Rate Review History
Pursuant to W. Va. Code § 16-29B-1 et seq., the West Virginia Health Care Authority (hereinafter referred to as the "Authority") was created in March, 1983, in order "to protect the health and well-being of the citizens of this state by guarding against unreasonable loss of economic resources as well as to ensure the continuation of appropriate access to cost-effective, high quality health care services." West Virginia Code § 16-29B-1. The statute created the Authority as a three-member board with the power "to approve or disapprove hospital rates and budgets taking into consideration the criteria set forth in section twenty" of the statute. West Virginia Code § 16-29B-19(a)(4).
Through the rate review process, the Authority established revenue limits for a group of payors termed "nongovernmental payors". This group included public and private insurers, persons who pay for their own hospital services, and all other third-party payors. The Authority established these revenue limits in accordance with W. Va. Code § 16-29B-1 et seq. and the "Hospital Cost-Based Rate Review System", 65 C.S.R. 5. The Authority could not establish payment rates for the hospital's Medicare and Medicaid patients. These programs are strictly controlled by the federal government and were beyond state regulatory powers for rate review purposes. Also exempt from review were the rates paid by the Public Employees Insurance Agency (PEIA) pursuant to the 1989 Omnibus Health Care Act. Although the Authority did not establish payment rates for these governmental programs, the Authority did review the impact of revenues and expenses associated with these programs on "nongovernmental payors".
From May 20, 1985, until July 1, 1992, the Authority established revenue limits for hospitals based upon hospital revenues rather than actual hospital costs.
In 1991, the Legislature substantially amended W. Va. Code § 16-29B-1 et seq and found that a cost-based rate review system would be more effective in containing the cost of acute care hospital services than a revenue - based system. The Legislature further required the Authority to develop a cost-based rate review system and adopt regulations to implement the cost-based rate review methodology by the first day of July, one thousand nine hundred ninety-two. The Legislature also amended W. Va. Code § 16-29B-20(a)(2) to require hospitals to file discount contracts for review by the Authority. A discount contract could not be implemented until it was approved by the board.
The two most commonly used application methodologies were: Standard and Benchmarking. The Standard application was a lengthier, more in-depth application process but it allowed the hospital to determine the amount of rate increase requested. The Benchmarking application was a streamlined process wherein hospitals were entitled to request an automatic rate of increase based on their rankings within their peer groups. Hospitals were ranked within a peer group based on cost and charge. The automatic rate of increase a hospital could request was then based on the average of its rankings in the peer group based on cost and charge. The more efficient hospitals qualified to ask for a greater percent of increase. The range of automatic request were from 2.5% to 7.5%.
On March 7, 2016, the WV Legislature passed SB 68 which eliminated the Authority’s ability to conduct rate review. As a result, the establishment of hospital rates ceased on July 1, 2016.