Section 13A. For hospital fiscal years beginning on or after October first, nineteen hundred and ninety-seven, rates and terms of payment established by the division with non-acute hospitals for services rendered to patients entitled to medical assistance under this chapter shall be established by contract between the division and such hospitals, unless otherwise required by law. Prior to said October first, for those non-acute hospitals whose rates and terms of payment have not been established by contract with the division, said rates and terms of payment shall be based on the system of reimbursement in effect immediately prior to the effective date of this section. This section shall not be construed preventing said division and a non-acute hospital from agreeing to such a contract prior to such date. Any medical necessity and administratively necessary determinations the division may establish for non-acute hospitals shall be based on the screening criteria and procedures applied by peer review organizations as are duly authorized under the Social Security Act.

For any hospital fiscal year subsequent to nineteen hundred and ninety-eight, the division of medical assistance may elect, solely at its discretion, that public payor-dependent non-acute hospitals shall be subject to the provisions of the preceding paragraph; provided, that reimbursement so established by said section shall include an administratively necessary day adjustment for any patient that a public payor-dependent non-acute hospital is unable to place in a more appropriate facility based on said screening criteria and procedures; provided further that the terms of payment for any such patient shall reflect the reasonable costs of any such hospital in providing care to recipients of medical care and assistance; and provided further, that reimbursement so established shall reflect the reasonable costs of treating a disproportionate share of public payor patients.

For any hospital fiscal year commencing on or after October 1, 2003, the division shall not classify any ventilator dependent patients in a public payor-dependent non-acute hospital as an administratively necessary day patient, unless a physician member of the hospital's utilization review committee finds and certifies that the medical services required by the patient are actually available in a non-hospital facility located within a 25 mile radius of the patient's principle residence and that the patient will receive safe and effective care. The division shall not make any decision or take any action as to the continuing necessity of hospital care in a public payor-dependent non-acute hospital which is inconsistent with the hospital utilization review committee findings. The division shall pay public payor-dependent non-acute hospitals at the full hospital inpatient per diem rate for services provided to such ventilator dependent patients entitled to medical assistance and the ventilator dependent patients shall not be subject to administratively necessary day rates.