(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) In addition to the reimbursement rate process described in subsection (1) of this section and subject to 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 to those hospitals that provide services that improve health care outcomes for their patients. The state department shall determine this amount based upon nationally recognized performance measures established in rules adopted by the state board. The state quality standards must be consistent with federal quality standards published by an organization with expertise in health care quality, including but not limited to, the centers for medicare and medicaid services, the agency for healthcare research and quality, or the national quality forum.

(b) The amount of the payments made pursuant to this subsection (3) shall be computed annually. For the first two fiscal years that paymentsare made pursuant to this subsection (3), the total amount of the payments shall be up to five percent of the total reimbursements made to hospitals in the previous year. For each fiscal year after the first two fiscal years, the total amount of the payments shall be up to seven percent of the total reimbursements made to hospitals in the previous year.

(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 recipient 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 recipients, 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) The state department shall provide a report to the joint budget committee on November 1, 2019, and November 1, 2020, detailing the estimates of the cost savings achieved and the impact of the cost-control measures authorized pursuant to this section on recipients and recipients' health outcomes.

(V) Beginning in 2018, and every year thereafter through 2020, the state department shall report on the status of the implementation of the hospital review program, any cost savings estimated or achieved due to the program, and the impact on recipients and recipients' outcomes of any cost-control measures as part of its "State Measurement for Accountable, Responsive,and Transparent (SMART) Government Act" hearing required by section 2-7-203.

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