Colorado § 25.5-4-402 - Providers - hospital reimbursement - hospital review program - rules.

§ 25.5-4-402. Providers - hospital reimbursement - hospital review program - rules.

(1) For all licensed or certified hospitals contracting for services under this article and articles 5 and 6 of this title, except those hospitals operated by the department of human services or those hospitals deemed exempt by the state board, the state department shall pay for inpatient hospital services pursuant to a system of prospective payment, generally based on the elements of a diagnosis-related group system. The state department shall develop and administer a system for ensuring appropriate utilization and quality of care provided by those providers who are reimbursed under this section. Subject to available appropriations, the state department may also make supplemental medicaid payments to certain hospitals. The state board shall promulgate rules to provide for the implementation of this section.

(2) (a) A hospital that receives payment under this article and articles 5 and 6 of this title for telemedicine services shall employ its existing quality-of-care protocols and patient confidentiality guidelines to ensure that such services meet the requirements of this article and articles 5 and 6 of this title.

(b) The executive director of the state department shall adopt rules in furtherance of this subsection (2), including, without limitation, rules to:

(I) Ensure the provision of appropriate care to patients;

(II) Prevent fraud and abuse; and

(III) Establish methods and procedures to avoid overuse of telemedicine services.

(3) (a) (I) In addition to the reimbursement rate process described in subsection (1) of this section and subject to federal approval and adequate funding being made available pursuant to section 25.5-4-402.4, the Colorado healthcare affordability and sustainability enterprise created in section 25.5-4-402.4 (3) shall pay an additional amount based upon performance in the hospital quality incentive program to those hospitals that deliver safer, more effective care that improves patient outcomes and reduces preventable utilization to reduce health-care costs. The hospital quality incentive program must include a performance metric related to workplace violence.

(II) (A) Prior to implementation of the program, the Colorado healthcare affordability and sustainability enterprise board shall approve the percentage of hospitals' reimbursement in the hospital quality incentive program, program structure, performance measures, and scoring methodology.

(B) When approving a program pursuant to this subsection (3)(a), the board shall require that new measures remain in place for a defined period of time not to exceed three years prior to modification or replacement of the new measures; except that the board may approve modifications or replacements prior to the end of the defined period of time if the board is presented with evidence that the approved measures are not meeting the goals of the program or require technical adjustments. Nothing in this subsection (3)(a) precludes the board from renewing measures that meet the goals of the program after the defined period of time not to exceed three years has expired.

(C) Any modifications to the hospital quality incentive program must be approved by the board prior to implementation; except that changes necessary to comply with federal law may be implemented immediately.

(III) Performance measures and methodologies must be based on factors that are reasonably within hospitals' control, aligned with nationally recognized standards to the maximum extent practicable, and designed to minimize administrative burden, including by avoiding duplicative reporting and leveraging existing data sources when possible. The hospital quality incentive program should align with federal quality standards.

(b) (I) For each state fiscal year, the total amount of the payments must be no more than seven percent of the total reimbursements made to hospitals in the previous state fiscal year.

(II) Notwithstanding subsection (3)(b)(I) of this section, the maximum percentage of payments must not exceed seven percent of the total reimbursements made to hospitals in the previous state fiscal year unless and until the Colorado healthcare affordability and sustainability enterprise board formally approves a hospital quality incentive program pursuant to subsection (3)(a) of this section, developed with input from hospital representatives with clinical expertise, after which the maximum percentage of payments must not exceed nine percent of the total reimbursements made to hospitals.

(c) (I) No later than September 1, 2025, the state department and the quality incentives payments subcommittee of the Colorado healthcare affordability and sustainability enterprise board created in section 25.5-4-402.4 (7) shall consult with the department of public health and environment, an association representing nurses working in Colorado hospitals, a representative of the health-care industry who participates in the Colorado medicaid program and does not represent a hospital, a representative from a statewide association of hospitals, a representative from an association representing rural hospitals, a representative from a hospital, the chairs of the house of representatives health and human services committee and the senate health and human services committee, and any other relevant state agencies to:

(A) Develop recommended workplace violence metrics after evaluating available national standards, considering innovative approaches, and accounting for variations across hospitals;

(B) Determine whether any federal or private funds are available to assist hospitals in lowering the number of incidents of workplace violence; and

(C) Develop legislative recommendations.

(II) During the state department's 2026 "SMART Act" hearing, the state department shall include a progress report on developing recommended workplace violence metrics, determining whether any federal or private funds are available to assist hospitals in lowering the number of incidents of workplace violence, and developing legislative recommendations pursuant to subsection (3)(c)(I) of this section.

(III) The Colorado healthcare affordability and sustainability enterprise board shall include the legislative recommendations developed pursuant to subsection (3)(c)(I)(C) of this section as part of its January 2027 report submitted pursuant to section 25.5-4-402.4 (7)(e).

(4) (a) Subject to federal approval, and notwithstanding any other provision of the "Colorado Medical Assistance Act", the state department shall design and implement an evidence-based hospital review program to ensure appropriate utilization of hospital services.

(b) Consistent with federal regulations set forth in 42 CFR 456, the hospital review program may include the following:

(I) Preadmission review;

(II) Continued stay review;

(III) Transfer planning;

(IV) Discharge planning;

(V) Care coordination; and

(VI) Retrospective claims review.

(c) The following factors must be considered in any coverage determinations made pursuant to the hospital review programs:

(I) Information provided, diagnosis determined, and treatment recommended by the treating provider or providers;

(II) Evidence-based clinical coverage criteria and member coverage guidelines as established by the state department;

(III) Nationally recognized utilization and technology assessment guidelines; and

(IV) Industry standard criteria, as appropriate.

(d) (I) The state department shall consult with affected stakeholders prior to implementation of the hospital review program. At a minimum, the state department shall solicit feedback from members, hospitals within Colorado that participate in medicaid, providers participating in the accountable care collaborative pursuant to section 25.5-5-419, and the Colorado healthcare affordability and sustainability enterprise board established in section 25.5-4-402.4 (7). If the state department contracts with a third-party vendor to implement the hospital review program, the state department shall require the vendor to participate in the stakeholder outreach with hospitals required pursuant to this subsection (4)(d)(I).

(II) Prior to implementation of the hospital review program, the state department shall provide an opportunity for hospitals to test connectivity to and workability of any new electronic interface created or implemented as part of this section. The state department shall select a limited group of hospitals to test any new requirements prior to full implementation.

(III) The state department shall provide a report to the joint budget committee by November 1, 2018, on the status of the implementation of the hospital review program. The report must include the comments received as part of the stakeholder process described in subsection (4)(d)(I) of this section and a description of, and any available results from, the testing process described in subsection (4)(d)(II) of this section.

(IV) and (V) Repealed.

(e) The state board shall adopt any rules necessary for the administration and implementation of this section.

Source: L. 2006: Entire article added with relocations, p. 1844, § 7, effective July 1; entire section amended, p. 1546, § 3, effective July 1. L. 2009: (1) amended and (3) added, (HB 09-1293), ch. 152, p. 645, § 4, effective July 1. L. 2017: (3)(a) amended, (SB 17-267), ch. 267, p. 1448, § 15, effective July 1. L. 2018: (4) added, (SB 18-266), ch. 264, p. 1624, § 2, effective May 29. L. 2023: (3)(a) amended, (HB 23-1301), ch. 303, p. 1830, § 48, effective August 7. L. 2024: (4)(c)(II) and (4)(d)(I) amended and (4)(d)(IV) and (4)(d)(V) repealed, (SB 24-176), ch. 152, p. 640, § 35, effective August 7. L. 2025: (3) amended, (SB 25-166), ch. 169, p. 686, § 1, effective August 6. L. 2026: (3)(a) and (3)(b) amended, (HB 26-1432), ch. 408, p. 2558, § 1, effective June 4.

Editor's note: (1) This section is similar to former § 26-4-405 as it existed prior to 2006.

(2) Amendments to section 26-4-405 by Senate Bill 06-165 were harmonized with this section as it appeared in Senate Bill 06-219.

(3) Section 34 of chapter 267 (SB 17-267), Session Laws of Colorado 2017, provides that the section of the act changing this section does not take effect if the centers for medicare and medicaid services determine that the amendments do not comply with federal law. For more information, see SB 17-267. (L. 2017, p. 1478.) The executive director of the department of health care policy and financing did not notify the revisor of statutes by June 1, 2017, of such determination; therefore, the changes to this section took effect July 1, 2017.

Cross references: For the legislative declaration contained in the 2006 act amending this section, see section 1 of chapter 312, Session Laws of Colorado 2006. For the legislative declaration in SB 17-267, see section 1 of chapter 267, Session Laws of Colorado 2017.