Capitation Rate Setting Methodology — Extraction of Graduate Medical Education Costs. Percentage of Teaching Hospitals' Rates Representing GME Costs. The Department, in consultation with the HSCRC, shall: Determine the amount, expressed as a percentage, of payments by the Program that are attributable to GME, based on historic cost and discharge abstract data that: Are specific to each individual teaching hospital; Are specific to Program recipients who would have been MCO-eligible if COMAR 10.67.01—.12 had been in effect at the time the activity reflected in the data occurred; Reflect services that would be, if performed during the contract year to which calculations utilizing a teaching hospital's GME percentage amount relate, included in the mandatory MCO benefits package described in COMAR 10.67.06; and Represent activity in FY 1995; and For any teaching hospital that is not in compliance with the primary care and innovation requirements of COMAR 10.10.67.11, reduce the Program's payments to the hospital deemed to be attributable to GME pursuant to §A(1)(a) of this regulation by the hospital's noncompliance penalty percentage derived in accordance with COMAR 10.67.11.03C. GME Percentage Start-Up Adjustment. To ameliorate the impact on MCOs that historically have experienced low utilization of teaching hospitals, the Department shall, during the first 3 years of separate GME funding, reduce the GME percentage determined in accordance with §A(1) of this regulation in the following amounts: FY 1999 ... 10 percent; FY 2000 ... 6.7 percent; FY 2001 ... 3.3 percent; and FY 2002 and thereafter ... 0 percent. Modifying GME Percentage to Maintain Budget Neutrality. To maintain budget neutrality in the GME funding procedure established pursuant to this regulation and COMAR 10.67.11, the Department may modify the GME percentages established pursuant to §A(1) and (2) of this regulation. The Department may use the modified GME percentage authorized by §A(3)(a) of this regulation to calculate non-GME teaching hospital costs pursuant to §A(4) of this regulation, for the purpose of equalizing: The amount of GME costs to be excluded from capitation rates for the contract year pursuant to §A(4) of this regulation; and The amount of GME allocation payments, determined pursuant to COMAR 10.67.11.03C. Application of the GME percentage modification authorized in §A(3)(a) and (b) of this regulation does not affect the amount of the GME allocation payments made pursuant to COMAR 10.67.11.03C. GME Adjustment in Capitation Rate-Setting Methodology. Before determining the average historic costs assigned to the rate cells set forth in Regulation .19B of this chapter, the Department shall, consistent with §A(1)—(3) of this regulation, deduct, for each rate cell, the dollar amount allocatable to GME contained in the Department's base year payments to teaching hospitals. The deduction referenced in §A(4)(a) of this regulation is calculated as follows: For each payment included in the base year data made by the Program to a teaching hospital in the contract year, the amount of the payment is multiplied by the hospital-specific GME percentage, established pursuant to §A(1)—(3) of this regulation; and The dollar amount attributable to GME that is included in the base year payments, as identified by the procedure described in §A(4)(b)(i) of this regulation, is subtracted from the total amount of the payment to yield the non-GME portion of the payment. Consistent with §A(4) of this regulation, the Department shall use the GME percentage rates calculated pursuant to §A(1)—(3) of this regulation for purposes of: Calculating each teaching hospital's GME allocation payment amounts pursuant to COMAR 10.67.11.03C; Determining the amount of each ACG's average non-GME historic costs for grouping ACGs to make risk adjustment category assignments of the ACGs pursuant to Regulation .19B of this chapter; Determining the amount of each demographic grouping's average non-GME historic costs; and Determining, for each risk adjustment category and demographic grouping, the capitation rates set forth in Regulation .19B of this chapter. The Department shall use, in calculating the capitation rates set forth in Regulation .19B of this chapter, a capitation rate-setting methodology that: Excludes the dollar amount allocatable to GME, consistent with the percentage of GME included in historic payments made by the Program to teaching hospitals that receive GME allocation payments in the contract year, based on calculations that: Are consistent with §A of this regulation; Reflect any modifications made pursuant to §A(2) and (3) of this regulation to the percentage of the Program's historic payments made to teaching hospitals allocable to GME; and Reflect the reduction of hospital-specific GME percentages, by operation of COMAR 10.67.11.03C and §A(1)(b) of this regulation, to decrease the amount of GME allocation payments made, pursuant to COMAR 10.67.11.03B, to teaching hospitals that are not in compliance with the primary care and innovation requirements of COMAR 10.67.11; Reduces historic costs to reflect savings expected to result from a managed care delivery system; Includes a trend factor to account for cost differences between the base year and the contract year; Excludes the dollar amount of historic payments determined, based on an aggregation of individual inpatients' payment data for the base year, to be avoidable by an MCO pursuant to Regulation .22 of this chapter, had the services been furnished during the contract year; and Beginning in FY 2000, takes into account Maryland Medicaid Managed Care Program enrollment of the newly eligible population entering the Program pursuant to the Maryland Children's Health Program.