New Posting Procedure for Hospital Cost-to-Charge Ratios

July 1, 2014

The current rule providing for the calculation and publication of the hospital cost-to-charge ratios under the Michigan Workers’ Compensation Fee Schedule states that the calculation shall happen annually.

R 418.101101 Calculation and revision of payment ratio for Michigan hospitals.
Rule 1101. (1) The workers' compensation agency shall annually calculate and revise, under the provisions of 1969 PA 306, 24.201 et seq. MCL, the payment ratios for all Michigan hospitals. The calculation shall be made using a hospital's most recent fiscal year information that is submitted to the Michigan department of community health, medical services administration, preceding each annual calculation. The information used shall be that reported to the Michigan department of community health, medical services administration, on the hospital's statement of patient revenues and operating expenses, G2 worksheet. The workers' compensation agency shall complete the payment ratio calculation between September 1 and October 1, or the earliest date when the figures are available from Michigan department of community health and shall annually publish the hospital ratio calculations in a separate manual effective for dates of service on or after the effective date of these rules.
(2) The workers' compensation agency shall calculate a hospital's cost-to-charge ratio by dividing each hospital's total operating expenses by total patient revenues as reported on the hospital's statement of patient revenues and operating expenses, G2 worksheet.

Rule 1101 is not tied to the legislative promulgation process, even though historically the publication of hospital ratios has occurred simultaneously with annual rule updates. Accordingly, the Health Care Services Division will publish hospital ratios annually.

As noted above, the agency calculates the ratios based on a hospital’s annual fiscal year financial information provided to the Michigan Department of Health & Human Services (DHHS). Hospitals, like many business entities, have different fiscal year-end dates. There is not a mandatory specific reporting deadline date that is applicable to all hospitals. Therefore, beginning in 2014, the Health Care Services Division will publish hospital cost-to-charge ratios in July of each year. The latest available cost report data available from DHHS at that time will be utilized to compile these ratios. The publication of this document will occur independently of any pending HCS rule set changes.