DAR File No. 43834

This rule was published in the July 15, 2019, issue (Vol. 2019, No. 14) of the Utah State Bulletin.

Health, Health Care Financing, Coverage and Reimbursement Policy

Rule R414-2A

Inpatient Hospital Services

Notice of Proposed Rule


DAR File No.: 43834
Filed: 06/28/2019 12:39:18 PM


Purpose of the rule or reason for the change:

The purpose of these changed is to implement, by rule, Medicaid policy for inpatient hospital services.

Summary of the rule or change:

These changes include a new definition on intensive physical rehabilitation, include a new section on reporting routine services, update requirements on hospital admission, clarify coverage and limitations, and update criteria for utilization control and review.

Statutory or constitutional authorization for this rule:

  • 42 CFR 440.10
  • Section 26-1-5
  • Section 26-18-3

Anticipated cost or savings to:

the state budget:

There is no impact to the state budget because these changes only update and clarify policy for inpatient hospital services. They neither affect member services nor provider reimbursement.

local governments:

There is no impact on local governments because they neither fund nor provide inpatient hospital services under the Medicaid program.

small businesses:

There is no impact on small businesses because these changes only update and clarify policy for inpatient hospital services. They neither affect member services nor provider reimbursement.

persons other than small businesses, businesses, or local governmental entities:

There is no impact on Medicaid providers and Medicaid members because these changes only update and clarify policy for inpatient hospital services. They neither affect member services nor provider reimbursement.

Compliance costs for affected persons:

There are no compliance costs to a single Medicaid provider or to a Medicaid member because these changes only update and clarify policy for inpatient hospital services. They neither affect member services nor provider reimbursement.

Comments by the department head on the fiscal impact the rule may have on businesses:

After conducting a thorough analysis, it was determined that these proposed rule changes will not result in a fiscal impact on businesses.

Joseph K. Miner, MD, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Health Care Financing, Coverage and Reimbursement Policy
288 N 1460 W
SALT LAKE CITY, UT 84116-3231

Direct questions regarding this rule to:

  • Craig Devashrayee at the above address, by phone at 801-538-6641, by FAX at 801-538-6099, or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:


This rule may become effective on:


Authorized by:

Joseph Miner, Executive Director


Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs

FY 2020

FY 2021

FY 2022

State Government




Local Government




Small Businesses




Non-Small Businesses




Other Person




Total Fiscal Costs:




Fiscal Benefits

State Government




Local Government




Small Businesses




Non-Small Businesses




Other Persons




Total Fiscal Benefits:




Net Fiscal Benefits:





*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described in the narrative. Inestimable impacts for Non - Small Businesses are described in Appendix 2.


Appendix 2: Regulatory Impact to Non - Small Businesses

None of the 113 non-small business providers will be impacted because these rule changes only implement current Medicaid policy for inpatient hospital services. They neither affect member services nor provider reimbursement.



R414. Health, Health Care Financing, Coverage and Reimbursement Policy.

R414-2A. Inpatient Hospital Services.

R414-2A-1. Introduction and Authority.

This rule defines the scope of inpatient hospital services that are available to Medicaid members[clients for the treatment of disorders other than mental disease]. This rule is authorized under Section 26-18-3 and governs the services allowed under 42 CFR 440.10.


R414-2A-2. Definitions.

(1) "Admission" means the acceptance of a Medicaid member for inpatient hospital care and treatment when the member meets established criteria for severity of illness and intensity of service and the required service cannot be provided in an alternative setting.

(2) "Inpatient" is an individual whose severity of illness and intensity of service requires continuous care in a hospital.

(3) "Inpatient Hospital Intensive Physical Rehabilitation" means an intense program of physical rehabilitation provided in an inpatient rehabilitation hospital or an inpatient rehabilitation unit of a hospital.

([3]4) "Inpatient Hospital Services" are services that a hospital provides for the care and treatment of inpatients.[with disorders other than mental illness.]

([4]5) "Observation services" means services, often less than 24 hours, including use of a bed and monitoring by hospital staff, which are reasonable and necessary to evaluate the medical condition or determine the need for a possible admission to the hospital.

([5]6) "Prepaid Mental Health Plan" means the Medicaid mental and/or substance use disorder managed care plan that covers inpatient and/or outpatient mental health services and outpatient substance use disorder services for PMHP-enrolled Medicaid members.


R414-2A-3. Member Eligibility Requirements.

Inpatient hospital services are available to categorically and medically needy individuals.


R414-2A-4. Hospital Admission Requirements.

(1) An inpatient hospital must meet Medicare participation requirements.

(2) Each hospital that provides inpatient services must have a utilization review plan as described in 42 CFR 482.30.

(3) Each hospital that accepts a Medicaid member for treatment is responsible to verify that the member receives all medically necessary services from Medicaid providers.

(4) Each hospital is financially responsible for any services a member receives from a non-Medicaid provider.

(5) Inpatient hospital intensive physical rehabilitation participation is subject to 42 CFR 482.56 and 42 CFR 412, Subpart B and Subpart P.


R414-2A-5. Prepaid Mental Health Plan.

Before admitting a Prepaid Mental Health Plan (PMHP) member for an inpatient psychiatric stay, a hospital must obtain prior authorization from the PMHP serving the member's county of residence. If the hospital is not contracted with the PMHP, the PMHP may choose to transfer the member to a contracted hospital.


R414-2A-6. Service Coverage.

(1) Inpatient hospital services must be medically necessary and ordered by an appropriate Medicaid-enrolled provider for the diagnosis and treatment of a member's illness.

(2) Services performed for a member by the admitting hospital or by an entity wholly-owned or wholly-operated by the hospital within three days of patient admission, are considered inpatient services. This three-day window applies to diagnostic and non-diagnostic services that are clinically related to the reason for the member's inpatient admission regardless of whether the inpatient, outpatient, or observation diagnoses are the same.

(3) Medical supplies, appliances, drugs, and equipment required for the care and treatment of a member during an inpatient stay are [reimbursed as part of payment under the Diagnosis Related Group (DRG)]included in the inpatient reimbursement.

[(4) Services associated with pregnancy, labor, and vaginal or C-section delivery are reimbursed as inpatient services as part of payment under the DRG, even if the stay is less than 24 hours.

(5) Medicaid may pay at least one-day inpatient admission for:

(a) Admission for a normal delivery;

(b) Admitted and expired;

(c) Admitted and transferred to a distinct part of or to another acute care hospital.]

([6]4) Outpatient hospital services during an inpatient episode are [bundled to the DRG]included in the inpatient reimbursement.

([7]5) Inpatient hospital psychiatric services are available to all Medicaid members. If the member is not enrolled in a PMHP, providers may bill the State directly on a fee-for-service basis. Otherwise, the provider must bill the member's PMHP.

(6) Inpatient hospital intensive physical rehabilitation services must meet the classification criteria of 42 CFR 412.29.

(7) Inpatient hospital intensive physical rehabilitation services are covered for acute conditions from birth through any age and are available one time per event.


R414-2A-7. Limitations.

Inpatient hospital care is limited to medical treatment of symptoms that lead to medical stabilization of the member. This medical stabilization care is irrespective of any underlying psychiatric diagnosis.

(1) Detoxification for a substance use disorder in a hospital is limited to medical detoxification for acute symptoms of withdrawal when the member is in danger of experiencing severe or life-threatening withdrawal. The Department does not cover any lesser level of detoxification in an inpatient hospital.

(2) Abortion procedures require prior authorization. Refer to Rule R414-1B.

(3) Sterilization and hysterectomy procedures require prior authorization and must meet the requirements of 42 CFR 441, Subpart F.

(4) Organ transplant services are governed by Rule R414-10A.

(5) Take-home supplies, dressings, non-rental durable medical equipment, and drugs are [reimbursed as part of payment under the DRG]included in the inpatient reimbursement.

(6) Coverage of sleep studies requires sleep center accreditation through one of the following nationally recognized accreditation organizations:

(a) American Academy of Sleep Medicine (AASM);

(b) Accreditation Commission for Health Care (ACHC); or

(c) The Joint Commission (TJC).

(7) Hyperbaric oxygen therapy is limited to service in a facility in which the hyperbaric unit is accredited by the Undersea and Hyperbaric Medical Society. Hyperbaric oxygen therapy is therapy that places the member in an enclosed pressure chamber for medical treatment.

(8) Medicaid does not cover inpatient services solely for pain management. Pain management is adjunct to other Medicaid services.

(9) Inpatient rehabilitation services require prior authorization.

(10) Observation services are limited to cases where observation and evaluation is required to establish a diagnosis and determine the appropriateness of an inpatient admission or discharge. Observation is used to monitor the member's condition, complete diagnostic testing to establish a definitive diagnosis and formulate the treatment plan.

(a) Medicaid covers observation services with a physician's written order that outlines specific medically necessary reasons for the service, such as the member requires more evaluation to determine the severity of illness (e.g. laboratory, imaging, other diagnostic test) and an order to continue monitoring for clinical signs and symptoms to determine improving or declining health status.

(b) Outpatient procedures include uneventful recovery period.

(i) Observation is used to monitor complications of outpatient procedures beyond uneventful recovery period.

(c) Medicaid does not cover observation services for convenience of the hospital, member or family, or when awaiting transfer to another facility.

(d) When an ordered hospital inpatient admission improves to the point of discharge with a stay less than 24 hours, the admission is covered as inpatient when documentation supports the medical necessity.

(e) Inpatient admissions solely for observation or diagnostic evaluation do not qualify for reimbursement under the DRG system.

(11) Medicaid does not cover admission solely for the treatment of eating disorders.

(12) Medicaid does not cover non-physician psychosocial counseling outside of the DRG.

(13) An individual (undocumented immigrant) who does not meet United States residency requirements may only receive emergency services, including emergency labor and delivery, to treat an emergency medical condition.

(a) Medicaid does not cover prenatal and post-partum services for undocumented immigrants.

(b) Medicaid does not cover prescriptions for a member who is eligible to receive emergency services only.

(14) Inpatient hospital intensive physical rehabilitation services are not covered when the condition and prognosis meet the requirements of placement into a long-term facility, skilled nursing facility, or outpatient rehabilitation service.

(15) Admission for deconditioning (e.g. cardiac or pulmonary) is not covered in an inpatient hospital intensive physical rehabilitation facility.

(16) Inpatient hospital intensive physical rehabilitation services for a member who has suffered a stroke or other cerebral vascular accident may be provided only when admission and therapy is initiated within the first 60 days after onset of the incident.


R414-2A-8. Provider-Preventable Conditions.

(1) Medicaid does not pay for Provider Preventable Conditions (PPC).

(a) Medicaid utilizes the Medicaid Severity-Diagnosis Related Group (MS-DRG) to identify a PPC.

(b) For inpatient hospital claims, Medicaid does not cover PPCs in Medicare crossover patients.

(c) To qualify as a PPC, one of the Medicare-listed diagnoses must develop during hospitalization.

(i) When present on admission, these diagnoses are not considered to be a PPC for that hospitalization.

(ii) Providers are expected to identify Present on Admission (POA) status for all diagnoses on each claim according to correct coding standards.

(d) Providers must assure that all PPC-related diagnoses, services, and charges are noted as "non-covered charges" on the claim.

(i) The Department does not use non-covered charges in calculating the hospital reimbursement.

(e) The Department shall deny PPC-related claims that result in an outlier payment and medical records will be required.

(i) Providers will receive Remittance Advice (RA) that confirms the occurrence of a PPC outlier claim.

(ii) The Department requires providers to know which medical records and other required documents are needed.

(iii) Upon RA notification of a PPC, the provider shall submit the following documents within 30 days:

(A) "Outlier PPC Medical Record Documentation Submission Form";

(B) Complete medical records from the associated hospital stay;

(C) Itemized bill (tab de-limited text file or Excel spreadsheet), including a detailed listing of PPC-related charges as non-covered charges, with total charges matching the total charges submitted on the claim.

(f) The Department will review and, if appropriate, re-process the claim based upon the review of the required documents submitted within the 30-day period of RA notification.

(g) The Department shall deny review of the claim unless the required documentation is submitted within 30 days of RA notification.

(h) The Department requires providers to report PPCs in accordance with Section R414-1-28.


R414-2A-9. Reporting Routine Services.

Routine services in a hospital must be included in a daily service charge, also referred to as room and board. These types of routine services that are not separately reported include:

(1) Room;

(2) Dietary services;

(3) Nursing services;

(4) Minor medical and surgical supplies;

(5) Medical and psychiatric social services;

(6) Use of hospital and facilities;

(7) Drugs, biologicals, supplies, appliances, and equipment, such as:

(a) Anything necessary or otherwise integral to the provision of a specific service, the delivery of services in a specific location, or both;

(b) Items and supplies that may be purchased over the counter;

(c) Reusable items, supplies, and equipment that are provided to all patients admitted to a given treatment area or unit receiving the same service;

(d) Certain other diagnostic or therapeutic services;

(e) Medical or surgical services provided by certain interns or residents-in-training; and

(f) Transportation services, including transport by ambulance.


R414-2A-[9]10. Utilization Control and Review Program for Hospital Services.

The Hospital Utilization Review Program is administered and operated in accordance with Title 63A, Chapter 13.

(1) The purpose of the hospital utilization review program is to ensure:

(a) efficient and effective delivery of services;

(b) services are appropriate and medically necessary;

(c) service quality is maintained; and

(d) the State satisfies federal requirements for a statewide surveillance and utilization control program.

(2) The Hospital Utilization Review Program shall conduct assessments and audits to ensure the appropriateness and medical necessity of the following:

(a) Admissions to a hospital or a designated distinct part unit within a hospital;

(b) Transfers from one acute care hospital to another acute care hospital, or to an inpatient [distinct part of a ]rehabilitation hospital[unit] or psychiatric unit in another acute care hospital (inter-facility transfer);

(c) Transfers from an acute care setting to an inpatient [distinct part ]rehabilitation unit of a hospital or psychiatric unit within the same facility (intra-facility transfer);

(d) Continued stays;

(e) Services, surgical services and diagnostic procedures;

(f) Principal diagnosis, principal surgical procedure or both, reflected on paid claims to ensure consistency with the attending physician's determination and documentation as found in the member's medical record;

(g) Determine whether co-morbidity, as found on the claim, is correct and consistent with the attending physician's determination and compatible with documentation found in the member's medical record; and

(h) Quality of care.

(3) The Hospital Utilization Review Program shall conduct assessments and audits to determine:

(a) Appropriate utilization;

(b) Compliance with state and federal Medicaid regulations;

(c) Whether documentation meets state and federal requirements for sufficiency, and whether it accurately describes the status of services provided to the member; and

(d) Whether procedures that require prior authorization have been approved before the provision of services, except in cases that meet the criteria listed in the Utah Medicaid Section 1: General Information Provider Manual (Retroactive Authorization).

(4) The Hospital Utilization Review Program shall make determinations of medical necessity[medical necessity], appropriateness of care, and suitability of discharge planning in accordance with the following criteria and protocols:

(a) InterQual Criteria;

(b) Administrative rules or criteria developed by Medicaid for programs and services not otherwise addressed; and

(c) DRGs.

(5) Hospital Utilization Readmission Policy and Reviews.

(a) Whenever information available to the reviewer indicates the possibility of readmission to acute care within 30 days of the previous discharge, the staff administering and operating the Hospital Utilization Review Program may review any claim for:

(i) Readmission for the same or a similar diagnosis to the same hospital, or to a different hospital;

(ii) Appropriateness of inter-facility transfers; and

(iii) Appropriateness of intra-facility transfers.

(b) The Hospital Utilization Review Program shall review all suspected readmissions within 30 days of a previous discharge to ensure that Medicaid criteria have been met for severity of illness, intensity of service, and appropriate discharge planning and financial impact to the Department as noted in Subsection R414-2A-[9]10(3).

(c) If a member is readmitted for the same or similar diagnosis within 30 days of discharge and, if after review as described in Subsection R414-2A-[9]10([4]5)(b), program review staff determines that readmission does not meet the criteria in Subsection R414-2A-[9]10(3)(b), then the payment shall be combined into a single DRG payment, unless it is cost effective to pay for two separate admissions. The first DRG (initial admission) shall be the DRG that is paid. This policy does not apply to cases related to pregnancy, neonatal jaundice, or chemotherapy.

(6) Definition, Policy Application.

(a) When applying policy, a similar diagnosis is defined as:

(i) Any diagnoses code with similar descriptors;

(ii) Any exchange or combination of principal and secondary diagnosis; and

(iii) Any other sets of principal diagnoses established to be similar by Utah Medicaid policy in written criteria and published to the hospitals prior to service dates.

(b) The evaluation criteria for utilization control are severity of illness, intensity of service, and cost effectiveness as noted in Subsection R414-2A-[9]10([4]5)(b).

(7) Appropriate remedial action will be initiated for inappropriate readmissions when identified though the hospital utilization post-payment review process.

(8) Applicability to Outpatient Hospital Services.

(a) When a Medicaid member is readmitted to the hospital, or readmitted as an outpatient within 30 days of a previous discharge for the same or similar diagnosis, Medicaid will evaluate both claims to determine if they should be combined into a single payment or paid separately.

(9) Recovery of Funds.

(a) The Department shall recover payment when post-payment review finds that services are not medically necessary, not appropriate, or that quality of service is not suitable.

(b) The Department shall recover payment when it determines there is a violation of the 30-day re-admission policy.

(10) Hospital Utilization Review.

(a) Each month, the Hospital Utilization Review Program shall review at least 5 percent of a selected universe of claims adjudicated in the previous month. At least 2.5 percent of the claims shall be a random sample. Up to 2.5 percent may be a focused review on a specific service. A staff decision to focus on a specific service shall be made no later than the beginning of the sample cycle.

(b) The Department shall select the universe from paid inpatient hospital claims within the Data Warehouse. The universe from which the random sample is selected is defined as all inpatient hospital claims adjudicated before the beginning of the review cycle, except for:

(i) Claims showing, as a principal diagnosis, any International Classification of Diseases, Tenth Revision, Clinical Modification (ICD-10-CM) delivery code in the ICD-10-CM Manual Chapter 15 -- Pregnancy, Childbirth, and the Puerperium, in the range of O00 through O9A.53, and other ICD-10-CM codes or DRG or DRGs as specified by policy or administrative decision.

(ii) Claims that show $0 payment by Medicaid;

(iii) Medicare crossover claims;

(iv) Claims with other codes or diagnoses determined by the review program staff to be inappropriate for review.

(c) The sample cycle shall begin on the first working day of each month.

(11) Utah State Hospital Utilization Review.

(a) The purpose of this utilization review is to ensure that Medicaid funds, as defined under 42 CFR 456, Subpart D, are expended appropriately and to ensure that services provided to Medicaid members at the Utah State Hospital (USH) are necessary and of high quality. Review program staff shall conduct oversight activities at USH.

(b) Oversight activities include quarterly clinical utilization reviews in which program staff review a sample of members who are under 21 years of age and are 65 years of age or older, and who were reviewed by USH utilization review staff during a previous quarter. These reviews are performed to:

(i) Evaluate the USH utilization process; and

(ii) Address the clinical topic selected for that quarter's review.

(c) Reviews of USH Quality Improvement and Quality Assurance programs are conducted to determine whether:

(i) The programs have been implemented in accordance with written hospital policy;

(ii) The programs are effective in meeting stated goals;

(iii) Improvements or modifications have been made to increase the effectiveness of program design.

(12) Applicability to Inpatient Psychiatric Care and Inpatient Rehabilitation Services.

(a) Provisions in the Hospital Utilization Review Program also apply to inpatient psychiatric care and inpatient rehabilitation services.


R414-2A-1[0]1. Cost Sharing.

A Medicaid member is responsible for a copayment as established in the Utah Medicaid State Plan and incorporated by reference in Rule R414-1.


R414-2A-1[1]2. Reimbursement.

Reimbursement for inpatient hospital services is in accordance with Attachment 4.19-B of the Utah Medicaid State Plan, which is incorporated by reference in Rule R414-1.


KEY: Medicaid

Date of Enactment or Last Substantive Amendment: [May 8, 2018]2019

Notice of Continuation: September 15, 2017

Authorizing, and Implemented or Interpreted Law: 26-1-5; 26-18-3; 26-18-3.5

Additional Information

More information about a Notice of Proposed Rule is available online.

The Portable Document Format (PDF) version of the Bulletin is the official version. The PDF version of this issue is available at https://rules.utah.gov/publicat/bull_pdf/2019/b20190715.pdf. The HTML edition of the Bulletin is a convenience copy. Any discrepancy between the PDF version and HTML version is resolved in favor of the PDF version.

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For questions regarding the content or application of this rule, please contact Craig Devashrayee at the above address, by phone at 801-538-6641, by FAX at 801-538-6099, or by Internet E-mail at [email protected].  For questions about the rulemaking process, please contact the Office of Administrative Rules.