            94

adjustments  in  accordance  with  subdivision  [fourteen-f] SIX of this
section for annual periods beginning on January first on and after Janu-
ary first, nineteen hundred ninety-seven through December  thirty-first,
nineteen  hundred  ninety-nine and on and after January first, two thou-
sand an amount which exceeds the costs incurred during  such  period  of
furnishing  inpatient  and  ambulatory hospital services, net of medical
assistance payments pursuant to title eleven  of  article  five  of  the
social services law, other than disproportionate share payments pursuant
to  [subdivision  twenty-six of this section or] subdivision thirteen of
section twenty-eight hundred seven-k of this article,  and  payments  by
uninsured patients, by the hospital to individuals who either are eligi-
ble  for  medical assistance pursuant to title eleven of article five of
the social services law or have no health insurance or other  source  of
third  party  coverage;  provided,  however, that the commissioner shall
make such increase to such maximum or to the manner in which the limita-
tion on disproportionate share payments is applied as shall increase the
maximum limit for a period or part of a period as authorized by  federal
law or regulation or the secretary of the department of health and human
services  for  purposes  of  federal financial participation pursuant to
title XIX of the federal social security act. For purposes of this para-
graph, payments to a general hospital for services provided to  indigent
patients  made  by  the  state  or a unit of local government within the
state shall not be considered to be a source of third party payment.
  (ii) Reductions pursuant to  this  paragraph  shall  be  made  in  the
following sequence:
  (A) [for periods through December thirty-first, nineteen hundred nine-
ty-six,  adjustments  in  accordance with subdivision fourteen-d of this
section; adjustments in accordance with subdivision fourteen-a  of  this
section;  and  distributions in accordance with subdivision seventeen of
this section, and
  (B) for periods during the  period  January  first,  nineteen  hundred
ninety-seven through December thirty-first, nineteen hundred ninety-nine
and on and after January first, two thousand,] adjustments in accordance
with subdivision [fourteen-f] SIX of this section; and
  (B)  distributions  in  accordance  with  section twenty-eight hundred
seven-k of this article.
  (iii) [(A) In the event a reduction pursuant to subparagraphs (i)  and
(ii) of this paragraph is effective for distributions in accordance with
subdivision  seventeen  of  this  section  for  a general hospital, such
general hospital shall receive a supplementary  distribution  not  as  a
disproportionate  share  payment  and  not  subject to federal financial
participation from funds available pursuant to subdivision seventeen  of
this section for periods through December thirty-first, nineteen hundred
ninety-six equal to one-half of such reduction.
  (B)]  In  the event a reduction pursuant to subparagraphs (i) and (ii)
of this paragraph is effective  for  distributions  in  accordance  with
section  twenty-eight  hundred  seven-k  of  this  article for a general
hospital, such general hospital shall receive a  supplementary  distrib-
ution not as a disproportionate share payment and not subject to federal
financial  participation  from funds available pursuant to section twen-
ty-eight hundred seven-k of this article for periods during  the  period
January  first,  nineteen  hundred ninety-seven through December thirty-
first, nineteen hundred ninety-nine and on and after January first,  two
thousand equal to one-half of such reduction.
  [(c)]  (B)(i) No general hospital other than a public general hospital
may receive in total from disproportionate share  payment  distributions

S. 6980                            95

[made in accordance with paragraph (b) of subdivision fourteen-c, subdi-
vision  seventeen  and paragraphs (c) and (d) of subdivision nineteen of
this section and adjustments in accordance with  subdivision  fourteen-d
of this section for the period April first, nineteen hundred ninety-five
through  December  thirty-first, nineteen hundred ninety-five or for the
annual rate period beginning on January first, nineteen hundred  ninety-
six through December thirty-first, nineteen hundred ninety-six, or] made
in  accordance with section twenty-eight hundred seven-k of this article
for annual periods beginning on  January  first  on  and  after  January
first,  nineteen  hundred  ninety-seven  through  December thirty-first,
nineteen hundred ninety-nine and on and after January first,  two  thou-
sand  an  amount  which exceeds the costs incurred during such period of
furnishing inpatient and ambulatory hospital services,  net  of  medical
assistance  payments  pursuant  to  title  eleven of article five of the
social services law, other than disproportionate share payments pursuant
to [subdivision twenty-six of this section or] subdivision  thirteen  of
section  twenty-eight  hundred  seven-k of this article, and payments by
uninsured patients, by the hospital to individuals who either are eligi-
ble for medical assistance pursuant to title eleven of article  five  of
the  social  services law or have no health insurance or other source of
third party coverage; provided, however,  that  the  commissioner  shall
make  such  modifications  to  the  manner  in  which  the limitation on
disproportionate share payments is applied to such  hospitals  as  shall
increase  the  maximum limit for a period or part of a period as author-
ized by federal law or regulation or the secretary of the department  of
health  and  human  services  for  purposes of federal financial partic-
ipation pursuant to title XIX of the federal social  security  act.  For
purposes  of this paragraph, payments to a general hospital for services
provided to indigent patients made by the  state  or  a  unit  of  local
government  within  the  state shall not be considered to be a source of
third party payment.
  (ii)[(A) Reductions pursuant to this  paragraph  for  periods  through
December  thirty-first, nineteen hundred ninety-six shall be made in the
following  sequence  for  general  hospitals  other   than   financially
distressed  hospitals:  adjustments in accordance with subdivision four-
teen-d of this section; and distributions in accordance with subdivision
seventeen of this section.
  (B) Reductions pursuant to this paragraph for periods through December
thirty-first, nineteen hundred ninety-six shall be made in the following
sequence for general  hospitals  designated  as  financially  distressed
hospitals: distributions in accordance with paragraph (b) of subdivision
fourteen-c  of this section; distributions in accordance with paragraphs
(c) and (d) of subdivision nineteen of this section;  and  distributions
in accordance with subdivision seventeen of this section.
  (C)]  Reductions  pursuant  to  this  paragraph for periods during the
period January first, nineteen  hundred  ninety-seven  through  December
thirty-first,  nineteen  hundred  ninety-nine  and  on and after January
first, two thousand, shall be made from distributions in accordance with
section twenty-eight hundred seven-k of this article.
  (iii) [(A) In the event a reduction pursuant to subparagraphs (i)  and
(ii) of this paragraph is effective for distributions in accordance with
paragraph  (b)  of subdivision fourteen-c of this section, paragraph (c)
or (d) of subdivision nineteen of this section,  subdivision  fourteen-d
of  this  section or subdivision seventeen of this section for a general
hospital, such general hospital shall receive a  supplementary  distrib-
ution not as a disproportionate share payment and not subject to federal

S. 6980                            96

financial  participation  from funds available pursuant to such subdivi-
sions equal to one-half of such reduction for periods  through  December
thirty-first, nineteen hundred ninety-six.
  (B)]  In  the event a reduction pursuant to subparagraphs (i) and (ii)
of this paragraph is effective  for  distributions  in  accordance  with
section  twenty-eight  hundred  seven-k  of  this  article for a general
hospital, such general hospital shall receive a  supplementary  distrib-
ution not as a disproportionate share payment and not subject to federal
financial  participation  from funds available pursuant to section twen-
ty-eight hundred seven-k of this article for periods during  the  period
January  first,  nineteen  hundred ninety-seven through December thirty-
first, nineteen hundred ninety-nine and on and after January first,  two
thousand equal to one-half of such reduction.
  [(d)]  (C)(i) Commencing April first, nineteen hundred ninety-four, no
general hospital may  be  eligible  to  receive  disproportionate  share
payments  determined  [in accordance with subdivision twenty-six of this
section through December thirty-first, nineteen hundred  ninety-six  or]
in  accordance with section twenty-eight hundred seven-k of this article
for periods during the period January first,  nineteen  hundred  ninety-
seven through December thirty-first, nineteen hundred ninety-nine and on
and  after  January first, two thousand unless the hospital has an inpa-
tient utilization rate for patients eligible for  payments  pursuant  to
title  eleven  of  article  five of the social services law eligible for
federal financial participation pursuant to title nineteen of the feder-
al social security act of not less than one percent.
  (ii) In the event a  general  hospital  is  disqualified  pursuant  to
subparagraph (i) of this paragraph from receiving disproportionate share
payments for a period, such general hospital shall receive distributions
not as disproportionate share payments and not subject to federal finan-
cial  participation from funds available [pursuant to subdivision seven-
teen of this section for periods through December thirty-first, nineteen
hundred  ninety-six,  and]  pursuant  to  section  twenty-eight  hundred
seven-k  of  this  article  for periods during the period January first,
nineteen hundred ninety-seven through  December  thirty-first,  nineteen
hundred  ninety-nine  and on and after January first, two thousand equal
to one-half of the distributions for which such general  hospital  would
have  been  qualified  pursuant to subdivision seventeen of this section
for periods through December thirty-first, nineteen hundred  ninety-six,
and pursuant to section twenty-eight hundred seven-k of this article for
periods  during  the period January first, nineteen hundred ninety-seven
through December thirty-first, nineteen hundred ninety-nine and  on  and
after  January first, two thousand without consideration of subparagraph
(i) of this paragraph.
  [(e)] (D) For purposes of calculations pursuant to [paragraphs (b) and
(c)] PARAGRAPH (A) of this subdivision of maximum disproportionate share
payment distributions for a year or  part  thereof,  costs  incurred  of
furnishing  hospital  services net of medical assistance payments, other
than disproportionate share payments, and payments by uninsured patients
shall be determined initially based on base year data and statistics for
the base year two years immediately preceding the year projected to  the
year  by  the trend factor determined in accordance with subdivision ten
of this section and shall be  subsequently  revised  to  reflect  actual
period  data  and  statistics.  For purposes of calculations pursuant to
paragraph [(d)] (B)  of  this  subdivision  of  eligibility  to  receive
disproportionate share payments for a year or part thereof, the hospital
inpatient  utilization  rate  shall  be  determined  based  on base year

S. 6980                            97

statistics in accordance with a methodology established by  the  commis-
sioner,  and  costs  incurred  of  furnishing hospital services shall be
determined in accordance with a methodology established by  the  commis-
sioner  consistent  with requirements of the secretary of the department
of health and human services for purposes of federal  financial  partic-
ipation  pursuant  to  title  XIX  of the federal social security act in
disproportionate share payments.
  [(e-1)] (E) For periods on and after January first, two thousand elev-
en, for purposes of calculations pursuant to [paragraphs  (b)  and  (c)]
PARAGRAPH  (A)  of  this  subdivision  of maximum disproportionate share
payment distributions for a rate year or part thereof, costs incurred of
furnishing hospital services net of medical assistance  payments,  other
than disproportionate share payments, and payments by uninsured patients
[shall]  for  the two thousand eleven calendar year, shall be determined
initially based on each hospital's submission of a fully  completed  two
thousand  eight  disproportionate  share  hospital data collection tool,
which is required to be submitted to the  department  by  March  thirty-
first, two thousand eleven, and shall be subsequently revised to reflect
each  hospital's  submission  of  a  fully  completed  two thousand nine
disproportionate share hospital data collection tool, which is  required
to be submitted to the department by October first, two thousand eleven.
  For  calendar  years  on  and  after two thousand twelve, such initial
determinations shall reflect submission  of  data  as  required  by  the
commissioner  on a specified date. All such initial determinations shall
subsequently be revised to reflect actual rate period data  and  statis-
tics. Indigent care payments will be withheld in instances when a hospi-
tal  has  not submitted required information by the due dates prescribed
in this paragraph, provided, however, that such payments shall  be  made
upon  submission  of  such  required  data. For purposes of calculations
pursuant to paragraph [(d)] (B) of this subdivision  of  eligibility  to
receive disproportionate share payments for a rate year or part thereof,
the hospital inpatient utilization rate shall be determined based on the
base  year  statistics in accordance with the methodology established by
the commissioner, and costs incurred  of  furnishing  hospital  services
shall  be determined in accordance with a methodology established by the
commissioner consistent  with  requirements  of  the  secretary  of  the
department  of  health and human services for purposes of federal finan-
cial participation pursuant to [the] title XIX  of  the  federal  social
security act in disproportionate share payments.
  (f) The commissioner may recover any amounts paid in excess of maximum
permissible  distributions  and  adjustments determined pursuant to this
subdivision by retroactive adjustment and recoupment from payments  made
for  beneficiaries  eligible  for  payments  pursuant to title eleven of
article five of the social services law.
  [(g) Notwithstanding any inconsistent provision of  this  subdivision,
the provision of subparagraph (iii) of paragraph (b), subparagraph (iii)
of  paragraph (c) or subparagraph (ii) of paragraph (d) of this subdivi-
sion shall be of no force and effect and shall be deemed  to  have  been
null  and  void as of January first, nineteen hundred ninety-four in the
event the secretary of the  department  of  health  and  human  services
determines  that  distributions  based on such provisions would render a
health care related tax on general  hospitals  an  impermissible  health
care related tax for purposes of the federal medicaid voluntary contrib-
ution  and  provider specific tax amendments of nineteen hundred ninety-
one for purposes of such health care related tax receipts  reducing  the

S. 6980                            98

amount  deemed  expended by the state as medical assistance for purposes
of federal financial participation.
  22.  Undistributed  funds.  Any  funds, including income from invested
funds, remaining in the bad debt and charity care and capital  statewide
pool  after distributions in accordance with paragraphs (a), (b), (b-1),
(c), (d), (e) and (f) of subdivision nineteen of this section  shall  be
distributed proportionately to voluntary non-profit, private proprietary
and  public general hospitals, excluding major public general hospitals,
on the basis of hospital specific assessments submitted to the pool.
  23.] 12. Reimbursement rates. The assessments pursuant to  subdivision
[eighteen]  EIGHT  of this section shall not be an allowable cost in the
determination of  general  hospital  inpatient  reimbursement  rates  in
accordance  with  this section and section twenty-eight hundred seven of
this article.
  [24.] 13. Federal financial participation. The council may adopt rules
and regulations, subject to the approval of the commissioner, to  adjust
rates of payment by governmental agencies for general hospital inpatient
services determined in accordance with this section as necessary to meet
federal requirements for securing federal financial participation pursu-
ant  to  title  XIX  of the federal social security act in the event the
state cannot provide assurances satisfactory to the secretary of  health
and  human  services  related to a comparison of rates of payment in the
aggregate to maximum aggregate payments determined  in  accordance  with
federal  law  and  regulation  which  are substantially the same as such
assurances as in effect on October twenty-sixth, nineteen hundred eight-
y-seven for securing such federal  financial  participation.    Notwith-
standing  any  other  law,  the  state  reserves the right to recoup any
payments  by  governmental  agencies  for  general  hospital   inpatient
services  authorized by this section for which federal financial partic-
ipation has been denied in connection with  that  determination  by  the
department of health and human services.
  [25.]  14. Medical education expenses. [(a) Notwithstanding any incon-
sistent provision of this section, to encourage  the  training  of  more
primary  care  physicians, for annual rate periods beginning on or after
January first, nineteen hundred ninety-two, indirect  medical  education
expenses,  as  defined in subparagraph (ii) of paragraph (c) of subdivi-
sion seven of this section, of a general hospital included in the deter-
mination of the operating cost component of general  hospital  rates  of
payment  for a rate period in accordance with subdivisions six and seven
of this section or in accordance with  paragraph  (e),  (g)  or  (i)  of
subdivision four of this section for general hospitals or distinct units
of  general hospitals not reimbursed on the basis of case based payments
per discharge shall be adjusted to reflect the following modifications:
  (i) the calculation  of  interns  and  residents  to  bed  ratios  for
purposes  of  determining indirect reimbursement shall include residents
in non-hospital ambulatory settings. The sum in total  for  all  general
hospitals of the indirect medical education expenses shall equal the sum
in  total  for  each general hospital determined as if the provisions of
this section were applied without consideration of residents in non-hos-
pital ambulatory settings; and
  (ii) for annual rate periods beginning  on  or  after  January  first,
nineteen  hundred  ninety-two,  residencies shall be weighted to provide
higher weights for  primary  care  and  emergency  medicine  physicians.
Primary care residents specialties shall include family medicine, gener-
al  pediatrics,  primary care internal medicine and primary care obstet-
rics and gynecology. In determining whether a residency  is  in  primary

S. 6980                            99

care,  the commissioner shall consult with the New York state council on
graduate medical education and the state hospital  review  and  planning
council. Reimbursable indirect expenses of medical education of a gener-
al  hospital  for  a  rate  period  shall be weighted based on projected
medical education statistics for such general  hospital  for  such  rate
period, and subsequently reconciled through appropriate audit procedures
to  actual  statistics  by a prospective adjustment to rates of payment.
The weighting factors shall be  determined  based  on  nineteen  hundred
ninety  data  and  statistics  and shall include residents identified in
subparagraph (i) of this  paragraph  not  previously  included  in  such
calculations such that the sum in total for all general hospitals of the
results  of  the  weighting  factors  multiplied by the indirect medical
education expenses for each general hospital shall equal, approximately,
the sum in total for all  general  hospitals  of  the  indirect  medical
education  expenses  for  each  general  hospital  determined  as if the
provisions of this section were applied  without  consideration  of  the
weighting  factors  or  residents  in  non-hospital  ambulatory settings
determined pursuant to this  subdivision.  Residency  positions  in  any
specialty  shall  be  weighted to equal no less than nine-tenths of what
such position would have equaled if  reimbursement  were  to  have  been
calculated  without regard to the weighting factors. If a general hospi-
tal is reimbursed by this provision in excess of the amount such  hospi-
tal  would have been reimbursed without regard to the weighting factors,
such general hospital shall apply such additional funds to encourage the
training of primary care physicians. The provisions of this subparagraph
shall not apply to those four specialty eye and ear, special surgery and
orthopedic and joint disease hospitals, specified by  the  commissioner,
whose  primary  mission is to engage in research, training, and clinical
care in the above-named areas.
  (b)] Hospitals shall furnish to the department such reports and infor-
mation as may be required by the commissioner to assess the cost, quali-
ty and health system needs for medical education provided.
  [(c) For purposes of  determining  how  such  weighting  factors  have
resulted  in  the  increased  training  of  physicians  in  primary care
specialties, the council on graduate medical education shall  prepare  a
report  on  or  before March thirty-first, nineteen hundred ninety-five.
Such report shall include, but shall not be limited to: an evaluation of
the effectiveness such weighting factors have had on the number of resi-
dents matched in primary care specialties;  the  degree  to  which  such
weighting  factors  have  impacted  general  hospitals to redirect their
residency programs toward training  primary  care  physicians;  and  the
impact  such  weighting  factors  have had on graduate medical education
within general hospitals. Such report shall also include recommendations
to the governor and the legislature on the continuation,  expiration  or
modification of such weighting factors.
  (d)  Notwithstanding  any  inconsistent  provision of this section and
subject to the availability of federal financial participation:
  (i) For periods on and after  April  first,  two  thousand  four,  the
commissioner  shall adjust inpatient medical assistance rates of payment
established pursuant  to  this  section,  including  discrete  rates  of
payment  calculated  pursuant to paragraph a-three of subdivision one of
this section, for non-public general hospitals, and for periods  on  and
after April first, two thousand seven, for public and non-public general
hospitals,  in  accordance with subparagraph (ii) of this paragraph, for
purposes of reimbursing graduate medical education costs  based  on  the
following methodology:

S. 6980                            100

  (ii)  Rate adjustments for each general hospital shall be based on the
difference between the graduate medical education component, direct  and
indirect,  of  the two thousand three medical assistance inpatient rates
of payment, including exempt unit per diem rates,  and  an  estimate  of
what  the  graduate medical education component, direct and indirect, of
such medical assistance inpatient rates  of  payment,  including  exempt
unit  per  diem  rates would be, stated at two thousand three levels and
calculated as follows:
  (A) Each general hospital's total direct medical  education  costs  as
reported  in the two thousand one institutional cost report submitted as
of December thirty-first, two thousand three, and
  (B) An estimate of the total indirect medical education costs for  two
thousand  one  calculated  in accordance with the methodology applicable
for purposes of determining an estimate of  indirect  medical  education
costs  pursuant  to  subparagraph  (ii)  of paragraph (c) of subdivision
seven of this section. The indirect medical education costs shall  equal
the  product  of  two thousand one hospital specific inpatient operating
costs, including exempt unit  costs,  and  the  indirect  teaching  cost
percentage determined by the following formula:
          1-(1/(1+1.89(((1+r)╣.405)-1)))
where  r equals the ratio of residents and fellows to beds for two thou-
sand one adjusted to reflect the projected two thousand  three  resident
counts.
  (C)  Each  hospital's rate adjustment shall be limited to seventy-five
percent of the graduate medical education component included in its  two
thousand  three medical assistance inpatient rates of payment, including
exempt unit rates. For periods on and after April  first,  two  thousand
seven,  the seventy-five percent limit shall not apply to rate decreases
calculated pursuant to this paragraph.
  (D) For the period April first, two thousand four through March  thir-
ty-first,  two  thousand seven, no hospital shall receive a rate adjust-
ment pursuant to this paragraph if such rate adjustment would be a nega-
tive amount. For periods on and after April first, two  thousand  seven,
no  public  general  hospital  shall  receive a rate increase calculated
pursuant to this paragraph.
  (iii) If the aggregate amount of rate adjustments calculated  pursuant
to this paragraph exceeds the upper payment limit calculated pursuant to
federal  regulations,  such  rate  adjustments  shall be reduced propor-
tionally by the amount in excess of the  federal  upper  payment  limit.
Such reduction, if applicable, shall be calculated on an annual basis.
  (iv)  Such  rate  adjustment shall be included as an add-on to medical
assistance inpatient rates of payment, excluding exempt unit rates,  but
including  inpatient  rates  of  payment  established in accordance with
paragraph a-three of subdivision one of this section. Such  rate  add-on
shall  be  based  on medical assistance data reported in each hospital's
annual cost report submitted for the period two years prior to the  rate
year  and  filed with the department by November first of the year prior
to the rate year. Such amounts shall not be reconciled to reflect chang-
es in medical assistance utilization between the year two years prior to
the rate year and the rate year.
  (e) From amounts available pursuant to paragraph (oo)  of  subdivision
one of section twenty-eight hundred seven-v of this article, allocations
shall  be  made to non-public general hospitals receiving a rate adjust-
ment pursuant to paragraph (d) of this subdivision when the rate adjust-
ment pursuant to paragraph (d) of this subdivision results in the gener-
al hospital exceeding  its  applicable  disproportionate  share  payment

S. 6980                            101

limit  in the year in which the adjustment is made and the amount of the
associated reduction in the hospital's disproportionate  share  payments
would  result in the hospital receiving less than its total distribution
amount  in  that year. A hospital's "total distribution amount" shall be
the amount that the hospital would have received pursuant to  paragraphs
(c) and (d) of subdivision three of section twenty-eight hundred seven-m
of  this article prior to the effective date of this paragraph. A hospi-
tal's eligible loss for purposes of this paragraph shall be  the  amount
of  the loss in such total distribution amount. Each eligible hospital's
allocation of available funds pursuant to this paragraph within  a  year
shall  be  determined  based on its proportionate share of the aggregate
eligible losses for all such hospitals, limited by  the  amount  of  the
rate adjustment pursuant to paragraph (d) of this subdivision.
  26.  Disproportionate  share payments. Distributions to general hospi-
tals from bad debt and charity care regional pools pursuant to  subdivi-
sion  seventeen of this section, distributions to general hospitals from
the bad debt and charity care and capital  statewide  pool  pursuant  to
paragraphs (c) and (d) of subdivision nineteen of this section, distrib-
utions  to  general  hospitals  from  the  bad debt and charity care for
financially distressed hospitals statewide pool pursuant to  subdivision
fourteen-c  of  this  section  and the adjustment provided in accordance
with subdivision fourteen-a of this section and the adjustment  provided
in  accordance  with  subdivision  fourteen-d  of  this section shall be
considered  disproportionate  share  payments  for  inpatient   hospital
services  to  general hospitals serving a disproportionate number of low
income patients with special needs for purposes of providing  assurances
to  the  secretary  of  health  and  human services as necessary to meet
federal requirements for securing federal financial participation pursu-
ant to title XIX of the federal social security act.
  27. Reports. (a) The commissioner of health shall submit a  report  to
the  legislature  and  the council on health care financing on or before
February first, nineteen hundred eighty-eight detailing  the  objective,
impact,  design  and  computation for an inpatient pricing component. In
terms of the design and computation for a  pricing  system  such  report
shall  include  but not be limited to: a description and methodology for
developing peer groups, identification of costs included in  the  calcu-
lation  of  a  group average and any adjustments made to such costs, the
methodology developed to reflect outliers, any  teaching  or  dispropor-
tionate share adjustments made, the calculation of wage and power equal-
ization  factors,  and  identification  of  any  adjustments made to the
service intensity weights or diagnosis-related group  categories.    The
commissioner  shall  explore methodologies for the inclusion of severity
of illness considerations in determining group average costs  and  rates
and  shall  include  all  details of his analysis in the report required
under this subparagraph. If it is determined that a severity of  illness
adjustment  cannot  be  developed for incorporation in the computations,
the report filed shall include the specific reasons for this conclusion.
With regard to a fiscal impact analysis such report  shall  include  but
not be limited to the impact on major types of general hospitals includ-
ing  rural, urban, teaching, non-teaching, plus a regional analysis; and
should indicate any characteristics  which  can  be  observed  regarding
general hospitals which would be significantly impacted by the introduc-
tion  of  a pricing component. The commissioner shall expeditiously make
available for inspection by interested parties pertinent  data  used  in
the  development  of  the  inpatient  pricing  component consistent with

S. 6980                            102

appropriate department procedures for  the  release  and  protection  of
confidential data.
  (b)  The  commissioner  shall  submit a report to the governor and the
legislature on or before February first,  nineteen  hundred  ninety-five
regarding  the  objective, impact, design and implementation of the case
based payment system for inpatient hospital services  based  on  diagno-
sis-related  groups  created  pursuant  to  this  section  including, in
particular, an analysis of the group price component of case based rates
of payment and the appropriateness and effectiveness of  the  provisions
relating  to  financing of uncompensated care. The reports shall include
but not be limited to a fiscal impact analysis of the impact of the case
based payment system on  major  types  of  general  hospitals  including
rural,  urban, teaching and non-teaching, plus a regional analysis. Such
reports shall evaluate the impact of the case based  payment  system  on
general  hospital inpatient medical and clinical care and the quality of
hospital services. The reports shall also  include  recommendations  for
continuation  or modification of the case based payment system for inpa-
tient hospital services provided on or  after  January  first,  nineteen
hundred ninety-six.
  (c)  The commissioner shall report to the governor and the legislature
on or before December first, nineteen hundred eighty-eight with  a  plan
relating  to  the structure and financing of graduate medical education.
Such plan shall include an evaluation of and recommendations for  gradu-
ate  medical  education  with  respect  to  health services delivery and
educational goals including but not limited to the following:  appropri-
ate supply and distribution of  primary  care  providers  by  geographic
area;  adequate supply and distribution of medical specialists according
to projected population needs; educational opportunities  representative
of  current  and  future  practice  settings; the impact of such plan on
health care delivery in  currently  underserved  and  rural  areas;  and
reimbursement  changes to effectuate the recommendations included in the
plan. Such plan shall be developed with substantial participation by the
department  of  education,  the  medical  schools,  residency   training
programs,  health systems agencies, health care institutions, and physi-
cians.
  28. Notwithstanding any inconsistent provision of this section:
  (a) the commissioner may adjust, on  a  per  unit  of  service  basis,
general  hospital inpatient services rates of payment established pursu-
ant to this section as in effect on and  before  December  thirty-first,
nineteen  hundred ninety-six prospectively as an additional factor to be
paid, including the impact of payment differentials as  were  in  effect
pursuant  to  this  section,  in  addition to, or as a reduction to, any
hospital charges or negotiated rate (the adjustment may not  be  negoti-
ated by the payor); including, but not limited to, capital related inpa-
tient  expenses reconciliation adjustments pursuant to subdivision eight
of this section, rate adjustments for corrections,  appeals  and  volume
changes  pursuant  to subdivision nine of this section, rate adjustments
to reflect trend factor adjustments pursuant to subdivision ten of  this
section,  maximum  case mix change adjustments pursuant to paragraph (f)
of subdivision eleven of this section, and adjustments based on audits;
  (b) the allowances percentages established pursuant to this article in
effect for a rate period shall be applied to hospital charges or negoti-
ated rates plus the prospectively adjusted payment of rates  of  payment
of  a general hospital in accordance with paragraph (a) of this subdivi-
sion;

S. 6980                            103

  (c) no recalculation of the  basis  for  distribution  of  funds  from
regional  or  statewide pools established pursuant to this section shall
be made based on the impact of a  prospective  adjustment  to  rates  of
payment authorized pursuant to this subdivision; and
  (d)  prospective rate adjustments authorized pursuant to this subdivi-
sion for a general hospital based  on  appeals  approved  after  January
first,  nineteen  hundred  ninety-eight  shall  be  included in rates of
payment as a one hundred percent facility specific adjustment and  shall
not affect the calculation of the group category average inpatient reim-
bursable  operating cost per discharge for such retrospective period for
any other general hospital.
  29.] 15. Coinsurance and deductibles. (a) If a general hospital and  a
third-party payor agree to a negotiated payment methodology for a period
on  or  after January first, nineteen hundred ninety-seven that is based
on a discount from hospital charges, such discount shall  apply  to  the
calculation  of  the charge basis for deductible and coinsurance amounts
for such period owed for any patient covered by such  third-party  payor
as the primary payor.
  (b)  If  a general hospital and a third-party payor agree to a negoti-
ated payment methodology for a period on or after January  first,  nine-
teen  hundred ninety-seven that is not based on a discount from hospital
charges, excluding capitation arrangements, the  maximum  amount  to  be
charged  for  deductible and coinsurance amounts for such period for any
patient covered by such third-party payor as the primary payor shall not
exceed the amount calculated by applying the deductible and  coinsurance
amounts  to  the  amount  due  on  the  basis of such negotiated payment
arrangement.
  [30. General hospital recruitment and retention of health  care  work-
ers.    Notwithstanding  any  inconsistent provision of this section and
subject to the availability of federal financial participation:
  (a) (i) The commissioner shall  adjust  inpatient  medical  assistance
rates  of  payment  established  pursuant to this section for non-public
general hospitals in accordance with subparagraph (ii) of this paragraph
for purposes of recruitment and retention of health care workers in  the
following aggregate amounts for the following periods:
  (A) ninety-three million two hundred thousand dollars on an annualized
basis  for  the  period  April  first, two thousand two through December
thirty-first, two thousand two; one hundred eighty-seven  million  eight
hundred  thousand  dollars on an annualized basis for the period January
first, two thousand three through December  thirty-first,  two  thousand
three;  two hundred sixty-two million one hundred thousand dollars on an
annualized basis for the period January first, two thousand four through
December thirty-first, two thousand six; one hundred thirty-one  million
one  hundred thousand dollars for the period January first, two thousand
seven through June  thirtieth,  two  thousand  seven,  and  two  hundred
forty-three  million  five  hundred thousand dollars for the period July
first, two thousand  seven  through  March  thirty-first,  two  thousand
eight, two hundred forty-three million five hundred thousand dollars for
the  period  April first, two thousand eight through March thirty-first,
two thousand nine; one hundred sixty-three million  one  hundred  forty-
five  thousand  dollars  for  the  period April first, two thousand nine
through November thirtieth, two thousand nine.
  (ii) Such increases shall be allocated proportionally  based  on  each
non-public  general  hospital's  reported  total gross salary and fringe
benefit costs as reported on exhibit 11 of the 1999  institutional  cost
report  submitted as of November first, two thousand one to the total of

S. 6980                            104

such reported costs for  all  non-public  general  hospitals,  provided,
however,  that  for periods on and after July first, two thousand seven,
fifty percent of such increases shall be allocated proportionally, based
on  each  non-public  hospital's  reported total gross salary and fringe
benefit costs, as reported on exhibit 11 of the nineteen  hundred  nine-
ty-nine  institutional  cost report as submitted to the department prior
to November first, two thousand one, to the total of such reported costs
for  all  non-public  general  hospitals,  and  fifty  percent  of  such
increases  shall  be allocated proportionally, based on each such hospi-
tal's total reported medicaid inpatient discharges, as reported  in  the
two  thousand four institutional cost report as submitted to the depart-
ment prior to November first, two thousand six, to  the  total  of  such
reported medicaid inpatient discharges for all non-public general hospi-
tals,  as  weighted proportionally to reflect the relative medicaid case
mix of each such hospital. These amounts shall be included  as  a  reim-
bursable  cost  add-on  to medical assistance inpatient rates of payment
established pursuant to this section for  non-public  general  hospitals
based  on  medical assistance utilization data in each hospital's annual
cost report submitted two years prior to the  rate  year.  Such  amounts
shall be reconciled to reflect changes in medical assistance utilization
between  the  year  two  years  prior to the rate year and the rate year
based on data reported in each hospital's cost report for the respective
rate year. These amounts shall be included as a reimbursable cost add-on
to medical assistance inpatient rates of payment established pursuant to
this section for non-public general hospitals based on  medical  assist-
ance  utilization  data  in each facility's annual cost report submitted
two years prior to the rate year. For  rate  adjustments  effective  May
first, two thousand five and thereafter such amounts shall be reconciled
to  reflect  changes  in medical assistance utilization between the year
two years prior to the rate year and  the  rate  year  based  upon  data
reported in each hospital's institutional cost report for the respective
rate year.
  (b)  (i)  Notwithstanding  sections one hundred twelve and one hundred
sixty-three  of  the  state  finance  law  and  any  other  inconsistent
provision  of  law, the commissioner shall make grants to public general
hospitals without a competitive bid or request for proposal process  for
purposes  of  recruitment  and  retention  of health care workers in the
following aggregate amounts for the following periods:
  (A) eighteen million five hundred thousand dollars  on  an  annualized
basis  for  the  period  April  first, two thousand two through December
thirty-first, two thousand two; thirty-seven million four hundred  thou-
sand  dollars  on  an annualized basis for the period January first, two
thousand  three  through  December  thirty-first,  two  thousand  three;
fifty-two  million  two  hundred thousand dollars on an annualized basis
for the period January first, two thousand four through  December  thir-
ty-first,  two  thousand  six;  twenty-six  million one hundred thousand
dollars for the period January first, two thousand  seven  through  June
thirtieth, two thousand seven, forty-nine million dollars for the period
July  first, two thousand seven through March thirty-first, two thousand
eight, and forty-nine million dollars for the period  April  first,  two
thousand eight through March thirty-first, two thousand nine.
  (ii)  Such  grants  shall  be  allocated  proportionally based on each
public general hospital's reported total gross salary and fringe benefit
costs as reported on exhibit 11 of the 1999  institutional  cost  report
submitted  as  of  November first, two thousand one to the total of such
reported costs for all public general hospitals.

S. 6980                            105

  (c) From amounts available pursuant to paragraph (gg)  of  subdivision
one of section twenty-eight hundred seven-v of this article, allocations
shall  be  made  to  non-public  general hospitals whose allocated labor
adjustments pursuant to paragraphs (a) and (e) of this  subdivision  and
adjustment pursuant to subdivision thirty-two of this section results in
the  general  hospital  exceeding  its applicable disproportionate share
payment limit. Each such hospital's allocation of available funds pursu-
ant to this paragraph within a year shall be  determined  based  on  its
proportionate  share  of  the  aggregate reduction of federal dispropor-
tionate share funding for all such hospitals for the year resulting from
the allocated labor adjustments pursuant to paragraphs (a)  and  (e)  of
this  subdivision  and from the adjustment pursuant to subdivision thir-
ty-two of this section.
  (d) General hospitals which  have  their  rates  adjusted  or  receive
grants  pursuant  to paragraphs (a) and (b) of this subdivision, respec-
tively, shall  use  such  funds  for  the  purpose  of  recruitment  and
retention  of  non-supervisory  workers at health care facilities or any
worker with direct patient care responsibility and are  prohibited  from
using such funds for any other purpose. Funds under this subdivision are
not  intended  to  supplant support provided by a local government. Each
such general hospital shall submit, at a time and  in  a  manner  to  be
determined  by  the commissioner, a written certification attesting that
such funds will be used  solely  for  the  purpose  of  recruitment  and
retention  of  non-supervisory  workers at health care facilities or any
worker with direct patient  care  responsibility.  The  commissioner  is
authorized  to audit each general hospital to ensure compliance with the
written certification required by this paragraph and  shall  recoup  any
funds  determined  to have been used for purposes other than recruitment
and retention of non-supervisory workers at health  care  facilities  or
any  worker  with  direct  patient  care responsibility. Such recoupment
shall be in addition to applicable penalties under sections  twelve  and
twelve-b of this chapter.
  (e)(i)  The  commissioner  shall  adjust  inpatient medical assistance
rates of payment established pursuant to this section for general hospi-
tals in accordance with subparagraph (ii) of this  paragraph  and  shall
establish  discrete  rates  of  payment for such hospitals in accordance
with subparagraph (iii) of this paragraph, for  purposes  of  additional
support  of  recruitment  and  retention  of  health care workers in the
following aggregate amounts for the following periods:
  (A) one hundred twenty-one million dollars for the period  May  first,
two  thousand  five through December thirty-first, two thousand five and
one hundred twenty-one million dollars for the period January first, two
thousand six through December thirty-first, two thousand six.
  (ii) Such increases shall be allocated proportionally  based  on  each
general  hospital's  reported  gross  salary and fringe benefit costs as
reported on exhibit 11 of the 1999 institutional cost  report  submitted
as  of  November  first,  two thousand one to the total of such reported
costs for all general hospitals. These amounts shall be  included  as  a
reimbursable  cost  add-on  to  medical  assistance  inpatient  rates of
payment established pursuant to this section for general hospitals based
on medical assistance utilization data in each  facility's  annual  cost
report submitted two years prior to the rate year. Such amounts shall be
reconciled  to reflect changes in medical assistance utilization between
the year two years prior to the rate year and the rate year  based  upon
data  reported  in  each  hospital's  institutional  cost report for the
respective rate year.

S. 6980                            106

  (iii) The commissioner shall establish, subject to the approval of the
director of the budget, discrete rates of payment for general  hospitals
for  payments  under  the  medical assistance program pursuant to titles
eleven and eleven-D of article five  of  the  social  services  law  for
persons  eligible  for medical assistance and family health plus who are
enrolled in health maintenance organizations based  on  the  calculation
set forth in subparagraph (ii) of this paragraph for such general hospi-
tals.  If  discrete  rates  of  payment  under this subparagraph are not
established, the commissioner shall adjust the  calculation  established
pursuant  to  subparagraph (ii) of this paragraph to account for medical
assistance utilization described under this subparagraph for  such  non-
public general hospital.
  (iv)  Payment  of  the  non-federal  share  of  the medical assistance
payments made pursuant to this paragraph shall be the responsibility  of
the state and shall not include a local share. Payments made pursuant to
this  paragraph  or pursuant to paragraph (a) of this subdivision may be
added to rates of payment or made  as  aggregate  payments  to  eligible
general hospitals.
  (f) In the event that a hospital entitled to an adjustment pursuant to
paragraph (a) or (e) of this subdivision closes or otherwise experiences
a  change  in  status that eliminates its ability to continue to receive
such adjustments, the commissioner shall allocate the amount  determined
under  subparagraph (ii) of paragraph (a) and subparagraph (ii) of para-
graph (e) of this subdivision for such  hospital  to  hospitals  in  the
immediate region of the closing hospital based upon the remaining hospi-
tals'  reported  gross  salary  and  fringe benefit costs as reported on
exhibit eleven of  the  two  thousand  four  institutional  cost  report
submitted  as  of November first, two thousand five to the total of such
reported costs for all general hospitals in the region, provided, howev-
er, that for periods on and after July first, two thousand  seven,  such
allocations  shall  be based on such remaining hospitals' reported medi-
caid inpatient discharges, as reported in the two thousand four institu-
tional cost report submitted to the department prior to November  first,
two  thousand  six,  to  the  total  of such reported medicaid inpatient
discharges for all such  remaining  hospitals.  The  commissioner  shall
define the immediate region as the county or counties within which work-
ers  displaced  from  the closing hospital are likely to seek re-employ-
ment.
  31. Supplemental general hospital recruitment  and  retention  adjust-
ment.   (a) Notwithstanding any law, rule or regulation to the contrary,
the commissioner shall, within amounts appropriated, and  contingent  on
the  availability of federal financial participation, make Medicaid rate
adjustments for non-public general hospitals  to  address  extraordinary
costs associated with recruitment and retention of non-supervisory work-
ers  at  health  care  facilities or any worker with direct patient care
responsibility at such general hospitals. Eligible  hospitals  shall  be
selected by the commissioner pursuant to a competitive process. Requests
for proposals for eligible projects shall be issued by the commissioner.
  (b) Such eligible projects may include:
  (i)  an  increase  in  non-supervisory  staff, either facility wide or
targeted at a particular area of care or shift;
  (ii)  increased  training  and  education  of  non-supervisory  staff,
including  allowing  non-supervisory  staff  to  increase their level of
licensure relevant to general hospital care;
  (iii) efforts to decrease staff turn-over; and

S. 6980                            107

  (iv) other efforts related to the recruitment and retention of non-su-
pervisory staff or any worker with direct  patient  care  responsibility
that will affect the quality of care at such facility.
  (c)  The  commissioner shall consider, in selecting eligible projects,
the likelihood that such project will provide needed resources  to  meet
legal  commitments  for increased labor costs, the financial need of the
facility, the existence of a shortage of qualified hospital  workers  in
the  geographic  area in which the facility is located, the existence of
high employee turn-over at the facility and such other  matters  as  the
commissioner deems appropriate.
  (d)  In  implementing  rate adjustments authorized under this subdivi-
sion, the commissioner shall establish, subject to the approval  of  the
director of the budget, discrete rates of payment for non-public general
hospitals  for payments under the medical assistance program pursuant to
titles eleven and eleven-D of article five of the  social  services  law
for  persons  eligible for medical assistance and family health plus who
are enrolled in health maintenance organizations.
  (e) Adjustments to Medicaid rates of payment  made  pursuant  to  this
section shall not be subject to subsequent adjustment or reconciliation.
  (f)  Adjustments  to  Medicaid  rates of payment made pursuant to this
section shall not, in aggregate, exceed fifteen million dollars for  the
period beginning April first, two thousand two and ending December thir-
ty-first,  two thousand two and, on an annualized basis, for each annual
period thereafter beginning January first, two thousand three and ending
December thirty-first, two thousand six, and shall  not,  in  aggregate,
exceed  seven million five hundred thousand dollars for the period Janu-
ary first, two thousand  seven  through  June  thirtieth,  two  thousand
seven.
  32.  Rural  hospital supplemental rate adjustment. Notwithstanding any
inconsistent provision of this section:
  (a) The commissioner shall adjust inpatient medical  assistance  rates
of  payment  established pursuant to this section for rural hospitals as
defined in paragraph (c) of  subdivision  one  of  section  twenty-eight
hundred seven-w of this article in accordance with paragraph (b) of this
subdivision  for  purposes  of  supporting critically needed health care
services in rural areas in  the  following  aggregate  amounts  for  the
following periods:
  seven  million  dollars  for  the  period May first, two thousand five
through December thirty-first, two thousand five, seven million  dollars
for  the period January first, two thousand six through December thirty-
first, two thousand six, seven million  dollars  for  the  period  April
first,  two  thousand  seven through December thirty-first, two thousand
seven, seven million dollars for calendar year two thousand  eight,  and
six million four hundred seventeen thousand dollars for the period Janu-
ary  first,  two  thousand nine through November thirtieth, two thousand
nine.
  (b) Such increases shall be allocated proportionately  based  on  each
such  rural  hospital's  total reported medicaid inpatient discharges as
reported in the two thousand two institutional cost report to the  total
of  such  discharges  for  all  rural  hospitals. These amounts shall be
included as a reimbursable cost add-on to medical  assistance  inpatient
rates  of  payment established pursuant to this section for rural hospi-
tals based on medical assistance utilization  data  in  each  facility's
annual  cost  report  submitted  two  years prior to the rate year. Such
amounts shall be reconciled to reflect  changes  in  medical  assistance
utilization  between  the  year two years prior to the rate year and the

S. 6980                            108

rate year based upon data reported in each hospital's institutional cost
report for the respective rate year.
  (c)  Payment  of  the  non-federal  share  of  the  medical assistance
payments made pursuant to this subdivision shall be  the  responsibility
of the state and shall not include a local share. Payments made pursuant
to  this  subdivision may be added to rates of payment or made as aggre-
gate payments to eligible general hospitals.
  33.] 16. Notwithstanding any provision of law  which  is  inconsistent
with  or  contrary  to the structure established by this subdivision and
subdivision two-a of section twenty-eight hundred seven of this  article
in  order to transition from nineteen hundred eighty-one base year costs
to two thousand five base year costs by no later than  December  thirty-
first,  two  thousand twelve, and subject to the availability of federal
financial participation, medicaid per diem and per  discharge  rates  of
payment  for general hospital inpatient services for discharges and days
occurring on and after December first,  two  thousand  eight,  shall  be
computed in accordance with the following:
  (a)(i) for the period December first, two thousand eight through March
thirty-first,  two  thousand  nine,  such  rates  shall  be subject to a
uniform transition adjustment which  shall  be  based  on  each  general
hospital's  proportional  share of projected medicaid reimbursable inpa-
tient operating costs and result in an aggregate reduction in such rates
equal to fifty-one million five hundred thousand dollars, as  determined
by  the commissioner, provided, however, that such transition adjustment
shall not apply to rates computed pursuant to [paragraph (1) of subdivi-
sion four] PARAGRAPH (F) OF SUBDIVISION TWO of this section; and
  (ii) for the period April first, two thousand nine through March thir-
ty-first, two thousand ten, such rates shall be revised  pursuant  to  a
chapter  of the laws of two thousand nine and as reflecting the findings
and recommendations of  the  commissioner  as  issued  pursuant  to  the
provisions of paragraph (b) of this subdivision, provided, however, that
such  revisions shall reflect an aggregate reduction in such rates of no
less than one hundred fifty-four million five hundred thousand  dollars,
provided  further, however, that, notwithstanding any contrary provision
of law, as determined by the commissioner, to the extent that a  chapter
of  the  laws  of  two thousand nine is not enacted resulting in such an
aggregate annual reduction  of  no  less  than  one  hundred  fifty-four
million  five  hundred  thousand dollars in such rates, the commissioner
shall implement a uniform reduction of such rates in accordance with the
methodology described in subparagraph  (i)  of  this  paragraph  to  the
extent  necessary, as determined by the commissioner, to achieve such an
aggregate reduction in such rates for the state  fiscal  year  beginning
April  first,  two  thousand nine and each state fiscal year thereafter;
and
  (iii) for the periods April first,  two  thousand  ten  through  March
thirty-first,  two  thousand twelve, rates shall reflect prior year rate
reductions and such additional reductions as are required  to  establish
rates  based  on  two  thousand  five  reported allowable Medicaid costs
pursuant to a chapter of the laws of two thousand ten.
  (b) In consultation with the chairs of the senate and assembly  health
committees,  the  commissioner  shall,  by no later than July first, two
thousand  eight,  establish  a  technical  advisory  committee  for  the
purposes  of  examining  data and evaluating rate-setting methodological
issues, including the impact on hospitals of different methodologies  in
preparation  for  the  phased  transition to the utilization of reported
allowable two thousand five operating costs for the purpose  of  setting

S. 6980                            109

inpatient  rates  of  payment  for periods on and after April first, two
thousand nine, which phased transition shall be authorized in accordance
with a chapter of the laws of two thousand nine. The technical  advisory
committee  shall  consist  of  three representatives of hospital associ-
ations, two representatives of the health care industry and three repre-
sentatives of community providers and consumers  as  determined  by  the
commissioner.  By  no  later  than August first, two thousand eight, the
commissioner shall make available to the  technical  advisory  committee
updated  data and documentation relevant to the projected phased transi-
tion to utilization of reported allowable two  thousand  five  operating
costs  for rate-setting purposes. The issues to be examined by the tech-
nical advisory committee shall include, but not be limited to,  hospital
re-basing, workforce recruitment and retention funding, graduate medical
education  funding,  peer group pricing, wage equalization factors, case
mix and such other related elements of the  general  hospital  inpatient
reimbursement  system  as  deemed  appropriate  by the commissioner. The
technical advisory committee shall also examine the scope and volume  of
hospital  out-patient  services.  By  no  later than November first, two
thousand eight the commissioner shall issue a report setting forth find-
ings and recommendations, including divergent views of  members  of  the
technical  advisory committee members concerning the matters examined by
the technical advisory committee and the projected phased transition  to
utilization  of two thousand five base year reported allowable operating
costs for inpatient rates of payments on  and  after  April  first,  two
thousand nine.
  (c) Paragraph (a) of this subdivision shall be effective the later of:
(i)  December  first,  two  thousand  eight; (ii) after the commissioner
receives final approval of federal financial participation  in  payments
made  for  beneficiaries eligible for medical assistance under title XIX
of the federal social security act for the rate methodology  established
pursuant  to  subdivision two-a of section twenty-eight hundred seven of
this article; or  (iii)  after  the  commissioner  determines  that  the
department  of  health has the capability, for payments made pursuant to
subdivision two-a of section twenty-eight hundred seven of this article,
to electronically receive and process claims and transmit payments  with
remittance  statements. Prior to the commissioner making such a determi-
nation, the department shall provide training sessions on the rate meth-
odology and billing requirements for services  pursuant  to  subdivision
two-a of section twenty-eight hundred seven of this article and opportu-
nity  for  hospitals to perform end-to-end testing on claims submission,
processing and payment.
  [35.] 17. Notwithstanding any inconsistent provision of this  section,
or  any  other contrary provision of law and subject to the availability
of federal financial participation, rates  of  payment  by  governmental
agencies   for  general  hospital  inpatient  services  with  regard  to
discharges occurring on and after  December  first,  two  thousand  nine
shall be in accordance with the following:
  (a)  For  periods  on  and after December first, two thousand nine the
operating cost component of such rates of payments shall reflect the use
of two thousand five operating costs as reported by each facility to the
department prior to July first,  two  thousand  nine  and  as  otherwise
computed in accordance with the provisions of this subdivision;
  (b)  The commissioner shall promulgate regulations, and may promulgate
emergency regulations, establishing methodologies for the computation of
general hospital inpatient rates and such regulations shall include, but
not be limited to, the following:

S. 6980                            110

  (i) The computation of a case-mix neutral statewide base price, appli-
cable to each  rate  period,  but  excluding  adjustments  for  graduate
medical  education  costs,  high  cost  outlier  costs, costs related to
patient transfers, and other non-comparable costs as determined  by  the
commissioner, such statewide base prices may be periodically adjusted to
reflect  changes in provider coding patterns and case-mix and such other
factors as may be determined by the commissioner;
  (ii) Only those two thousand five base year costs which relate to  the
cost  of  services provided to Medicaid inpatients, as determined by the
applicable ratio of costs to charges methodology, shall be utilized  for
rate-setting  purposes,  provided,  however,  that  the commissioner may
utilize updated Medicaid inpatient related base year costs  and  statis-
tics  as  necessary  to adjust inpatient rates in accordance with clause
(C) of subparagraph (x) of this paragraph;
  (iii) Such rates shall reflect the application  of  hospital  specific
wage equalization factors reflecting differences in wage rates;
  (iv)  Such  rates  shall  reflect  the  utilization of the all patient
refined (APR) case mix methodology, utilizing diagnostic related  groups
with  assigned  weights that incorporate differing levels of severity of
patient condition and the associated risk of mortality, and  as  may  be
periodically updated by the commissioner;
  (v)  such  regulations  shall  incorporate  quality  related measures,
including, but not limited  to,  potentially  preventable  re-admissions
(PPRs) and provide for rate adjustments or payment disallowances related
to  PPRs  and  other  potentially preventable negative outcomes (PPNOs),
which shall be calculated in accordance with methodologies as determined
by the commissioner, provided, however, that such methodologies shall be
based on a comparison of the actual and risk adjusted expected number of
PPRs and other PPNOs in a given hospital and with benchmarks established
by the commissioner and provided further that such rate  adjustments  or
payment disallowances shall result in an aggregate reduction in Medicaid
payments of no less than thirty-five million dollars for the period July
first,  two thousand ten through March thirty-first, two thousand eleven
and no less than fifty-one million dollars for annual periods  beginning
April  first,  two thousand eleven through March thirty-first, two thou-
sand fourteen, provided further that such aggregate reductions shall  be
offset by Medicaid payment reductions occurring as a result of decreased
PPRs  during the period July first, two thousand ten through March thir-
ty-first, two thousand eleven and the period April first,  two  thousand
eleven through March thirty-first, two thousand fourteen and as a result
of  decreased  PPNOs  during the period April first, two thousand eleven
through March thirty-first, two thousand fourteen; and provided  further
that  for  the period July first, two thousand ten through March thirty-
first, two thousand fourteen, such rate adjustments or payment disallow-
ances shall not apply to behavioral health PPRs; or to readmissions that
occur on or after fifteen days following an  initial  admission.  By  no
later  than July first, two thousand eleven the commissioner shall enter
into consultations with representatives of the  health  care  facilities
subject  to  this  section  regarding potential prospective revisions to
applicable methodologies and benchmarks set forth in regulations  issued
pursuant to this subparagraph;
  (vi)  Such regulations shall address adjustments based on the costs of
high cost outlier patients;
  (vii) Such rates shall continue to reflect trend factor adjustments as
otherwise provided in paragraph (c) of subdivision [ten]  FOUR  of  this
section;

S. 6980                            111

  (viii) Such rates shall not include any adjustments pursuant to subdi-
vision nine of this section;
  (ix) Rates for non-public, not for profit general hospitals which have
not,  as  of the effective date of this subdivision, published an ancil-
lary charges schedule as provided in paragraph (j) of subdivision one of
section twenty-eight hundred three of  this  article  shall  have  their
inlier  payments  increased  by  an  amount equal to the average of cost
outlier payments for comparable hospitals or by a methodology that  uses
a statewide or regional ratio of cost to charges applied to statewide or
regional  comparable  charges  for those cases determined by the commis-
sioner;
  (x) Such regulations shall provide for  administrative  rate  appeals,
but  only  with regard to: (A) the correction of computational errors or
omissions of data, including with regard to the hospital specific compu-
tations pertaining to  graduate  medical  education,  wage  equalization
factor  adjustments, (B) capital cost reimbursement, and, (C) changes to
the base year statistics and costs used  to  determine  the  direct  and
indirect  graduate medical education components of the rates as a result
of new teaching programs at new teaching hospitals and/or as a result of
residents displaced and transferred as a  result  of  teaching  hospital
closures;
  (xi)  Rates for teaching general hospitals shall include reimbursement
for direct and indirect graduate medical education as defined and calcu-
lated pursuant to such regulations. In addition, such regulations  shall
specify  the  reports  and  information  required by the commissioner to
assess the cost, quality and health system needs for  medical  education
provided;
  (xii)  Such  regulations  may  incorporate  quality  related  measures
pertaining to the  inappropriate  use  of  certain  medical  procedures,
including,  but  not  limited  to,  cesarean deliveries, coronary artery
bypass grafts and percutaneous coronary interventions;
  (xiii) Such regulations may impose a fee on  general  hospital  suffi-
cient  to  cover  the  costs  of auditing the institutional cost reports
submitted by general hospitals, which shall be deposited in  the  Health
Care Reform Act (HCRA) resources account.
  (c)  The  base period reported costs and statistics used for rate-set-
ting for operating cost components, including the  weights  assigned  to
diagnostic  related  groups,  shall  be  updated no less frequently than
every four years and the new base period shall  be  no  more  than  four
years  prior  to the first applicable rate period that utilizes such new
base period provided, however, that the first updated base period  shall
begin on January first, two thousand fourteen.
  (d) Capital cost reimbursement for general hospitals otherwise subject
to  the  provisions  of  this  subdivision  shall  remain subject to the
provisions of subdivision [eight] THREE of this section.
  (e) The provisions of this subdivision shall not apply to those gener-
al hospitals or distinct units  of  general  hospitals  whose  inpatient
reimbursement  does  not,  as  of November thirtieth, two thousand nine,
reflect case based payment per diagnosis-related group  or  whose  inpa-
tient  reimbursement  is, for periods on and after July first, two thou-
sand nine, governed by the provisions of [paragraphs (e-1) or  (e-2)  of
subdivision  four]  PARAGRAPHS  (B)  OR  (C)  OF SUBDIVISION TWO of this
section.
  (f) Notwithstanding section one hundred twelve or one  hundred  sixty-
three  of  the state finance law or any other law, rule or regulation to
the contrary, the commissioner may contract with a vendor for  consider-

S. 6980                            112

ation  to  develop  the  specifications for the diagnosis-related groups
methodology as provided for in regulations promulgated pursuant to para-
graph (b) of this subdivision if the commissioner certifies to the comp-
troller  that such contract is in the best interest of the health of the
people of the state. Notwithstanding that such specifications  shall  be
available  pursuant  to  article  six  of  the public officers law, such
contract may provide that the specifications for such adjusted or  addi-
tional  diagnosis-related groups provided by the vendor shall be subject
to copyright protection pursuant to federal copyright law.
  (g) Notwithstanding any inconsistent provision of this subdivision  or
any  other  contrary  provision  of  law, the commissioner may, for rate
periods on and after December first, two thousand nine  and  subject  to
the  availability  of  federal  financial participation, make additional
adjustments to the inpatient rates of payment of eligible general hospi-
tals, to facilitate improvements in hospital operations and finances, in
accordance with the following:
  (i) General hospitals eligible  for  distributions  pursuant  to  this
paragraph  shall  be those non public hospitals with Medicaid discharges
equal to or greater than seventeen and one-half percent for two thousand
seven.
  (ii) Funds distributed pursuant to this paragraph shall  be  allocated
to  eligible hospitals pursuant to a formula such that, to the extent of
funds available, no hospital's reduction in Medicaid  inpatient  revenue
as  a  result of the application of the provisions of paragraphs (a) and
(b) of this subdivision exceeds a percentage reduction as determined  by
the commissioner.
  (iii)  Funding  pursuant  to this paragraph shall be available for the
following periods and in the following amounts:
  (A) for the period December first, two  thousand  nine  through  March
thirty-first,  two thousand ten, up to thirty-three million five hundred
thousand dollars;
  (B) for the period April first, two thousand ten through  March  thir-
ty-first,  two  thousand  eleven,  up  to  seventy-five million dollars,
provided, however, that, notwithstanding subparagraph (ii) of this para-
graph, no facility shall receive an amount pursuant to this clause  that
is  less  than  such  facility  received  pursuant to clause (A) of this
subparagraph;
  (C) for the period April first,  two  thousand  eleven  through  March
thirty-first, two thousand twelve, up to fifty million dollars;
  (D)  for  the  period  April  first, two thousand twelve through March
thirty-first, two thousand thirteen, up to twenty-five million dollars.
  (iv) Payments made pursuant to this paragraph shall be added to  rates
of  payments  and  not be subject to retroactive adjustment or reconcil-
iation.
  (v) Each hospital receiving funds pursuant to this paragraph shall, as
a condition for eligibility for such funds, adopt a  resolution  of  the
board  of  directors  of  each  such  hospital setting forth its current
financial condition and a plan for reforming and improving  such  finan-
cial  condition, including ongoing board oversight, and shall, after two
years, issue a report as adopted by each such board of directors setting
forth what  progress  has  been  achieved  regarding  such  improvement,
provided, however, if such report is not issued and adopted by each such
board  of  directors,  or  if  such  report  fails to set forth adequate
progress, as determined by the commissioner, the commissioner  may  deem
such  facility  ineligible  for  further  distributions pursuant to this
paragraph and may  redistribute  such  further  distributions  to  other

S. 6980                            113

eligible facilities in accordance with the provisions of this paragraph.
The  commissioner  shall be provided with copies of all such resolutions
and reports.
  (h) Inpatient rate adjustments made pursuant to paragraphs (a) through
(f)  of  this  subdivision  after  application of adjustments authorized
pursuant to subdivision [thirty-three] SIXTEEN  of  this  section  shall
result  in a net statewide decrease in aggregate Medicaid payments of no
less than seventy-five million dollars for the  period  December  first,
two  thousand  nine through March thirty-first, two thousand ten, and no
less than two hundred twenty-five million dollars for the  period  April
first,  two thousand ten through March thirty-first, two thousand eleven
and each state fiscal year  thereafter,  provided,  however,  that  such
reductions  shall  be in addition to the reductions required pursuant to
subparagraph (ii) of paragraph (a) of subdivision [thirty-three] SIXTEEN
of this section.
  (i) (i) Notwithstanding any inconsistent provision of this subdivision
or any other contrary provision of law and subject to  the  availability
of federal financial participation, for the period July first, two thou-
sand ten through March thirty-first, two thousand eleven, and each state
fiscal  year  period  thereafter, the commissioner shall make additional
inpatient hospital payments up to the aggregate upper payment limit  for
inpatient hospital services after all other medical assistance payments,
but  not to exceed two hundred thirty-five million five hundred thousand
dollars for the period July first, two thousand ten through March  thir-
ty-first,  two  thousand  eleven, three hundred fourteen million dollars
for each state fiscal year beginning April first, two  thousand  eleven,
through  March  thirty-first,  two  thousand  thirteen, and no less than
three hundred thirty-nine million dollars for  each  state  fiscal  year
thereafter, to general hospitals, other than major public general hospi-
tals,  providing emergency room services and including safety net hospi-
tals, which shall, for the purpose of  this  paragraph,  be  defined  as
having  either:  a Medicaid share of total inpatient hospital discharges
of at least thirty-five  percent,  including  both  fee-for-service  and
managed  care  discharges  for  acute and exempt services; or a Medicaid
share of total discharges of at least  thirty  percent,  including  both
fee-for-service  and  managed  care  discharges  for  acute  and  exempt
services,  and  also  providing  obstetrical  services.  Eligibility  to
receive  such additional payments shall be based on data from the period
two years prior to the rate year, as reported on the institutional  cost
report submitted to the department as of October first of the prior rate
year.  Such  payments  shall  be made as medical assistance payments for
fee-for-service inpatient hospital services pursuant to title eleven  of
article five of the social services law for patients eligible for feder-
al financial participation under title XIX of the federal social securi-
ty act and in accordance with the following:
  (A)  Thirty  percent of such payments shall be allocated to safety net
hospitals based on each eligible hospital's proportionate share  of  all
eligible  safety net hospitals' Medicaid discharges for inpatient hospi-
tal services, including both Medicaid fee-for-service and  managed  care
discharges  for acute and exempt services, based on data from the period
two years prior to the rate year, as reported on the institutional  cost
report submitted to the department as of October first of the prior rate
year;
  (B)  Seventy  percent  of such payments shall be allocated to eligible
general hospitals based on each such hospital's proportionate  share  of
all  eligible  hospitals'  Medicaid  discharges  for  inpatient hospital

S. 6980                            114

services, including  both  Medicaid  fee-for-service  and  managed  care
discharges  for acute and exempt services, based on data from the period
two years prior to the rate year, as reported on the institutional  cost
report submitted to the department as of October first of the prior rate
year;
  (C)  No  eligible general hospital's annual payment amount pursuant to
this paragraph shall exceed the lower of the sum of the  annual  amounts
due  that  hospital pursuant to section twenty-eight hundred seven-k and
section twenty-eight hundred seven-w of this article; or the  hospital's
facility  specific  projected  disproportionate  share  hospital payment
ceiling established pursuant to federal  law,  provided,  however,  that
payment amounts to eligible hospitals pursuant to clauses (A) and (B) of
this  subparagraph in excess of the lower of such sum or payment ceiling
shall be reallocated to eligible  hospitals  that  do  not  have  excess
payment  amounts.  Such reallocations shall be proportional to each such
hospital's aggregate payment amount pursuant to clauses (A) and  (B)  of
this  subparagraph to the total of all payment amounts for such eligible
hospitals;
  (D) Subject to the availability of  federal  financial  participation,
the  payment  methodology  set forth in this subparagraph may be further
revised by the commissioner on an annual basis pursuant  to  regulations
issued  pursuant  to  this  subdivision  for  periods on and after April
first, two thousand eleven; and
  (E) Subject to the availability of federal financial participation and
in conformance with all applicable  federal  statutes  and  regulations,
such  payments  shall  be  made  as  upper  payment  limit payments and,
further, such payments shall be made as aggregate  monthly  payments  to
eligible general hospitals.
  (ii) In the event that the commissioner determines that federal finan-
cial  participation will not be available for aggregate payments made in
accordance with clause  (E)  of  subparagraph  (i)  of  this  paragraph,
payments pursuant to this paragraph shall be included as rate add-ons to
medical  assistance  inpatient  rates of payment established pursuant to
this subdivision based on data from the period two years  prior  to  the
rate year, as reported on the institutional cost report submitted to the
department  as of October first of the prior rate year, provided, howev-
er, that if such payments are made as  rate  add-ons,  the  commissioner
shall  establish  a  procedure  to  reconcile payment amounts to reflect
changes in medical assistance utilization  from  the  period  two  years
prior  to  the  rate  year  and  the  actual  rate year based on data as
reported on each hospital's annual institutional  cost  report  for  the
respective rate year, as submitted to the department as of October first
of the year following the rate year.
  (iii) Notwithstanding any other law, rule or regulation to the contra-
ry,  projections of each general hospital's disproportionate share limi-
tations as computed by the commissioner  pursuant  to  applicable  regu-
lations  shall be adjusted to reflect any additional revenue received or
anticipated to be received by each such  general  hospital  pursuant  to
this paragraph.
  S  2.  Subdivision  6  of  section 2500-d of the public health law, as
amended by chapter 639 of the laws  of  1996,  is  amended  to  read  as
follows:
  6. A general hospital which is designated as a regional poison control
center  shall  submit  a  budget  indicating the costs of operating such
center. Costs determined by the commissioner to be necessary and reason-
able in order to comply with the requirements of this section  shall  be

S. 6980                            115

reimbursable  and  shall be allocated to costs of general hospital emer-
gency services. Such reimbursable costs  for  a  rate  period  shall  be
considered in the calculation of rates of payment for emergency services
of  a  general hospital for such rate period in accordance with subdivi-
sion two of section twenty-eight hundred seven of this  chapter  without
application  of  the maximum payment for the operating cost component of
rates of payment for emergency services. Notwithstanding any  inconsist-
ent  provision of law, reimbursable costs of a general hospital of oper-
ating a regional poison  control  center  determined  pursuant  to  this
subdivision for annual rate periods beginning on or after January first,
nineteen  hundred  ninety-one  through  December  thirty-first, nineteen
hundred ninety-six allocable to emergency services provided  to  persons
within  such  payor  categories as specified in paragraphs (a)[, (b) and
(c)] AND (E) of subdivision one of section twenty-eight hundred  seven-c
of  this chapter for inpatient hospital services, excluding governmental
agencies, shall be included in the determination of inpatient  rates  of
payment  for  such payors, excluding governmental agencies, and rates of
payment determined  in  accordance  with  section  twenty-eight  hundred
seven-c  of  this chapter shall be adjusted on a hospital-specific basis
in accordance with rules and regulations adopted by the  state  hospital
review  and planning council, subject to the approval of the commission-
er, to reflect such costs and maximum inpatient charges of such  general
hospital  computed  in  accordance  with  such section shall be adjusted
accordingly; and cost based rates of payment for emergency services  for
such  payors,  other  than  governmental  agencies,  shall be calculated
excluding costs of operating a regional poison control center.
  S 3. Subparagraph (iii) of paragraph (a) of subdivision 2  of  section
2803  of the public health law, as amended by chapter 639 of the laws of
1996, is amended to read as follows:
  (iii) the identification of appropriate and reasonable  standards  for
the  development  of  acceptable  collection  procedures used by general
hospitals in an effort to collect unpaid bills  prior  to  the  determi-
nation  that  the  unpaid  bill is a bad debt eligible for reimbursement
consideration pursuant to paragraphs (e) and (f) of subdivision eight of
section twenty-eight hundred seven-a or [paragraph  (b)  of  subdivision
fourteen  of  section  twenty-eight hundred seven-c and] SECTION twenty-
eight hundred seven-k of this article,
  S 4. Subparagraph (ii) of paragraph (c) of subdivision  2  of  section
2803-i  of  the  public health law, as added by chapter 2 of the laws of
1988, is amended to read as follows:
  (ii) Notwithstanding any inconsistent provision of law, general hospi-
tal contract costs incurred in accordance with subparagraph (i) of  this
paragraph  may  be included as an additional charge for general hospital
inpatient services in determining patient charges for payors included in
the payor categories specified in paragraph (c) of  subdivision  one  of
section  twenty-eight hundred seven-c of this article, or as a charge in
addition to rates of payment for general hospital inpatient services  in
determining  payment  due  for  payors  included in the payor categories
specified in paragraph [(b)] (E) of subdivision one of  section  twenty-
eight hundred seven-c of this article, or paragraph (a) of such subdivi-
sion  one  if a payor has not designated a review agent for such payor's
subscribers or beneficiaries or enrolled members[, or paragraph  (a)  or
(b)  of  subdivision two of section twenty-eight hundred seven-c of this
article]. Such additional charges shall not be subject to maximum charge
or rate of payment ceilings determined in accordance with section  twen-
ty-eight hundred seven-c of this article for such payors.

S. 6980                            116

  S  5.  Paragraph  (a) of subdivision 2 of section 2805-a of the public
health law, as amended by chapter 639 of the laws of 1996, is amended to
read as follows:
  (a)  A  report  of  hospital  expenses  incurred in providing services
during the period covered by the reports required under this section for
which payment was not received and is not anticipated for  such  periods
for  which  pool distributions pursuant to [section twenty-eight hundred
seven-c or] section twenty-eight hundred seven-k  of  this  article  are
made  related to such expenses. The report shall be completed in accord-
ance with regulations developed by  the  council  and  approved  by  the
commissioner  which  shall include definitions for bad debts and charity
care. The report shall identify as bad debts or charity care the cost of
services provided to  emergency  inpatients,  non-emergency  inpatients,
emergency  ambulatory  patients, clinic patients and referred or private
ambulatory patients for which the hospital did not receive and does  not
anticipate payment.
  S  6.  Subdivision  3  of  section  2807  of the public health law, as
amended by chapter 2 of the laws of 1988, is amended to read as follows:
  3. Commissioner rate certification, governmental  payments.  Prior  to
the  approval  of  such  rates,  as  provided in subdivision two of this
section, the commissioner shall determine, and in the case of  approvals
by  the  state director of the budget, certify to such official that the
proposed rate schedules for  payments  to  hospitals  for  hospital  and
health-related  services  are  reasonable and adequate to meet the costs
which must be incurred by efficiently and economically operated  facili-
ties.  In  making  such  certification, the commissioner shall take into
consideration the elements of cost, geographical  differentials  in  the
elements  of  cost considered, economic factors in the area in which the
hospital is located, the rate of increase or decrease of the economy  in
the  area in which the hospital is located, costs of hospitals of compa-
rable size, and the need for incentives to improve services  and  insti-
tute economies.  The commissioner shall also take into consideration the
economies  and improvements in service to be anticipated from the opera-
tion of joint central service or use of facilities or services which may
serve as alternatives or substitutes  for  the  whole  or  any  part  of
in-hospital  service, including, but not limited to, obstetrical, pedia-
tric, laboratory, training, radiology,  pharmacy,  laundry,  purchasing,
preadmission,  nursing  home,  ambulatory  or  home  care  services. The
commissioner shall exclude costs for research and  those  parts  of  the
costs for educational salaries which the commissioner shall determine to
be  not  directly  related to hospital service, and allowances for costs
which are not specifically identified except for  allowances  authorized
under  section  twenty-eight  hundred  seven-a  [or twenty-eight hundred
seven-c] of this article. In determining and  certifying  to  the  state
director  of the budget rates of payment, including rates of payment for
residential health care facilities, the  commissioner  shall  take  into
consideration  the different levels of care authorized to be provided in
such hospital  or  health-related  service  and  determine  and  certify
distinct  rates of payment for each such level of care. If the modifica-
tion of an operating certificate of a hospital pursuant  to  subdivision
six  of  section  twenty-eight  hundred six of this article requires the
establishment of a rate for a level of service not  previously  provided
in  such  hospital  during  the rate period existing at the time of such
modification, a new rate period for that portion of the hospital reclas-
sified as a result of such modification may be  established  upon  sixty
days' prior notice.

S. 6980                            117

  7.  Section 2807-b of the public health law, as added by section 11 of
part D of chapter 57 of the laws of 2006, is amended to read as follows:
  S  2807-b.  Outstanding  payments  and  reports  due under subdivision
[eighteen] EIGHT of section twenty-eight hundred seven-c, sections twen-
ty-eight hundred seven-d,  twenty-eight  hundred  seven-j,  twenty-eight
hundred  seven-s and twenty-eight hundred seven-t of this article. 1. If
there is a basis for estimating the amount of outstanding  payments  due
in  accordance with subdivision [eighteen] EIGHT of section twenty-eight
hundred seven-c of  this  article,  and  sections  twenty-eight  hundred
seven-d,  twenty-eight hundred seven-j, twenty-eight hundred seven-s and
twenty-eight hundred seven-t of this  article,  the  commissioner  shall
bill  applicable  providers  and payors for such payments, including any
interest and penalties set forth in this article, no later  than  ninety
days after each calendar quarter following enactment of this section.
  2.  If  there  is  no  basis  for estimating the amount of outstanding
payments due in accordance with subdivision [eighteen] EIGHT of  section
twenty-eight  hundred seven-c of this article, and sections twenty-eight
hundred seven-d,  twenty-eight  hundred  seven-j,  twenty-eight  hundred
seven-s  and  twenty-eight  hundred seven-t of this article, the commis-
sioner shall notify  applicable  providers  and  payors  of  outstanding
reports and payments no later than ninety days after each calendar quar-
ter  following  the  effective  date  of this section. Such notice shall
include information regarding any interest, penalties or other sanctions
which may be implemented in accordance with this article.
  S 8. Paragraph (b) of subdivision 1 of section 2807-d  of  the  public
health  law,  as amended by chapter 41 of the laws of 1992, subparagraph
(i) as amended by chapter 639 of the laws of 1996, is amended to read as
follows:
  (b) Subject to the provisions of subdivision twelve of  this  section,
the  following  categories of hospitals shall not be charged assessments
pursuant to this section: (i) [voluntary nonprofit and private  proprie-
tary  general  hospitals which qualify for distributions made in accord-
ance with paragraph (c) of subdivision nineteen of section  twenty-eight
hundred  seven-c  of  this article, or for assessments during the period
January first, nineteen hundred ninety-seven  through  December  thirty-
first,  nineteen  hundred  ninety-seven  voluntary nonprofit and private
proprietary general hospitals which qualified for distributions made  in
accordance  with  paragraph (c) of subdivision nineteen of section twen-
ty-eight hundred seven-c of this article as  of  December  thirty-first,
nineteen hundred ninety-five; (ii)] voluntary nonprofit hospitals total-
ly  financed  by charitable contributions or by the income thereon dedi-
cated to free care of low income patients; and [(iii)] (II) any facility
dedicated solely to the care of police,  firefighters,  volunteer  fire-
fighters, and emergency service personnel.
  S  9.  Paragraph  (a) of subdivision 3 of section 2807-d of the public
health law, as amended by section 3-e of part B of chapter  109  of  the
laws of 2010, is amended to read as follows:
  (a)  for  general  hospitals, all monies received for or on account of
inpatient  hospital  service,  outpatient  service,  emergency  service,
referred  ambulatory  service  and ambulatory surgical service, or other
hospital  or  health-related  services,  excluding,   subject   to   the
provisions of subdivision twelve of this section: distributions from bad
debt  and  charity  care  regional  pools,  primary health care services
regional pools, bad debt and charity  care  for  financially  distressed
hospitals  statewide  pools  and  bad  debt and charity care and capital
statewide pools created in accordance with section twenty-eight  hundred

S. 6980                            118

seven-c of this article and the components of rates of payment or charg-
es  related  to  the allowances provided in accordance with subdivisions
fourteen, fourteen-b and fourteen-c, the adjustment provided in  accord-
ance  with subdivision fourteen-a, the adjustment provided in accordance
with subdivision  fourteen-d,  the  adjustment  for  health  maintenance
organization  reimbursement  rates  provided  in accordance with section
twenty-eight hundred seven-f of this article, the adjustment for commer-
cial insurer reimbursement rates provided in accordance  with  paragraph
(i)  of  subdivision  eleven  of section twenty-eight hundred seven-c of
this article or, if effective, the  adjustment  provided  in  accordance
with subdivision fifteen of section twenty-eight hundred seven-c of this
article  or  the adjustment provided in accordance with section eighteen
of chapter two hundred sixty-six of the laws of nineteen hundred  eight-
y-six as amended and physician practice or faculty practice plan revenue
received  by  a  general hospital based on discrete billings for private
practicing physician services, revenue received by  a  general  hospital
from a public hospital pursuant to an affiliation agreement contract for
the  delivery  of  health care services to such public hospital, revenue
received pursuant to paragraph (i) of subdivision  [thirty-five]  SEVEN-
TEEN  of  section  twenty-eight hundred seven-c of this article, revenue
received pursuant to section twenty-eight hundred seven-w of this  arti-
cle,  all  revenue received as disproportionate share hospital payments,
in accordance with title nineteen of the federal  Social  Security  Act,
revenue received pursuant to sections eleven, twelve, thirteen and four-
teen  of  part A of chapter one of the laws of two thousand two, revenue
received pursuant to sections thirteen and fourteen of part B of chapter
one of the laws of two thousand two, revenue from patient personal  fund
allowances,  revenue  from  income  earned  on patient funds, investment
income from externally restricted funds, revenue from investment sinking
funds, revenue from investment  operating  escrow  accounts,  investment
income  from funded depreciation, investment income from mortgage repay-
ment escrow accounts, revenue derived  from  the  operation  of  schools
leading  to  licensure,  and  revenue  from  the collection of sales and
excise taxes;
  S 10. Paragraph (c) of subdivision 1 and paragraph (a) of  subdivision
2 of section 2807-e of the public health law, as added by chapter 731 of
the  laws  of 1993, paragraph (a) of subdivision 2 as further amended by
section 104 of part A of chapter 62 of the laws of 2011, are amended  to
read as follows:
  (c) "Third-party payor" shall mean those payors within the payor cate-
gories  specified  in paragraphs (a) and [(b)] (E) of subdivision one of
section  twenty-eight  hundred  seven-c  of  this  article,  except  for
payments  made  for  persons  who are eligible as beneficiaries of title
XVIII of the federal social security act (medicare).
  (a) Notwithstanding any inconsistent provisions of  law,  the  commis-
sioner  shall,  on  or  after  July first, nineteen hundred ninety-five,
develop a uniform patient bill for the purpose of providers providing  a
health care consumer with a patient bill for hospital and health-related
services, in consultation with the superintendent of financial services,
statewide  organizations  representative  of  providers  of hospital and
health-related services, third-party payors as described  in  paragraphs
(a)  and  [(b)]  (E)  of  subdivision  one of section two thousand eight
hundred seven-c of this article,  and  representatives  of  health  care
consumers.  Such  patient  bill  shall be in such form and shall contain
such information as may be required in accordance with rules  and  regu-
lations  developed  by  the commissioner, provided that distinct uniform

S. 6980                            119

patient bills may be developed for each type or level of  health-related
service.
  S  11.  Paragraph (d) of subdivision 4 of section 2807-f of the public
health law is REPEALED.
  S 12. Paragraph (d) of subdivision 2 of section 2807-j of  the  public
health law, as amended by section 50 of part B of chapter 58 of the laws
of 2009, is amended to read as follows:
  (d)  The total percentage allowance for payments by governmental agen-
cies, as determined in accordance with paragraphs (a) and [(a-1)] (B) of
subdivision one of section twenty-eight hundred seven-c of this  article
as  in  effect on December thirty-first, nineteen hundred ninety-six, or
health maintenance organizations for services  provided  to  subscribers
eligible for medical assistance pursuant to title eleven of article five
of  the  social  services  law,  or  approved organizations for services
provided to subscribers eligible for  the  family  health  plus  program
pursuant  to  title eleven-D of article five of the social services law,
shall be five and ninety-eight-hundredths  percent,  provided,  however,
that  for  services provided on and after July first, two thousand three
the total percentage allowance shall be six and  forty-seven  hundredths
percent,  and  further  provided that for services provided on and after
January first, two thousand six, the total percentage allowance shall be
six and fifty-four hundredths percent, and  further  provided  that  for
services provided on and after April first, two thousand nine, the total
percentage allowance shall be seven and four hundredths percent.
  S  13. Paragraph (a) and subparagraph (i) of paragraph (c) of subdivi-
sion 4 of section 2807-j of the public  health  law,  paragraph  (a)  as
amended  by  section  62  of  part  B of chapter 58 of the laws of 2005,
subparagraph (i) of paragraph (c) as added by chapter 1 of the  laws  of
1999, are amended to read as follows:
  (a) For periods prior to January first, two thousand five, the commis-
sioner  is authorized to contract with the article forty-three insurance
law plans, or such other contractors as the  commissioner  shall  desig-
nate,  to  receive  and distribute funds from the allowances established
pursuant to this section, and funds  from  the  assessments  established
pursuant to subdivision [eighteen] EIGHT of section twenty-eight hundred
seven-c  of this article. In the event contracts with the article forty-
three insurance law plans or other commissioner's designees are effectu-
ated, the commissioner shall conduct annual audits of  the  receipt  and
distribution  of  the  funds.  The  reasonable  costs and expenses of an
administrator as approved by the commissioner, not to exceed for person-
nel services on an annual basis two million two hundred thousand dollars
for collection and distribution of  allowances  and  assessments  estab-
lished  pursuant  to  this  section  and subdivision [eighteen] EIGHT of
section twenty-eight hundred seven-c of this article, shall be paid from
the allowance and assessment funds.
  (i) Funds accumulated and pooled pursuant to this  section,  paragraph
(a)  of  subdivision  [eighteen]  EIGHT  of section twenty-eight hundred
seven-c of this article, and sections twenty-eight hundred  seven-s  and
twenty-eight hundred seven-t of this article; and
  S  14. The opening paragraph of subdivision 9 of section 2807-j of the
public health law, as added by chapter 639  of  the  laws  of  1996,  is
amended to read as follows:
  Funds  accumulated,  including  income  from  invested funds, from the
allowances specified in this section, and the  assessments  pursuant  to
subdivision  [eighteen] EIGHT of section twenty-eight hundred seven-c of
this article, and the assessments pursuant to paragraph (c) of  subdivi-

S. 6980                            120

sion  nine of section twenty-eight hundred seven-d of this article, plus
such funds as may be allocated in accordance with  section  twenty-eight
hundred seven-s of this article, including interest and penalties, shall
be  deposited  by  the  commissioner  or  the commissioner's designee as
follows:
  S 15. Subdivision 12 of section 2807-j of the public  health  law,  as
added by chapter 639 of the laws of 1996, is amended to read as follows:
  12.  Revenue from the allowances pursuant to this section shall not be
included in gross revenue  received  for  purposes  of  the  assessments
pursuant to subdivision [eighteen] EIGHT of section twenty-eight hundred
seven-c  of  this article, subject to the provisions of paragraph (e) of
subdivision [eighteen] EIGHT of section twenty-eight hundred seven-c  of
this  article,  and  shall not be included in gross revenue received for
purposes of the assessments pursuant  to  section  twenty-eight  hundred
seven-d of this article, subject to the provisions of subdivision twelve
of section twenty-eight hundred seven-d of this article.
  S  16. Clause (A) of subparagraph (ii) of paragraph (d) of subdivision
5-a of section 2807-k of the public health law, as added by section 28-b
of part B of chapter 58 of the laws of  2008,  is  amended  to  read  as
follows:
  (A)  payments  in  accordance  with  subdivision  [fourteen-f]  SIX of
section twenty-eight hundred seven-c of this article;
  S 17. Subparagraph (iv) of paragraph (b) of subdivision 5-d of section
2807-k of the public health law, as added by section  1  of  part  C  of
chapter 56 of the laws of 2013, is amended to read as follows:
  (iv) Such regulations shall reserve one percent of the funds available
for  distribution  in the two thousand fourteen and two thousand fifteen
calendar years pursuant to this  subdivision,  subdivision  [fourteen-f]
SIX  of  section  twenty-eight  hundred  seven-c  of  this  article, and
sections two hundred eleven and  two  hundred  twelve  of  chapter  four
hundred  seventy-four  of  the laws of nineteen hundred ninety-six, in a
"financial assistance compliance pool" and shall establish methodologies
for the distribution of such pool funds to  facilities  based  on  their
level  of  compliance,  as  determined  by  the  commissioner,  with the
provisions of subdivision nine-a of this section.
  S 18. Subdivision 10 of section 2807-k of the public  health  law,  as
added by chapter 639 of the laws of 1996, is amended to read as follows:
  10. In order for a general hospital to be eligible for distribution of
funds  from  the  pool, such general hospital if it provides obstetrical
care and services must be in compliance with the  provisions  of  [para-
graph  (e)  of subdivision sixteen] SUBDIVISION SEVEN of section twenty-
eight hundred seven-c of this article.
  S 19. Subdivision 13 of section 2807-k of the public  health  law,  as
amended  by  chapter  80  of  the  laws  of  2004, is amended to read as
follows:
  13. Distributions to general hospitals pursuant to  this  section  and
the adjustments provided in accordance with subdivision [fourteen-f] SIX
of section twenty-eight hundred seven-c of this article shall be consid-
ered  disproportionate share payments for inpatient hospital services to
general hospitals  serving  a  disproportionate  number  of  low  income
patients  with special needs for purposes of providing assurances to the
secretary of health and human services  as  necessary  to  meet  federal
requirements  for  securing  federal financial participation pursuant to
title XIX of the federal social security act.
  S 20. Subdivision 15 of section 2807-k of the public  health  law,  as
added by chapter 639 of the laws of 1996, is amended to read as follows:

S. 6980                            121

  15.  Revenue  from  distributions pursuant to this section and adjust-
ments pursuant to subdivision [fourteen-f] SIX of  section  twenty-eight
hundred  seven-c  of this article shall not be included in gross revenue
received for purposes of the assessments pursuant to subdivision  [eigh-
teen]  EIGHT  of  section  twenty-eight hundred seven-c of this article,
subject to the provisions of paragraph  (e)  of  subdivision  [eighteen]
EIGHT of section twenty-eight hundred seven-c of this article, and shall
not  be  included  in gross revenue received for purposes of the assess-
ments pursuant to section twenty-eight hundred seven-d of this  article,
subject  to the provisions of subdivision twelve of section twenty-eight
hundred seven-d of this article.
  S 21. Subdivision 16 of section 2807-k of the public  health  law,  as
amended  by  chapter  419  of  the  laws  of 2000, is amended to read as
follows:
  16. Supplemental indigent care distributions. From available resources
established pursuant to paragraph (a-1)  of  subdivision  four  of  this
section,  each  hospital  shall  receive a proportionate share, provided
that no hospital shall receive less than the reduction amount calculated
pursuant to paragraph (d) of subdivision three of  section  twenty-eight
hundred seven-m of this article, subject to hospital specific dispropor-
tionate  share  payment limits calculated in accordance with subdivision
[twenty-one] ELEVEN of section  twenty-eight  hundred  seven-c  of  this
article.
  S  22.  Subdivision  17 of section 2807-k of the public health law, as
added by section 3-b of part B of chapter 109 of the laws  of  2010,  is
amended to read as follows:
  17.  Indigent  care  reductions.  For each hospital receiving payments
pursuant to paragraph (i)  of  subdivision  [thirty-five]  SEVENTEEN  of
section  twenty-eight  hundred seven-c of this article, the commissioner
shall reduce the sum of any amounts paid pursuant to  this  section  and
pursuant  to  section  twenty-eight  hundred seven-w of this article, as
computed based on projected  facility  specific  disproportionate  share
hospital  ceilings,  by an amount equal to the lower of such sum or each
such hospital's payments pursuant to paragraph (i) of subdivision [thir-
ty-five] SEVENTEEN of section twenty-eight hundred seven-c of this arti-
cle, provided, however, that any additional aggregate reductions enacted
in a chapter of the laws of two thousand ten to  the  aggregate  amounts
payable  pursuant  to  this section and pursuant to section twenty-eight
hundred seven-w of this article  shall  be  applied  subsequent  to  the
adjustments otherwise provided for in this subdivision.
  S  23.  Subdivision  3  of section 2807-l of the public health law, as
amended by section 7 of part C of chapter 59 of the  laws  of  2011,  is
amended to read as follows:
  3.  Revenue  from  distributions pursuant to this section shall not be
included in gross revenue  received  for  purposes  of  the  assessments
pursuant to subdivision [eighteen] EIGHT of section twenty-eight hundred
seven-c  of  this article, subject to the provisions of paragraph (e) of
subdivision [eighteen] EIGHT of section twenty-eight hundred seven-c  of
this  article,  and  shall not be included in gross revenue received for
purposes of the assessments pursuant  to  section  twenty-eight  hundred
seven-d of this article, subject to the provisions of subdivision twelve
of section twenty-eight hundred seven-d of this article.
  S  24.  Subparagraph  (i) of paragraph (s) of subdivision 1 of section
2807-m of the public health law, as amended by section 16 of part  B  of
chapter 58 of the laws of 2008, is amended to read as follows:

S. 6980                            122

  (i)  determining the difference between (A) a calculation of what each
teaching general hospital would have been paid if payments made pursuant
to paragraph [(a-3)] (D) of  subdivision  one  of  section  twenty-eight
hundred  seven-c of this article between January first, nineteen hundred
ninety-six  and  December  thirty-first,  two  thousand three were based
solely on the case mix of persons eligible for medical assistance  under
the  medical assistance program pursuant to title eleven of article five
of the social services law who are enrolled in health maintenance organ-
izations and persons paid for  under  the  family  health  plus  program
enrolled in approved organizations pursuant to title eleven-D of article
five  of  the social services law during those years, and (B) the actual
payments to each such hospital pursuant  to  paragraph  [(a-3)]  (D)  of
subdivision  one of section twenty-eight hundred seven-c of this article
between January first, nineteen hundred ninety-six and December  thirty-
first, two thousand three.
  S  25.  Subdivision  8  of section 2807-m of the public health law, as
added by chapter 639 of the laws of 1996 and as renumbered by chapter  1
of the laws of 1999, is amended to read as follows:
  8.  Revenue  from  distributions  pursuant  to  this  section shall be
included in gross revenue  received  for  purposes  of  the  assessments
pursuant to subdivision [eighteen] EIGHT of section twenty-eight hundred
seven-c  of this article and for purposes of the assessments pursuant to
section twenty-eight hundred seven-d of this article.
  S 26. Subdivision 9 of section 2807-s of the  public  health  law,  as
added by chapter 639 of the laws of 1996, is amended to read as follows:
  9.  Revenue  from the allowances pursuant to this section shall not be
included in gross revenue  received  for  purposes  of  the  assessments
pursuant to subdivision [eighteen] EIGHT of section twenty-eight hundred
seven-c  of  this article, subject to the provisions of paragraph (e) of
subdivision [eighteen] EIGHT of section twenty-eight hundred seven-c  of
this  article,  and  shall not be included in gross revenue received for
purposes of the assessments pursuant  to  section  twenty-eight  hundred
seven-d of this article, subject to the provisions of subdivision twelve
of section twenty-eight hundred seven-d of this article.
  S  27.  Subdivision  5  of section 2807-w of the public health law, as
added by section 3-c of part B of chapter 109 of the laws  of  2010,  is
amended to read as follows:
  5.  For  each hospital receiving payments pursuant to paragraph (i) of
subdivision [thirty-five]  SEVENTEEN  of  section  twenty-eight  hundred
seven-c  of  this  article, the commissioner shall reduce the sum of any
amounts paid pursuant to this section and pursuant  to  section  twenty-
eight  hundred  seven-k  of this article, as computed based on projected
facility specific disproportionate share hospital ceilings, by an amount
equal to the lower of such sum or each such hospital's payments pursuant
to paragraph (i) of subdivision [thirty-five] SEVENTEEN of section twen-
ty-eight hundred seven-c of this article, provided,  however,  that  any
additional  aggregate reductions enacted in a chapter of the laws of two
thousand ten to the aggregate amounts payable pursuant to  this  section
and  pursuant  to  section  twenty-eight hundred seven-k of this article
shall be applied subsequent to the adjustments otherwise provided for in
this subdivision.
  S 28. Paragraph (a) of subdivision 1 of section 2807-y of  the  public
health  law,  as added by section 67 of part B of chapter 58 of the laws
of 2005, is amended to read as follows:
  (a) subdivision  [eighteen]  EIGHT  of  section  twenty-eight  hundred
seven-c of this article;

S. 6980                            123

  S  29. Subparagraph (i) of paragraph (a) of subdivision 2-b of section
2808 of the public health law, as amended by section  2  of  part  I  of
chapter 2 of the laws of 2009, is amended to read as follows:
  (i)  Subject  to  the provisions of subparagraphs (ii) through (vi) of
this paragraph, for the two thousand seven  rate  period  the  operating
cost  component  of  rates  of  payment shall reflect the operating cost
component of rates effective for October first,  two  thousand  six,  as
adjusted  for  inflation in accordance with paragraph (c) of subdivision
[ten] FOUR of section twenty-eight hundred seven-c of this article;  and
for  the  January  first, two thousand eight through March thirty-first,
two thousand nine rate period the operating cost component of  rates  of
payment  shall  reflect  the operating cost component of rates effective
for December thirty-first, two thousand six, as adjusted  for  inflation
in  accordance  with  paragraph (c) of subdivision [ten] FOUR of section
twenty-eight hundred seven-c of this article.
  S 30. Clause (A) of subparagraph (i) of paragraph (b)  of  subdivision
2-b  of  section 2808 of the public health law, as amended by section 61
of part A of chapter 56 of the laws of  2013,  is  amended  to  read  as
follows:
  (A)  Subject  to the provisions of subparagraphs (ii) through (xiv) of
this paragraph, for periods on and after April first, two thousand  nine
the operating cost component of rates of payment shall reflect allowable
operating  costs  as reported in each facility's cost report for the two
thousand two calendar year, as adjusted for inflation on an annual basis
in accordance with the methodology set forth in paragraph (c) of  subdi-
vision  [ten] FOUR of section twenty-eight hundred seven-c of this arti-
cle, provided, however, that for those facilities which  are  determined
by  the  commissioner to be qualifying facilities in accordance with the
provisions of clause (B) of this subparagraph, rates  shall  be  further
adjusted  to  include  the  proportionate  benefit, as determined by the
commissioner, of the expiration of the opening paragraph  and  paragraph
(a)  of  subdivision  sixteen  of  this  section and of paragraph (a) of
subdivision fourteen of this section,  and  provided  further  that  the
operating  cost component of rates of payment for those facilities which
are determined by  the  commissioner  to  be  qualifying  facilities  in
accordance  with the provisions of clause (B) of this subparagraph shall
not be less than the operating component such facilities received in the
two thousand eight rate period, as adjusted for inflation on  an  annual
basis  in  accordance with the methodology set forth in paragraph (c) of
subdivision [ten] FOUR of section twenty-eight hundred seven-c  of  this
article  and  further provided, however, that rates for facilities whose
operating cost component reflects base year costs subsequent to  January
first,  two  thousand  two  shall have rates computed in accordance with
this paragraph, utilizing allowable operating costs as reported in  such
subsequent  base  year  period,  and trended forward to the rate year in
accordance with applicable inflation factors.
  S 31. Paragraph (b) of subdivision 9 of section  2808  of  the  public
health  law,  as added by chapter 190 of the laws of 1990, is amended to
read as follows:
  (b) The methodology shall be developed by four independent consultants
with expertise in health economics appointed by the commissioner  pursu-
ant  to  paragraph (b) of subdivision [ten] FOUR of section twenty-eight
hundred seven-c of this chapter. On or about  September  first  of  each
year  following  the effective date of this subdivision, the consultants
shall provide to the commissioner and the council the methodology to  be
used  to  determine  the trend factors for subsequent rate periods only,

S. 6980                            124

beginning with the nine month period commencing  April  first,  nineteen
hundred  ninety-one  and  for subsequent twelve month periods commencing
January first, nineteen hundred ninety-two and thereafter.  The  commis-
sioner  shall monitor the actual price movements during these periods of
the external price indicators used in the methodology, shall report  the
results  of  the  monitoring  to the consultants and shall implement the
recommendations of the consultants for one  prospective  interim  annual
adjustment  to  the trend factors to reflect such price movements and to
be effective on January first, one year after the initial  trend  factor
was established and one prospective final annual adjustment to the trend
factors  to  reflect such price movements and to be effective on January
first, two years after the initial trend factor was established.
  S 32. Paragraph (d) of subdivision 2 of section  4406  of  the  public
health law, as amended by chapter 504 of the laws of 1995, is amended to
read as follows:
  (d)  If the commissioner determines that an organization has permitted
the benefits provided pursuant to an out-of-plan system  to  exceed  ten
percent,  except  as  permitted by paragraph (b) or (c) of this subdivi-
sion, the commissioner may, where appropriate, assess an organization  a
civil  penalty  not  to  exceed the amount determined by multiplying the
percentage permitted in excess of ten percent by the amount, in dollars,
of the difference between  what  the  organization  paid  all  inpatient
hospitals for such year and the amount such organization would have paid
such  hospitals  had  it been a payor within the categories specified in
paragraph [(b)] (E) of subdivision one of section  twenty-eight  hundred
seven-c  of this chapter and not authorized to negotiate hospital rates.
The commissioner, in consultation with the superintendent,  may  revoke,
suspend  or  limit  an  approval issued pursuant to this subdivision for
non-compliance by the organization with any of the  provisions  of  this
article or the rules and regulations promulgated thereunder.
  S  33.  Paragraph  (b)  of subdivision 8 of section 4900 of the public
health law is REPEALED and paragraphs (c), (d) and  (e)  are  relettered
paragraphs (b), (c) and (d).
  S 34. Subdivisions 9 and 10 of section 365 of the social services law,
subdivision 9 as added by chapter 74 of the laws of 1989, subdivision 10
as  added  by  chapter  938  of the laws of 1990, are amended to read as
follows:
  9. Any inconsistent provision of this chapter or  other  law  notwith-
standing, the social services district in which an eligible major public
general  hospital  is  physically  located  shall be responsible for the
supplementary bad debt and charity care adjustment component of the rate
of payment for such major public general  hospital  [(as  determined  in
accordance  with  subdivision fourteen-a of section twenty-eight hundred
seven-c of the public health law)] for all inpatient  hospital  services
provided  by  such  major  public  general  hospital  in accordance with
section three hundred sixty-five-a of this article, regardless of wheth-
er another social services district or the department may  otherwise  be
responsible  for  furnishing  medical assistance to the eligible persons
receiving such inpatient services.
  10. Any inconsistent provision of this chapter or other  law  notwith-
standing,  the  social  services  district  in  which an eligible public
general hospital is physically located  shall  be  responsible  for  the
supplementary  low  income  patient  adjustment component of the rate of
payment for such public general hospital [(as determined  in  accordance
with  subdivision  fourteen-d of section twenty-eight hundred seven-c of
the public health law)] for all inpatient hospital services provided  by

S. 6980                            125

such  public  general  hospital in accordance with section three hundred
sixty-five-a of this  article,  regardless  of  whether  another  social
services  district  or  the  department may otherwise be responsible for
furnishing  medical  assistance  to  the eligible persons receiving such
inpatient services.
  S 35. Subdivision 12 of section 365 of the  social  services  law,  as
added by chapter 639 of the laws of 1996, is amended to read as follows:
  12.  Any  inconsistent provision of this chapter or other law notwith-
standing, the social services  district  in  which  an  eligible  public
general  hospital  is  physically  located  shall be responsible for the
public general  hospital  indigent  care  adjustment  component  of  the
payments  to  such  public general hospital (as determined in accordance
with  subdivision  [fourteen-f]  SIX  of  section  twenty-eight  hundred
seven-c  of  the  public health law) for all inpatient hospital services
provided by such public general  hospital  in  accordance  with  section
three hundred sixty-five-a of this article, regardless of whether anoth-
er social services district or the department may otherwise be responsi-
ble  for furnishing medical assistance to the eligible persons receiving
such inpatient services.
  S 36. Subparagraph 4 of paragraph (c) of subdivision 5 of section  366
of  the  social  services  law,  as amended by chapter 41 of the laws of
1992, is amended to read as follows:
  (4) Any transfer made by a person or the person's spouse under subpar-
agraph three of this paragraph shall cause the person to  be  ineligible
for  nursing  facility  services, for services at a level of care equiv-
alent to that of nursing facility services for the lesser of (i) a peri-
od of thirty months from the date of transfer, or (ii) a period equal to
the total uncompensated value of the resources so  transferred,  divided
by  the  average  cost of nursing facility services to a private patient
for a given period of time at the time of application as  determined  by
the  commissioner. For purposes of this subparagraph the average cost of
nursing facility services to a private patient for  a  given  period  of
time  at  the  time  of  application shall be presumed to be one hundred
twenty percent of the average medical assistance rate of payment  as  of
the  first day of January of each year for nursing facilities within the
region as established [pursuant to paragraph (b) of subdivision  sixteen
of section twenty-eight hundred seven-c of the public health law] BY THE
COMMISSIONER, wherein the applicant resides.
  S  37. Subparagraph 4 of paragraph (d) of subdivision 5 of section 366
of the social services law, as added by chapter 170 of the laws of 1994,
is amended to read as follows:
  (4) Any transfer made by an  individual  or  the  individual's  spouse
under  subparagraph three of this paragraph shall cause the person to be
ineligible for services for a period  equal  to  the  total,  cumulative
uncompensated  value of all assets transferred during or after the look-
back period, divided by the average monthly costs  of  nursing  facility
services provided to a private patient for a given period of time at the
time  of  application,  as determined pursuant to the regulations of the
department. The period of ineligibility shall begin with the  first  day
of  the  first  month during or after which assets have been transferred
for less than fair market value, and which does not occur in  any  other
periods  of  ineligibility  under  this  paragraph. For purposes of this
subparagraph, the average monthly costs of nursing facility services  to
a  private patient for a given period of time at the time of application
shall be presumed to be  one  hundred  twenty  percent  of  the  average
medical  assistance  rate  of  payment as of the first day of January of

S. 6980                            126

each year for nursing facilities within the region wherein the applicant
resides, as  established  [pursuant  to  paragraph  (b)  of  subdivision
sixteen  of  section  twenty-eight  hundred seven-c of the public health
law] BY THE COMMISSIONER.
  S  38. Subparagraph 5 of paragraph (e) of subdivision 5 of section 366
of the social services law, as added by section 26-a of part C of  chap-
ter 109 of the laws of 2006, is amended to read as follows:
  (5)  Any  transfer  made  by  an individual or the individual's spouse
under subparagraph three of this paragraph shall cause the person to  be
ineligible  for  services  for  a  period equal to the total, cumulative
uncompensated value of all assets transferred during or after the  look-
back  period,  divided  by the average monthly costs of nursing facility
services provided to a private patient for a given period of time at the
time of application, as determined pursuant to the  regulations  of  the
department. For purposes of this subparagraph, the average monthly costs
of  nursing facility services to a private patient for a given period of
time at the time of application shall be  presumed  to  be  one  hundred
twenty  percent  of the average medical assistance rate of payment as of
the first day of January of each year for nursing facilities within  the
region  where  the  applicant resides, as established [pursuant to para-
graph (b) of subdivision sixteen of section twenty-eight hundred seven-c
of the public health law] BY THE COMMISSIONER. The period of ineligibil-
ity shall begin the first day of a month during or  after  which  assets
have  been transferred for less than fair market value, or the first day
the otherwise  eligible  individual  is  receiving  services  for  which
medical  assistance  coverage  would  be  available based on an approved
application for such care but for the provisions of  subparagraph  three
of  this  paragraph, whichever is later, and which does not occur in any
other periods of ineligibility under this paragraph.
  S 39. Paragraphs (k), (m) and (o) of subdivision 1 of section 368-a of
the social services law are REPEALED.
  S 40. Section 335 of the insurance law, as added by chapter 2  of  the
laws of 1988, is amended to read as follows:
  S  335.  Implementation  of  hospital  reimbursement  methodology. The
superintendent shall have the power to prescribe rules  and  regulations
governing  insurer  procedures and subscriber contract provisions neces-
sary to implement a hospital reimbursement  methodology  established  in
accordance  with  the  provisions  of article twenty-eight of the public
health law, and insurer procedures and  subscriber  contract  provisions
necessary  to  implement  a  hospital inpatient discharge review program
established in accordance with the provisions  of  section  twenty-eight
hundred  three-i  of  the public health law, and to establish standards,
criteria and procedures for evaluation of insurer performance in  offer-
ing  contracts  for  hospital and medical benefits on an open enrollment
basis necessary for a determination of the hospital payment rate conver-
sion factor [in accordance with  the  provisions  of  paragraph  (i)  of
subdivision eleven of section twenty-eight hundred seven-c of the public
health law].
  The  superintendent shall periodically report his findings and conclu-
sions to the commissioner of health and to the chairman and  vice-chair-
man  of the council on health care financing concerning insurer perform-
ance in offering contracts for hospital and medical benefits on an  open
enrollment basis.
  S  41.  Paragraph 2 of subsection (h) of section 4900 of the insurance
law is REPEALED and paragraphs 3, 4 and 5 are renumbered paragraphs 2, 3
and 4.

S. 6980                            127

  S 42. Subdivisions (a) and (b) of section 92-dd of the  state  finance
law,  as  amended  by  section  3 of part T of chapter 61 of the laws of
2011, are amended to read as follows:
  (a)  On  and  after  April  first,  two thousand five, such fund shall
consist of the revenues heretofore and hereafter collected  or  required
to  be  deposited  pursuant  to  paragraph (a) of subdivision [eighteen]
EIGHT of section twenty-eight hundred seven-c, and sections twenty-eight
hundred seven-j, twenty-eight hundred seven-s and  twenty-eight  hundred
seven-t  of  the  public  health  law,  subdivision  (b) of section four
hundred eighty-two of the tax law and required to  be  credited  to  the
tobacco  control  and  insurance  initiatives  pool, subparagraph (O) of
paragraph four of subsection (j) of section four thousand three  hundred
one  of the insurance law, section twenty-seven of part A of chapter one
of the laws of two thousand two and all other moneys credited or  trans-
ferred thereto from any other fund or source pursuant to law.
  (b)  The  pool  administrator  under contract with the commissioner of
health pursuant to section twenty-eight hundred seven-y  of  the  public
health  law shall continue to collect moneys required to be collected or
deposited pursuant to paragraph (a) of subdivision [eighteen]  EIGHT  of
section  twenty-eight hundred seven-c, and sections twenty-eight hundred
seven-j, twenty-eight hundred seven-s and twenty-eight  hundred  seven-t
of  the  public  health  law,  and shall deposit such moneys in the HCRA
resources fund.  The  comptroller  shall  deposit  moneys  collected  or
required  to  be  deposited  pursuant to subdivision (b) of section four
hundred eighty-two of the tax law and required to  be  credited  to  the
tobacco  control  and  insurance  initiatives  pool, subparagraph (O) of
paragraph four of subsection (j) of section four thousand three  hundred
one  of the insurance law, section twenty-seven of part A of chapter one
of the laws of two thousand two and all other moneys credited or  trans-
ferred thereto from any other fund or source pursuant to law in the HCRA
resources fund.
  S  43.  Subdivision  (c) of section 92-dd of the state finance law, as
amended by section 75-f of part C of chapter 58 of the laws of 2008,  is
amended to read as follows:
  (c)  The pool administrator shall, from appropriated funds transferred
to the  pool  administrator  from  the  comptroller,  continue  to  make
payments  as required pursuant to sections twenty-eight hundred seven-k,
twenty-eight hundred seven-m (not including payments  made  pursuant  to
subparagraph (ii) of paragraph (b) and paragraphs (c), (d), (e), (f) and
(g)  of subdivision five-a and subdivision seven of section twenty-eight
hundred seven-m), and twenty-eight hundred seven-w of the public  health
law,  paragraph  (e)  of  subdivision  [twenty-five] FOURTEEN of section
twenty-eight hundred seven-c of the public health law, AS SUCH  SUBDIVI-
SION  WAS  IN  EFFECT PRIOR TO TWO THOUSAND FOURTEEN, paragraphs (b) and
(c) of subdivision thirty of section twenty-eight hundred seven-c of the
public health law, paragraph (b)  of  subdivision  eighteen  of  section
twenty-eight  hundred  eight of the public health law, subdivision seven
of section twenty-five hundred-d of the public health  law  and  section
eighty-eight of chapter one of the laws of nineteen hundred ninety-nine.
  S  44.  Subdivision  1  of  section  97-x of the state finance law, as
amended by section 731 of the laws  of  1993,  is  amended  to  read  as
follows:
  1.  Each  general  hospital  shall  be  assessed  an annual fee by the
commissioner of health calculated on  the  basis  of  its  proportionate
share of the sum of total costs reported by all general hospitals in the
most  recent  calendar year for which certified data are available. Such

S. 6980                            128

fee shall not exceed  one-tenth  of  one  percent  of  the  total  costs
reported  by  such  general hospital. Where rates of payment for general
hospital services established pursuant to section  twenty-eight  hundred
seven-a  of  the  public  health law or pursuant to section twenty-eight
hundred seven-c of the public health  law  have  not  been  adjusted  to
reflect  the  proportionate  share  of costs associated with such annual
fee, rates shall be  so  adjusted.  The  commissioner  of  health  shall
promulgate regulations establishing a time schedule for payment of annu-
al  fees assessed on general hospitals. The commissioner of health shall
charge a user fee for the production of any data to any person or organ-
ization, provided, however, that the commissioner of  health  may  waive
such fee for the provision of reports, to be defined in regulation, to a
general  hospital  or  its  designee  as approved by the commissioner of
health or third-party payor or health systems agency to  perform  duties
and functions provided for in subdivision seven, excluding paragraph (s)
of such subdivision, of section twenty-nine hundred four-b of the public
health  law.  Notwithstanding any inconsistent provisions of any general
or special law, charges established pursuant to  subdivision  twelve  of
section  twenty-eight hundred seven-a of the public health law or pursu-
ant to paragraph [(c)] (H) of subdivision one  of  section  twenty-eight
hundred  seven-c of the public health law shall be permitted to increase
to reflect increased costs resulting from the proportionate cost of  the
annual fees assessed pursuant to this subdivision.
  S  45. Subparagraph 1 of subdivision (d) of section 13 of the workers'
compensation law, as amended by chapter 419 of the laws of 2000, is laws
of 1993, is amended to read as follows:
  (1) In the event  that  an  insurer  or  health  benefits  plan  makes
payments  for  medical  and/or  hospital services for or on behalf of an
injured employee they shall  be  entitled  to  be  reimbursed  for  such
payments by the carrier or employer within the limits of the medical and
hospital  fee  schedules  if  the  board  determines  that  the claim is
compensable. For the purposes of this  section,  an  insurer  or  health
benefits plan includes a medical expense indemnity corporation, a health
or hospital service corporation, a commercial insurance company licensed
to  write  accident  and  health  insurance  in the state of New York, a
health maintenance organization operating  in  accordance  with  article
forty-three  of  the  insurance  law or article forty-four of the public
health law, or a self-insured or self-funded health care  benefits  plan
operated by, or on behalf of, any business, municipality or other entity
(including  an employee welfare fund as defined in article forty-four of
the insurance law or any other union trust fund or union health benefits
plan). Notwithstanding any other provision of law, in no event shall the
carrier or employer be required to reimburse the insurer or health bene-
fits plan in an amount greater than the  amount  paid  for  medical  and
hospital  services  for  or  on  behalf  of the injured employer by such
corporation or company; provided, however, if the  carrier  or  employer
does  not  reimburse  the  insurer or health benefits plan within thirty
days after the board determines  that  the  claim  is  compensable,  the
carrier  or employer shall reimburse the insurer or health benefits plan
at the amount the carrier or employer would be  obligated  to  reimburse
the  hospital  or  other  provider of medical services if the carrier or
employer made payment directly to the provider of medical and/or  hospi-
tal  services  pursuant  to  this  chapter (or, in the case of inpatient
hospital services, pursuant to paragraphs [(b) and (b-1)] (E) AND (F) of
subdivision one of section twenty-eight hundred seven-c  of  the  public
health  law).  Upon reimbursement to the insurer or health benefits plan

S. 6980                            129

pursuant to this subdivision, the carrier or employer shall be  relieved
of  liability for the medical and/or hospital services for which payment
has been made by the insurer or health benefits plan.
  S 46. Subdivision 5 of section 168 of chapter 639 of the laws of 1996,
constituting  the New York Health Care Reform Act of 1996, as amended by
section 1 of part C of chapter 59 of the laws of  2011,  is  amended  to
read as follows:
  5.  sections  [2807-c,] 2807-j, 2807-s and 2807-t of the public health
law, [as amended or] as added by this act, shall expire on December  31,
2014,  and shall be thereafter effective only in respect to any act done
on or before such date or action or proceeding arising out of  such  act
including continued collections of funds from assessments and allowances
and surcharges established pursuant to sections [2807-c,] 2807-j, 2807-s
and  2807-t  of  the  public health law, and administration and distrib-
utions of funds from pools established pursuant  to  sections  [2807-c,]
2807-j,  2807-k,  2807-l, 2807-m, 2807-s and 2807-t of the public health
law related to patient services provided before December 31,  2014,  and
continued  expenditure of funds authorized for programs and grants until
the exhaustion of funds therefor;
  S 47. Subdivision 1 of section 138 of chapter 1 of the laws  of  1999,
constituting  the New York Health Care Reform Act of 2000, as amended by
section 2 of part C of chapter 59 of the laws of  2011,  is  amended  to
read as follows:
  1.  sections [2807-c,] 2807-j, 2807-s, and 2807-t of the public health
law, as amended by this act, shall expire  on  December  31,  2014,  and
shall  be  thereafter  effective  only in respect to any act done before
such date or action or proceeding arising  out  of  such  act  including
continued  collections  of  funds  from  assessments  and allowances and
surcharges established pursuant to sections [2807-c,] 2807-j, 2807-s and
2807-t of the public health law, and administration and distributions of
funds from pools established  pursuant  to  sections  [2807-c,]  2807-j,
2807-k,  2807-l, 2807-m, 2807-s, 2807-t, 2807-v and 2807-w of the public
health law, as amended or added by this act, related to patient services
provided before December 31, 2014, and continued  expenditure  of  funds
authorized  for programs and grants until the exhaustion of funds there-
for;
  S 48. Subdivision 2 of section 246 of chapter 81 of the laws of  1995,
amending  the  public  health  law  and  other  laws relating to medical
reimbursement and welfare reform, as amended by section 4 of part  B  of
chapter 56 of the laws of 2013, is amended to read as follows:
  2.  Sections  five,  seven  through nine, twelve through fourteen, and
eighteen of this act shall be deemed to have  been  in  full  force  and
effect  on  and  after  April  1, 1995 through March 31, 1999 and on and
after July 1, 1999 through March 31, 2000 and on and after April 1, 2000
through March 31, 2003 and on and after April 1, 2003 through March  31,
2006  and  on  and after April 1, 2006 through March 31, 2007 and on and
after April 1, 2007 through March 31, 2009 and on  and  after  April  1,
2009  through  March 31, 2011 and sections twelve, thirteen and fourteen
of this act shall be deemed to be in full force and effect on and  after
April 1, 2011 [through March 31, 2015];
  S 49. This act shall take effect immediately; provided that the amend-
ments  to  section  2807-j  of  the  public  health law made by sections
twelve, thirteen, fourteen and fifteen of this act and the amendments to
section 2807-s of the public health law made by  section  twenty-six  of
this  act  shall not affect the expiration of such sections and shall be
deemed to expire therewith.