The department may develop, implement and periodically update methods for reimbursing or paying hospitals for allowable services or commodities provided a recipient. The methods may include standards and criteria for limiting any given hospital’s total reimbursement or payment to that which would be provided to an economically and efficiently operated facility.

A hospital whose reimbursement or payment is determined on the basis of the methods developed and implemented under subd. 1. shall annually prepare a report of cost and other data in the manner prescribed by the department.

The department may adopt a prospective payment system under subd. 1. which may include consideration of an average rate per diem, diagnosis-related groups or a hospital-specific prospective rate per discharge.

If the department maintains a retrospective reimbursement system under subd. 1. for specific provided services or commodities, total reimbursement for allowable services, care or commodities provided recipients during the hospital’s fiscal year may not exceed the lower of the hospital’s charges for the services or the actual and reasonable allowable costs to the hospital of providing the services, plus any disproportionate share funding that the hospital is qualified to receive under 42 USC 1396r-4.

The daily reimbursement or payment rate to a hospital for services provided to medical assistance recipients awaiting admission to a skilled nursing home, intermediate care facility, community-based residential facility, group home, foster home, or other custodial living arrangement may not exceed the maximum reimbursement or payment rate based on the average adjusted state skilled nursing facility rate, created under sub. (6m). This limited reimbursement or payment rate to a hospital commences on the date the department, through its own data or information provided by hospitals, determines that continued hospitalization is no longer medically necessary or appropriate during a period when the recipient awaits placement in an alternate custodial living arrangement. The department may contract with a peer review organization, established under 42 USC 1320c to 1320c-10, to determine that continued hospitalization of a recipient is no longer necessary and that admission to an alternate custodial living arrangement is more appropriate for the continued care of the recipient. In addition, the department may contract with a peer review organization to determine the medical necessity or appropriateness of physician services or other services provided during the period when a hospital patient awaits placement in an alternate custodial living arrangement.

Notwithstanding subd. 7., the daily reimbursement or payment rate for services at a hospital established under s. 45.50 (10) provided to medical assistance recipients whose continued hospitalization is no longer medically necessary or appropriate during a period where the recipient awaits placement in an alternate custodial living arrangement shall be the skilled nursing facility rate paid to a Wisconsin veterans home operated by the department of veterans affairs under s. 45.50.

Hospital research costs that the department finds to be indirectly related to patient care are not allowable costs in establishing a hospital’s reimbursement or payment rate under subd. 1.

Hospital procedures on an inpatient basis that could be performed on an outpatient basis shall be reimbursed or paid at the outpatient rate. The department shall determine which procedures this subdivision covers.

All facilities listed in a certificate of approval issued to the University of Wisconsin Hospitals and Clinics Authority under s. 50.35 are a hospital for purposes of reimbursement under this section.

All facilities listed in a certificate of approval issued to a free-standing pediatric teaching hospital under s. 50.35 are a hospital for purposes of reimbursement under this section. Notwithstanding this subdivision, the department shall use physician clinic reimbursement rates to reimburse the facilities under this section for types of services for which, before July 1, 2009, the department reimbursed the facilities using physician clinic reimbursement rates, as determined by the department.

The department shall use a portion of the moneys collected under s. 50.38 (2) to pay for services provided by eligible hospitals, as defined in s. 50.38 (1), under the Medical Assistance Program under this subchapter, including services reimbursed on a fee-for-service basis and services provided under a managed care system. For state fiscal year 2008-09, total payments required under this subdivision, including both the federal and state share of Medical Assistance, shall equal the amount collected under s. 50.38 (2) (a) for fiscal year 2008-09 divided by 57.75 percent. For each state fiscal year after state fiscal year 2008-09, total payments required under this subdivision, including both the federal and state share of Medical Assistance, shall equal the amount collected under s. 50.38 (2) (a) for the fiscal year divided by 61.68 percent. For each state fiscal year after state fiscal year 2024-25, total payments required under this subdivision, including both the federal and state share of Medical Assistance, shall equal the amount collected under s. 50.38 (2) (a) and (b) for the fiscal year divided by 56.1 percent.