CurrentNew Mexico Health Care AuthorityPolicy N/A

TITLE 8 SOCIAL SERVICES CHAPTER 311 – HOSPITAL SERVICES (Part 2)

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Rules governing Medicaid (MAD) coverage, provider eligibility, billing, utilization review, prior authorization, and reimbursement for inpatient, outpatient, and emergency hospital services in New Mexico; applies to providers and the general public.

Policy Summary

PayerNew Mexico Health Care Authority

PolicyHospital services coverage and provider requirements (Title 8, Ch. 311, Part 2)

Policy CodePolicy N/A

Change TypeNo material changes

Effective DateJuly 1, 2024

Last ReviewJul 1, 2024

Next Review DateN/A

Key ActionObtain prior authorization from MAD or its designee for outpatient PT/OT/ST and other services requiring prior approval.

SourceLink

POLICY UPDATE CHANGES

No material clinical or coverage changes in this revision.

Jul 1, 2024effective date

Permanentduration

General publicscope

PT/OT/STprior auth required

3%medicare reduction

MAD Hospital Coverage & Emergency Criteria

MAD hospital coverage criteria and limits

MAD covers medically necessary inpatient, outpatient, and emergency services with specific coverage rules, exclusions, and reimbursement methodologies.

Services must be medically necessary for prevention, diagnosis, or treatment and furnished under the direction of an enrolled MAD physician, podiatrist, or dentist with hospital privileges.

MAD does not cover services deemed not medically necessary, services requiring prior authorization for which approval was not requested (except extenuating circumstances), services furnished to individuals not eligible on the date of service, experimental or investigational procedures/technologies/therapies and related services, drugs classified as 'ineffective' by the FDA, private duty or incremental nursing services, laboratory specimen handling or mailing charges, and formal educational or vocational training for traditional academic subjects or employment training.

Hospitals are not reimbursed for inappropriate admissions or transfers identified through medical review; patterns of inappropriate admissions and transfers must be identified and corrected.

Providers must be enrolled before submitting claims; services furnished by providers not enrolled on the date of service are non-covered.

Physician-ordered hospital stays less than 24 hours are observation (outpatient) services; one- or two-day hospital stays are subject to pre- or post-payment review and observation determinations may be re-reviewed.

When utilization review determines a recipient no longer meets acute criteria but is awaiting lower-level placement, 'awaiting placement' days are reimbursed at the weighted average nursing facility or residential rates (with hospitals not paid ancillary services for those days); for recipients under 21 awaiting residential placement, awaiting placement days may be paid at weighted average residential service rates; MAD does not cover residential care for individuals over 21.

Additional cost for a private room is not reimbursed unless medically necessary to protect the health of the recipient or others.

Outpatient hospital services are covered when medically necessary and furnished within the scope and practice of the professional provider; outpatient noncovered services mirror inpatient noncoverage rules (not medically necessary, lack of prior approval when required, not eligible on date of service, experimental/investigational).

Outpatient hospital services reimbursed under OPPS where applicable; for services not reimbursed using OPPS or fee schedules, MAD uses the Medicare allowable cost method reduced by three percent, and MAD establishes interim rates and other payment rates considering cost-to-charge ratios and TEFRA principles.

Inpatient reimbursement follows established methodologies (DRG, cost-based methods) where the hospital payment covers services during the inpatient stay while physician services are billed separately; transportation may be included in DRG payment when appropriate.

Prior authorization / utilization review

Certain procedures and services require prior authorization from MAD or its designee (examples include transfers between DRG hospitals, PPS-exempt psychiatric inpatient stays, rehabilitation and specialty inpatient stays).
Admission and continued stay reviews are required for specified inpatient stays; services with prior authorization remain subject to utilization review and providers may request re-review and reconsideration of utilization review decisions per MAD-953.

Reimbursement for capital costs follows HIM-15 and TEFRA principles with limits on construction cost bases and inclusion of land and fixed equipment valuations; total basis of depreciable assets limited as specified by MAD.

Critical access hospitals' OPPS adjustments and fee-for-service rates are set based on the provider's reported cost-to-charge ratio from the most recent cost report prior to February 1, 2012, when applicable.

If a provider and an MCO fail to agree on payment, the MCO must pay and the provider must accept 100% of the applicable reimbursement rate equal to the HCA rate excluding DSH and medical education payments as a backstop.

Emergency room coverage and reimbursement criteria

MAD covers medically necessary emergency room services within program scope, with limitations and exceptions.

MAD covers emergency room services that are medically necessary for the diagnosis and treatment of medical or surgical emergencies for eligible recipients and which are within the scope of the MAD program.

An 'emergency condition' is defined by the prudent layperson standard: acute symptoms of sufficient severity (including severe pain) such that an average person could reasonably expect absence of immediate medical attention to place the individual's health, or in the case of a pregnant woman her or her unborn child's health, in serious jeopardy, cause serious impairment to bodily function, or serious dysfunction of any bodily organ or part.

Emergency room services may be subject to prepayment or post-payment retrospective review; providers (enrolled or non-enrolled, including MCO or out-of-network providers) may not bill eligible recipients for emergency services—including diagnostic and ancillary services—that are denied for lack of medical necessity or lack of being an emergency, except as allowed by 8.302.2 NMAC; MCO enrollees are further protected under 42 CFR 438 Subpart C.

Prior authorization

Some services or procedures performed in an emergency room setting require prior approval from MAD or its designee.
Procedures that require prior approval in non-emergency settings also require prior approval when performed in emergency settings.

Noncovered emergency services include diagnostic and other ancillary services not considered medically necessary as emergency services; services furnished to individuals not eligible on the date of service; experimental or investigational procedures/technologies/therapies and related services; drugs classified as 'ineffective' by the FDA; and laboratory specimen handling or mailing charges.

Reimbursement for emergency room services furnished by an eligible provider is as outpatient hospital services; when ER services are furnished in conjunction with an inpatient admission in a DRG-reimbursed hospital, ER charges are included in the DRG; physician services in the ER are not reimbursed to the hospital but may be paid as professional components.

Coding, Reimbursement Basis, and Adjustments

inv-05: Medicare allowable cost reduction

Adjustment appliedMedicare allowable costs are reduced by 3% when reimbursement uses the Medicare allowable cost method.

Applicable scopeApplies to services not reimbursed under OPPS or fee schedules for MAD fee-for-service providers.

Interim rateMAD establishes an interim rate of payment and rates for providers not subject to cost settlement to approximate final TEFRA-based payments.

Non-cost-settled providersIf provider is not cost settled, reimbursement rate uses the provider's cost-to-charge ratio from the most recent cost report prior to February 1, 2012.

Prior Authorization, Utilization Review, and Reconsideration

Prior Authorization

Prior authorization and utilization review — provider obligations

Certain procedures or services require prior authorization from MAD or its designee; examples include all transfers between DRG-reimbursed acute care hospitals, inpatient stays in PPS-exempt psychiatric units, inpatient stays in rehabilitation or specialty hospitals (admission and continued stay reviews), and outpatient physical, occupational, and speech therapy services. Services for which prior authorization was obtained remain subject to utilization review at any point in the payment process. Providers are responsible for accessing and following utilization review instructions and for complying with authorization requirements, including enrollment with coordinated services contractors when applicable.

All transfers from one acute care DRG-reimbursed hospital to another require prior authorization.
All inpatient stays for PPS-exempt psychiatric units and rehabilitation or specialty hospitals require admission and continued stay reviews.
Outpatient physical, occupational, and speech therapy services require prior authorization.
Services with prior authorization remain subject to utilization review at any point in the payment process.

Denial Risk

Reconsideration and eligibility verification

A provider may request a re-review and reconsideration if they disagree with a prior authorization denial or other utilization review decision. Prior authorization does not guarantee that the recipient is eligible for MAD services; providers must verify recipient eligibility and any other health insurance at the time services are furnished.

Request re-review and reconsideration per MAD-953 when disputing a utilization review decision.
Verify recipient MAD eligibility and other health insurance at the time services are furnished — prior authorization alone is not proof of eligibility.

Prior Authorization

Prior authorization for emergency room procedures

Some services or procedures performed in an emergency room setting require prior approval from MAD or its designee; procedures that require prior approval in non-emergency settings also require prior approval when performed in the ER. Noncovered emergency services are listed separately and include diagnostic/ancillary services not medically necessary as emergency services and services to individuals not eligible on the date of service.

Prior authorization requirements that apply in non-emergency settings also apply in emergency settings.
MAD does not cover diagnostic or ancillary services that are not medically necessary as emergency services, nor services to individuals not eligible on the date of service.

Key Definitions

inv-09: Observation stay

DefinitionObservation stay: physician-ordered hospital stay less than 24 hours classified as an outpatient observation service.

Billing requirementIf admission is considered an observation stay, the hospital must bill these services as outpatient observation services; they must be medically necessary and not involve premature discharge of an unstable patient.

ExemptionsExemptions to observation stay classification include death, left against medical advice or removal by legal guardian, transfer to another facility for necessary care, or inpatient admission resulting in delivery.

Re-reviewThe hospital or attending physician may request a re-review and reconsideration of the observation stay decision (see MAD 953).

inv-10: Emergency

Prudent layperson standardAn emergency is a condition that a prudent layperson could reasonably expect, without immediate attention, to result in placing health in serious jeopardy, serious impairment, or serious dysfunction.

Scope of coverageMAD covers emergency room services medically necessary for diagnosis and treatment of medical or surgical emergencies within the MAD program scope.

Retrospective review and billing protectionsEmergency services may be subject to prepayment or post-payment review; providers cannot bill eligible recipients for denied emergency services except as allowed by billing rules and 42 CFR 438 Subpart C for MCO enrollees.

Pregnancy considerationDefinition explicitly includes consideration of risks to a pregnant woman or her unborn child when determining an emergency.

inv-11: Eligible provider

Licensure and participationEligible hospitals must be licensed by the New Mexico Department of Health and participate in Medicare or be accredited by The Joint Commission.

PPS-exempt unitsProspective payment system (PPS)-exempt units such as inpatient rehabilitation or psychiatric units in a hospital are eligible providers.

Free-standing psychiatric hospitalsFree-standing psychiatric hospitals may be reimbursed for inpatient and outpatient services for eligible recipients under age 21.

Border/out-of-state hospitalsBorder area and out-of-state hospitals may be reimbursed if their state Medicaid or Medicare licensure and certification is accepted in lieu of MAD certification.

Emergency-only certified hospitalsHospitals certified only for emergency services are reimbursed for inpatient and outpatient emergency services for the period during which the emergency exists.

inv-12: Emergency condition

Clinical thresholdAn emergency condition manifests with acute symptoms of sufficient severity (including severe pain) that a prudent layperson could reasonably expect lack of immediate attention to place health in serious jeopardy, cause serious impairment to bodily function, or serious dysfunction of any bodily organ or part.

Behavioral health includedEmergency condition definition applies to medical or behavioral health conditions manifested by acute severe symptoms.

Pregnant women and unborn childDefinition expressly includes consideration of the health of a pregnant woman and her unborn child when assessing emergency conditions.

Policy Summary

PayerNew Mexico Health Care Authority

PolicyHospital services coverage and provider requirements (Title 8, Ch. 311, Part 2)

Policy CodePolicy N/A

Change TypeNo material changes

Effective DateJuly 1, 2024

Last ReviewJul 1, 2024

Next Review DateN/A

Key ActionObtain prior authorization from MAD or its designee for outpatient PT/OT/ST and other services requiring prior approval.

SourceLink

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TITLE 8 SOCIAL SERVICES CHAPTER 311 – HOSPITAL SERVICES (Part 2)

Customize your policy alerts

Sign up for all New Mexico Health Care Authority policy alerts

Know when New Mexico Health Care Authority releases new policies or updates existing guidance.

Monitor payer policy activity

Receive email alerts as soon as relevant payer policies are published or updated.

MAD Hospital Coverage & Emergency Criteria

MAD hospital coverage criteria and limits

MAD covers medically necessary inpatient, outpatient, and emergency services with specific coverage rules, exclusions, and reimbursement methodologies.

Services must be medically necessary for prevention, diagnosis, or treatment and furnished under the direction of an enrolled MAD physician, podiatrist, or dentist with hospital privileges.

Hospitals are not reimbursed for inappropriate admissions or transfers identified through medical review; patterns of inappropriate admissions and transfers must be identified and corrected.

Providers must be enrolled before submitting claims; services furnished by providers not enrolled on the date of service are non-covered.

Additional cost for a private room is not reimbursed unless medically necessary to protect the health of the recipient or others.

Prior authorization / utilization review

Certain procedures and services require prior authorization from MAD or its designee (examples include transfers between DRG hospitals, PPS-exempt psychiatric inpatient stays, rehabilitation and specialty inpatient stays).
Admission and continued stay reviews are required for specified inpatient stays; services with prior authorization remain subject to utilization review and providers may request re-review and reconsideration of utilization review decisions per MAD-953.

Emergency room coverage and reimbursement criteria

MAD covers medically necessary emergency room services within program scope, with limitations and exceptions.

Prior authorization

Some services or procedures performed in an emergency room setting require prior approval from MAD or its designee.
Procedures that require prior approval in non-emergency settings also require prior approval when performed in emergency settings.

Coding, Reimbursement Basis, and Adjustments

inv-05: Medicare allowable cost reduction

Adjustment appliedMedicare allowable costs are reduced by 3% when reimbursement uses the Medicare allowable cost method.

Applicable scopeApplies to services not reimbursed under OPPS or fee schedules for MAD fee-for-service providers.

Interim rateMAD establishes an interim rate of payment and rates for providers not subject to cost settlement to approximate final TEFRA-based payments.

Non-cost-settled providersIf provider is not cost settled, reimbursement rate uses the provider's cost-to-charge ratio from the most recent cost report prior to February 1, 2012.

Prior Authorization, Utilization Review, and Reconsideration

Prior Authorization

Prior authorization and utilization review — provider obligations

All transfers from one acute care DRG-reimbursed hospital to another require prior authorization.
All inpatient stays for PPS-exempt psychiatric units and rehabilitation or specialty hospitals require admission and continued stay reviews.
Outpatient physical, occupational, and speech therapy services require prior authorization.
Services with prior authorization remain subject to utilization review at any point in the payment process.

Denial Risk

Reconsideration and eligibility verification

Request re-review and reconsideration per MAD-953 when disputing a utilization review decision.
Verify recipient MAD eligibility and other health insurance at the time services are furnished — prior authorization alone is not proof of eligibility.

Prior Authorization

Prior authorization for emergency room procedures

Prior authorization requirements that apply in non-emergency settings also apply in emergency settings.
MAD does not cover diagnostic or ancillary services that are not medically necessary as emergency services, nor services to individuals not eligible on the date of service.

Key Definitions

inv-09: Observation stay

DefinitionObservation stay: physician-ordered hospital stay less than 24 hours classified as an outpatient observation service.

Re-reviewThe hospital or attending physician may request a re-review and reconsideration of the observation stay decision (see MAD 953).

inv-10: Emergency

Scope of coverageMAD covers emergency room services medically necessary for diagnosis and treatment of medical or surgical emergencies within the MAD program scope.

Pregnancy considerationDefinition explicitly includes consideration of risks to a pregnant woman or her unborn child when determining an emergency.

inv-11: Eligible provider

Licensure and participationEligible hospitals must be licensed by the New Mexico Department of Health and participate in Medicare or be accredited by The Joint Commission.

PPS-exempt unitsProspective payment system (PPS)-exempt units such as inpatient rehabilitation or psychiatric units in a hospital are eligible providers.

Free-standing psychiatric hospitalsFree-standing psychiatric hospitals may be reimbursed for inpatient and outpatient services for eligible recipients under age 21.

Border/out-of-state hospitalsBorder area and out-of-state hospitals may be reimbursed if their state Medicaid or Medicare licensure and certification is accepted in lieu of MAD certification.

Emergency-only certified hospitalsHospitals certified only for emergency services are reimbursed for inpatient and outpatient emergency services for the period during which the emergency exists.

inv-12: Emergency condition

Behavioral health includedEmergency condition definition applies to medical or behavioral health conditions manifested by acute severe symptoms.

Pregnant women and unborn childDefinition expressly includes consideration of the health of a pregnant woman and her unborn child when assessing emergency conditions.