1. CYE 15 APR-DRG Implementation The APR-DRG payment methodology will be implemented for all acute/general hospitals (provider type 02) The same payment methodology will be used for both in- and out-of-state hospitals Rehab and Long Term Care hospitals will be split to a new provider type and will continue to paid under a per diem rate methodology Select transplants will continue to be carved out into bundled payment contracts

2. CYE 15 APR-DRG Implementation – Select Payment Policies Capitation rate impacts are under review for all policy decisions Pricing logic under APR-DRG (DRG) will be based on discharge date Thus payer at date of discharge is responsible for payment of all Medicaid covered days during the inpatient stay Dates of discharge on and after 10/1/14 will be paid at DRG Potentially preventable readmissions will not be paid, as follows: – Readmissions within 72 hours to the same hospital with the same base DRG assignment will be pended to medical review – If the readmission is determined to have been preventable, payment will be disallowed

3. CYE 15 APR-DRG Implementation – Select Payment Policies Due to the characteristics of the AHCCCS population, administrative days will be covered, only when prior authorized and based on negotiated per diem rates (Medicare does not cover under CMS DRGs) Interim billing will be permitted in 30 day increments – Interim bills will be reimbursed at $500 per day – Interim bills must be voided and a final replacement admission through discharge bill must be submitted at discharge encompassing all days billed as interim and covered by Medicaid – Interim payments will be recouped and the final bill paid at APR- DRG – Post-payment audits may be performed to ensure providers submit the final bill per these guidelines

4. CYE 15 APR-DRG Implementation – Select Payment Policies All claims with an admission date matching the end date of service with a patient status of discharge/transfer will be reimbursed under the existing OPFS methodology including same day admit/discharge maternity/newborn claims (thus eliminating the current lessor of evaluation) MCO vs. RBHA payment - if the member’s primary diagnosis is: – a medical diagnosis, then AHCCCS/MCOs will pay under DRG (unless otherwise contracted) – a behavioral diagnosis, then the RBHAs will pay under the current per diem methodology (unless otherwise contracted) – Hospitals must start a new claim for the behavioral health portion of the patient stay after a member is medically stabilized and transferred within the facility

5. CYE 15 APR-DRG Implementation – Select Payment Policies Prorated pricing of claims will occur for stays including, but not limited to: – Transfers – Member gains eligibility for AHCCCS after admission – Member loses eligibility for AHCCCS before discharge Proration methodology differs depending on the situation though payment will never exceed a full DRG payment

6. CYE 15 APR-DRG Implementation – Reinsurance Policy Changes Capitation rate impacts are under review for all reinsurance policy changes Encounters that include PPC days will not be eligible for reinsurance – MCOs will not be permitted to split such encounters Encounters for interim bills will not be eligible for reinsurance – The final encounters replacing interim bills will be eligible for reinsurance unless the claims cross contract years Encounters that cross contract years will not be eligible for reinsurance – MCOs will not be permitted to split such encounters