(1) For hospital services rendered by a hospital not licensed as a medical assistance facility under Title 50, chapter 5, MCA, the amount payable by an insurer for those services performed during the period starting July 1, 1997, and ending March 31, 1998, is the higher of:

(a) 69 percent of the hospital's usual and customary charges, as those charges were in existence for the hospital on January 1, 1997; or

(b) the discount factor established by the department that was in effect on June 30, 1997, as calculated pursuant to ARM 24.29.1425.

(2) Starting April 1, 1998, for hospital services rendered by a hospital, other than one licensed as a medical assistance facility under Title 50, chapter 5, MCA, that changes its usual and customary charges between January 1, 1997, and June 30, 1998, must have its rates adjusted by the use of a discount factor. The discount factor is computed by taking the existing discount factor for that hospital, divided by the quantity 1 + ORI, where ORI is the overall percentage rate change adopted by the hospital, divided by 100.

(3) As an example of the application of this rule, if a hospital changes its rates between January 1, 1997, and June 30, 1998, the discount factor is adjusted before determining whether use of (1) (a) or (1) (b) above yields the greater payment. Assume that a hospital's January 1, 1997 discount factor is .5655 and the hospital increases its rates by 2 percent on March 1. The rate provided by (1) (a) is calculated as follows: A $100 charge times 69 percent yields a $69.00 payment. If rates are increased by 2 percent, the $69.00 payment divided by the increased amount billed of $102 yields an adjusted discount factor of .6765. The rate provided by (1) (b) is calculated as follows: A $100 charge times the discount factor, which in this example is .5655 yields a payment of $56.55. If rates have been increased by 2 percent, the $56.55 payment divided by the increased amount billed of $102 yields an adjusted discount factor of .5544. Because (1) (a) yields a $69.00 payment with a discount factor of .6765 and (1) (b) only yields a $56.55 payment with a discount factor of .5544, the greater payment is chosen. The discount factor for the hospital in this example is established as .6765, and is effective for services rendered on or after April 1, 1998.