3. a. For the period January 1, 1993 to December 31, 1993, hereinafter referred to as the “transition year,” the Hospital Rate Setting Commission shall establish a revenue cap for each hospital whose rates had been established prior to this period by the Hospital Rate Setting Commission under the diagnosis related group methodology pursuant to P.L.1978, c.83. The Hospital Rate Setting Commission shall establish the revenue cap effective January 1, 1993.

The revenue cap shall establish the maximum amount a hospital may collect in revenues in 1993 from all payers, but shall not include payments from the fund. The revenue cap shall be based upon the same financial elements used to prepare the preliminary cost base for 1992, but shall not include any amounts provided in 1992 for a subsidy to Blue Cross and Blue Shield of New Jersey, Inc. and for patient appeals. The revenue cap shall include:

(1) a component for a hospital’s bad debt as determined by the hospital’s payment for bad debt from the New Jersey Health Care Trust Fund in 1992 pursuant to P.L.1991, c.187 (C. 26:2H-18.24 et al.), but the total amount allowed for bad debt plus the amount a hospital is eligible to receive from the fund for its charity care subsidy shall not exceed the total amount of uncompensated care payments the hospital received in 1992 from the New Jersey Health Care Trust Fund;

(2) the hospital specific amount agreed to by a hospital and the Hospital Rate Setting Commission pursuant to the 1990 voluntary settlement program (N.J.A.C.8:31B-3.65); and

(3) an amount to be determined by the Hospital Rate Setting Commission which represents a hospital’s share of the total outstanding reconciliation amounts as of December 31, 1992, including any reasonably projected reconciliation amounts for calendar year 1992, which total amount shall be adjusted so that a hospital’s revenue cap does not exceed the hospital’s preliminary cost base for 1992.

b. In addition to the categories of revenues described in paragraphs (1), (2) and (3) of subsection a. of this section, which together shall constitute the hospital revenue cap for 1993, each hospital subject to this section may also retain any revenues collected in 1993 that represent an amount to provide for the financial impact of a certificate of need approved service or project that was not included in the hospital’s preliminary cost base for 1992. This addition will be calculated by the department as follows:

(1) For new inpatient services, the addition to the preliminary cost base is determined by multiplying the appropriate DRG rate by the 1993 admissions resulting from that new or expanded service.

(2) For any new outpatient services, the addition to the preliminary cost base is calculated by multiplying the appropriate charge by the number of admissions related to the new or expanded service.

(3) Increased debt service costs allocated to new patient services above that debt service included in the 1992 preliminary cost base will be additions to the 1992 preliminary cost base.

This addition to the cap for any hospital which implements a new certificate of need approved service in 1992 or 1993 shall be verified by the hospital’s auditor through an agreed-upon procedures report. The report shall be submitted in accordance with the procedures outlined by the department pursuant to subsection c. of this section. The department shall review and approve any addition to a hospital revenue cap due to new certificate of need projects prior to such additions being implemented.

The additional revenues that provide for the financial impact of a certificate of need approved service or project shall not be considered in the calculations of a hospital’s revenue cap or in the assessment of any revenue cap penalties levied pursuant to subsection d. of this section. A hospital shall continue to provide any public health services which were formerly supported by grant funds but whose costs were included in that hospital’s preliminary cost base for 1992 and shall provide for its regional hemophilia center and regional maternal and child health consortia, as applicable.

c. The department shall provide for an audit of a hospital’s revenues for 1993 in a time frame established by the department.

d. A hospital whose revenues exceeded its revenue cap during 1993 shall be liable to a civil penalty of payment of an amount not to exceed 1.5 times the amount of revenue in excess of the revenue cap.

The civil penalty provided for in this section shall be recovered in an administrative proceeding held pursuant to the “Administrative Procedure Act,” P.L.1968, c.410 (C. 52:14B-1 et seq.). Any monies recovered pursuant to this penalty shall be deposited in the fund.

e. In order to minimize the disruption in the transition year, any discounts negotiated between hospitals and non-governmental third party payers shall reflect cost savings resulting from the efficient use of resources and not merely cost shifts from one payer to another. The final rate shall be mutually agreeable to both parties.

f. In the event that the revenues collected by a hospital during the transition year are insufficient, the State shall not be liable for any deficiency.

L1992,c.160,s.3; amended 1994,c.120.