Medicare Financial Management 
Chapter 1 - Budget Preparation - Intermediaries and 
Carriers 
 
Table of Contents 
(Rev. 149, 03-27-09 
 
Transmittals for Chapter 1 
 
10 - General 
10.1 - Budget Forms Supply 
20 - The Budget Cycle 
30 - Role of the Regional Offices (RO) 
40 - Introduction of Activity Level Budget and Cost Reporting 
50 - General CAFM II System Information 
50.1 - Budget and Cost Reports 
60 - List of Acronyms 
70 - Exhibit of Administrative Budget and Cost Report, Activity Form 
80 - Completing the Administrative Budget and Cost Report - Activity Form 
90 - Explanation of Entries on the Activity Form 
90.1 Title and Use 
90.2 - Contractor Number 
90.3 - Contractor Name 
90.4 - Activity Code 
90.5 - Funding FY 
90.6 - Reporting FY 
90.7 - Report Month 
90.8 - Acceptance Date 
90.9 - Cost Categories 
90.10 - Allocation of Overhead and General and Administrative Costs 
100 - Description of Operations 
100.1 - Bills/Claims Payment Function (Summary Level Code 11000) 
100.2 - Appeals Function (Summary Level Code 12000) 
100.3 - Inquiries Function (Summary Level Codes 13000 and 33000) 
100.4 - PM - Provider Education and Training (PET) Function (Summary Level 
Code 14000) 
100.5 - Provider Reimbursement Function (Summary Level Code 16000) 
100.5.1 - Participating Physicians Function (Summary Code 15000) 
100.6 - Productivity Investments (PI) Function (Summary Level Code 17000) 
100.10 - Benefit Integrity (BI) Function (Summary Level Code 23000) 
100.11 - MIP - Provider Education and Training (PET) Function (Summary Level 
Code 24000) 
100.12 - Audit Function (Summary Level Code 26000) 
100.13 - MIP Productivity Investments Function (Summary Level Code 27000)  100.14 - MIP-Medicare Program Administration (Summary Level Code 29000) 
110 - Exhibit of Special Projects Form 
110.1 - Completing the Special Projects Form 
120 - Exhibit of Schedule of Other Direct Costs (Schedule A) 
120.1 - Completing the Schedule of Other Direct Costs (Schedule A) 
130 - Exhibit of Schedule of Other Costs (Schedule B) 
130.1 - Completing the Schedule of Other Costs (Schedule B) 
140 - Exhibit of Schedule of Non-COB Credits (Schedule C) 
140.1 - Completing the Schedule of Non-COB Credits (Schedule C) 
150 - Exhibit of Schedule of Other Adjustments (Schedule D) 
150.1 - Completing the Schedule of Other Adjustments (Schedule D) 
160 - Exhibit of the Miscellaneous Cost Schedule 
160.1 - Completing the Miscellaneous Cost Schedule 
170 - Exhibit of Cost Classification Report, Form CMS-2580 
180 - Completing the Cost Classification Report, Form CMS-2580 
180.1 - Column A 
180.2 - Column B 
180.3 - Column C 
180.4 - Column D 
180.5 - Cost Classification Categories 
180.6 - Total 
180.7 - Pension Costs 
180.8 - Remarks 
190 - Exhibit of Certification Form 
190.1  Completing the Certification Form 
200 - Exhibit of Schedule of Net Hours Available, Form CMS-3258 
200.1 - Completing the Schedule of Net Hours Available 
210 - Contractors Performing Services for Other Medicare Contractors 
210.1 - Servicing Contractor 
210.2 - Receiving Contractor 
220 - Budget Justification 
230 - Completing the Budget Request 
230.1 - Transmittal 
230.2 - Hard Copy Requirements 
230.3 - Activities 
230.4 - Hours 
230.5 - Costs 
230.6 - Workload 
230.7 - Net Hours Available (Miscellaneous Section) 
230.8 - Narrative and Financial Analysis Requirements 
230.9 - Financial Information Survey 
240 - Additional Instructions Pertaining To Supplemental Budget Requests (SBRs) 
250 - The Notice of Budget Approval (NOBA) 250.1 - End of FY NOBA 
250.2 - Cumulative Quarterly Distribution 
250.3 - Certifying Official  270 - Budget Preparation Check List for Program Management And Medicare Integrity 
Program 
280 - Exhibit of Contractors Auditing and Settlement Reports Form CMS-1525A 
300 - Exhibit of Audit Selection Criteria Report - Intermediaries Only 
310 - Completing the Audit Selection Criteria Report (ASCR) 
310.1 - Audit Selection Priorities 
350 - Instructions for Using the System for Tracking Audit and Reimbursement (STAR) 
370 - General 
380 - Interest Rates In Calculating Debt Due To The Government 
390 - Travel Costs 
400 - Calculating Return on Investment Where the Contractor's Year for Insurance 
Commission Filing Differs from the Medicare Contract Year 410 - Cost of Project 
Exceeds Estimates 
440 - Introduction to Financial Policies for Coordination of Medicare and Other 
Insurance Programs 
450 - Coordination of Medicare and Complementary Insurance Programs 
460 - Coordination of Medicare with The Federal Grants-In-Aid Program (Medicaid) 
460.1 - Furnishing Title XVIII Claims Information 
460.2 - Treatment of Administrative Cost of Furnishing Information to State 
Agencies 
460.3 - Cost of a Separate Claims Process 
460.4 - Integrated Claims Processing Systems 
460.5 - Other Services 
470 - Principles for Sharing Costs of Physician Profiles 
470.1 - Release of Physician Profile Information to Title XIX Agencies and to 
TRICARE Fiscal Intermediaries 
470.2 - Principles for Sharing Costs of Physician Profiles When Used for Medicare and 
the Carriers' Regular Business 
480 - Coordination of Medicare and Medicare Supplemental (Medigap) Health Insurance 
Policies 
480.1 - Exhibits, Medigap Insurers 
490 - Establishing a Common Provider Audit Program.490 - Establishing a 
Common Provider Audit Program. 
490.1 - Policies for Implementation of a Common Provider Audit Program for 
Titles V, XVIII and XIX of the Social Security Act 
490.2 - Cost Sharing 
490.3 - Desk Review 
490.4 - Field Audit 
490.5 - Final Settlement 
490.6 - Implementing a Common Audit Program 
490.7 - Contacting State Agencies or Their Fiscal Agents 
490.8 - Points to Remember in Discussions with Other Parties 
490.9 - Release of Final Settlement Data for Periods Ending Prior to January l, 
1970 to State Agencies Signing Agreements 
490.10 - Release of Final Settlement Data for Periods Ending After December 31, 
1969 to State Agencies Signing Agreements  490.11 - Treatment of Administrative Costs Accrued in the Operation of a 
Common Audit Program 
490.12 - Treatment of Receipts for Final Settlement Data Released to State 
Agencies 
500 - Coordination of Final Settlement Data Without A Common Audit Program 
500.1 - Treatment of Administrative Costs and Receipts for Furnishing Settlement 
Information Where There is No Common Audit Program 
510 - Reporting Costs for Assistance Provided PROs 
 
NOTE: Revision 1, the initial release of this chapter, includes a cross reference to the 
source sections in current manuals. The manual is identified by A1, A2, A3, or A4 for 
Intermediary Manual Parts 1 through 4; or by B1, B2, B3 or B4 for Carriers Manual Parts 
1 through 4. This indicator is followed by a dash and the related section number.  10 - General - (Rev. 1, 08-30-02) 
A1-1200, B1-4200 
 
The Secretary is authorized to make funds available for administrative costs related to the 
functions contractors perform as stipulated in the Agreement under the provisions of title 
XVIII of the Social Security Act. Funds available for this purpose are in the DHHS 
Appropriation Act. These funds are provided for a fiscal year (FY) beginning October 1. 
They are not available for obligation and expenditure until released by the Office of 
Management and Budget in an apportionment that is made on a quarterly basis to 
preclude an expenditure rate that exceeds the appropriation. Medicare administrative 
funds will be requested separately for program management (PM) and Medicare Integrity 
Program (MIP). Contractors shall report this on CMS's activity level budget and cost 
reporting system - Contractor Administrative-Budget and Financial Management System 
(CAFM II). 
 
The Anti-Deficiency Act, 31 USC 1341, provides that no government official or 
employee may authorize or create an obligation, or make or cause to make an expenditure 
in excess of an apportionment of appropriated funds. To enforce this prohibition, the Act 
requires administrative discipline of government officials and employees who 
inadvertently exceed their authority, and criminal penalties for those who do so 
knowingly and willfully. 
 
In order for the Secretary to ensure that adequate funds are available and trust funds are 
efficiently used for the administration of the Federal Health Insurance Program, the 
contractor shall submit an estimate of administrative costs that are anticipated for the 
ensuing FY. Predicate the annual budget on the budget and performance requirements 
(BPRs) issued by CMS and on its previous Medicare cost and productivity experience. It 
shall consider unusual or non-recurring type activities that could be part of the historical 
cost data. 
 
The Secretary will pay contractors for necessary and proper costs of administration as 
determined by the Principles of Reimbursement in Appendix B of the contract/agreement. 
The amount of the settlement is subject to audit. Thus, the inclusion of funds in an 
approved budget or in a subsequent cost statement does not constitute a final 
determination as to the allowability of such costs. However, it is intended that a mutual 
agreement on the estimate will facilitate fiscal planning by both the contractor and CMS, 
and provide a basis for common understanding for determining administrative costs. 
 
The Secretary may also enter into fixed price or other non-cost related agreements. The 
instructions that follow do not pertain to non-cost related agreements, unless specifically 
designated in the individual contract. 
 
10.1 - Budget Forms Supply - (Rev. 1, 08-30-02) 
A1-1200.1, B1-4200.1 
  Copies of all forms referred to in the ensuing sections can be obtained from the CAFM II 
System. 
 
20 - The Budget Cycle - (Rev. 1, 08-30-02) 
A1-1201, B1-4201 
 
The following annual budget calendar establishes approximate target dates for each phase 
of the budget cycle to insure an orderly workflow during the planning, preparation, and 
review of budgets. This calendar may be supplemented and revised in the annual BPRs 
letter. 
 
  The contractor shall submit workload estimates (if requested) - February/March. 
 
  BPRs transmitted to contractor - May/June. (Included in the BPRs is information 
relative to statement of work, level of effort, program emphases, new program 
developments and specific recommendations regarding activities of individual 
contractors.) 
 
  Contractor shall submit budget requests (BRs) - June/July. 
 
  Negotiations - July through September. Negotiations proceed directly between the 
contractor and the RO. The RO reaches agreement with the contractor in regard to 
date, time, and location for negotiations. The contractor shall conduct negotiations 
by telephone, correspondence, on-site visits or at the RO. 
 
  Notice of Budget Approvals (NOBA) sent to contractor - September/October. In 
the absence of a NOBA, a continuing resolution letter will provide interim 
funding. 
 
  Budget distribution - 30 days after the contractor receives its initial annual 
NOBA. 
 
  Budget distribution approval - 30 days after distribution is received by the RO. 
 
To aid the contractor in its preparation and timely submission of required budget 
preparation reports, see 270 for a checklist of the due dates and material to submit. 
 
30 - Role of The Regional Offices (RO) - (Rev. 1, 08-30-02) 
A1-1202, B1-4202 
 
The ROs have the responsibility of negotiating and approving contractor budgets. The 
Office of Financial Management has the authority to negotiate and approve budgets for 
the Blue Cross/Blue Shield Association. 
 
40 - Introduction of Activity Level Budget and Cost Reporting - (Rev. 1, 
08-30-02)  A1-1203, B1-4203 
 
Costs are allocated and reported separately by PM and MIP functions and activities. 
Contractors and CMS are not allowed to co-mingle the PM and MIP funding that is 
appropriated separately by Congress. PM provides funding for claims processing 
functions, and MIP provides funding for payment safeguard functions. A function is a 
unique operation that is separately identifiable, such as Claims Payment or Appeals. An 
activity is defined as a subcategory of a Medicare function. The activities available to a 
contractor may vary depending upon the functions performed by that contractor. A listing 
of activities is available within the CAFM II reporting system utilized for Medicare 
contractor budget and cost reporting. 
 
50 - General CAFM II System Information - (Rev. 1, 08-30-02) 
A1-1204, B1-4204 
 
The CAFM II is an integrated, mainframe based software system utilized by CMS for the 
budget, cost, and funds disbursement reporting requirements for both local contractors 
operating under the terms of the current Medicare contract and those contractors 
operating under a standard government contract generally pursuant to a solicitation. 
 
50.1 - Budget and Cost Reports - (Rev. 1, 08-30-02) 
A1-1204.1, B1-4204.1 
 
The same multi-purpose format is used for the BR, the supplemental budget request 
(SBR), the Interim Expenditure Report (IER), and the final administrative cost proposal 
(FACP). The NOBA will be issued on a FY basis, and will provide a cumulative, 
quarterly distribution of the budgeted funds. Funds will be drawn, via Smartlink, in line 
with anticipated expenses not to exceed the cumulative, quarterly distribution on the 
NOBA. 
 
The CAFM II requires contractors to identify and report costs on an activity level basis 
with detailed cost reporting and will sum these costs by function. The system will then 
generate a separate PM and/or MIP budget that the contractor will certify for accuracy of 
costs requested. The CAFM II User Manual contains instructions for accessing and 
inputting data into CAFM II and 90 and 100 of this manual contain general instructions 
for completing the screens. 
 
60 - List of Acronyms 
(Rev. 128; Issued:  07-13-07; Effective:  10-01-06; Implementation:  08-13-07) 
 
The following are acronyms that are used frequently throughout the Budget Preparation 
chapter: 
 
Acronym  Text 
ABCR  Administrative Budget and Cost Report 
ALJ  Administrative Law Judge  BI  Benefits Integrity 
BPRs  Budget and Performance Requirements 
BR  Budget Request 
CAFM II  Contractor Administrative-Budget and Financial Management System 
CCR  Cost Classification Report 
CMS  Centers for Medicare & Medicaid Services 
CFR  Code of Federal Regulations 
CO  Central Office 
COB  Coordination of Benefits 
CROWD  Contractor Reporting of Operational and Workload Data 
CWF  Common Working File 
EDP  Electronic Data Processing 
EMC  Electronic Media Claims 
FACP  Final Administrative Cost Proposal 
FAR  Federal Acquisition Regulations 
FM  Facilities Management 
FY  Fiscal Year 
G&A  General and Administrative 
IER  Interim Expenditure Report 
PM  Program Management 
MR  Medical Review 
MIP  Medicare Integrity Program 
MSP  Medicare Secondary Payer 
NOBA  Notice of Budget Approval 
OIG  Office of Inspector General 
PET  Provider Education and Training 
PI  Productivity Investment 
PRRB  Provider Reimbursement Review Board 
RO  Regional Office 
ROI  Return on Investment 
SBR  Supplemental Budget Request 
UPIN  Unique Physician Identification Number 
 
70 - Exhibit of Administrative Budget and Cost Report Activity Form - 
(Rev. 1, 08-30-02) 
A1-1210, B1-4210 
 
Click here to view Exhibit of Administrative Budget and Cost Report Activity Form. 
 
80 - Completing the Administrative Budget and Cost Report Activity 
Form - (Rev. 1, 08-30-02) 
A1-1211, B1-4211   
A.  General 
 
The Administrative Budget and Cost Report (ABCR) is intended for multiple-use. It is 
used for the following specific annual, periodic, and monthly reports the contractor 
submits. 
 
  Budget Request (BR). See 230; 
 
  Supplemental Budget Request (SBR). See 240; 
 
  Interim Expenditure Report (IER). See Chapter 2, 60; and  
 
  Final Administrative Cost Proposal (FACP). See Chapter 2, 130. 
 
For all of these uses, funding and costs are reported separately by PM and MIP functions 
and activities. Funding and costs for PM and MIP must be kept separate and may not be 
co-mingled. 
 
The contractor shall transmit the ABCR form for all budget reports electronically using 
the CAFM II System. See 270 and Chapter 2, 180 for due dates. 
 
B.  Identification of Costs 
 
The ABCR identifies activities within each Medicare function. For each activity, the 
following costs are separately identified: salaries and wages, fringe benefits, Electronic 
Data Processing (EDP) equipment, other direct costs, other costs, non-Coordination of 
Benefits (COB) credits, overhead, general & administrative (G&A), fee/profit, total cost, 
other adjustments, forward funding, and total adjusted cost. Each Activity Screen also 
identifies up to three discrete workloads and direct, indirect, subcontract, and 
overhead/G&A hours. 
 
The contractor shall separately identify costs in the BR, IER, and FACP pending a 
determination of allowability by CMS. It shall identify these costs in the remarks section. 
 
The principles for determining allowable administrative costs are in Part 31 of the 
Federal Acquisition Regulation (FAR), as codified in Title 48, and in the 
contract/agreement. In accordance with the FAR, costs are directly charged, where it is 
possible to do so, and are allocated where it is not. Costs are assigned to various 
Medicare activities on this basis. 
 
The identification of unallowable costs is in Chapter 2, Budget Execution,  200.3. The 
contractor shall treat them as follows: 
 
  It shall not include costs that the Secretary has determined to be unallowable or 
that it and CMS have mutually agreed are not allowable; and    
  It shall separately identify costs in the BR, IER, and FACP that have been 
previously withheld by CMS pending a final determination of allowability. It shall 
identify these costs in the Remarks section. 
 
NOTE:  The contractor shall round all cost entries to the nearest hundred dollars in the 
BR and SBR. 
 
90 - Explanation of Entries on the Activity Form - (Rev. 1, 08-30-02) 
A1-1212, B1-4212 
 
90.1 Title and Use - (Rev. 1, 08-30-02) 
A1-1212.1, B1-4212.1 
 
The title of the report, ABCR, and the use, i.e., BR, SBR, IER, or FACP. 
 
90.2 - Contractor Number - (Rev. 1, 08-30-02) 
A1-1212.2, B1-4212.2 
 
The five-digit Medicare number assigned. 
 
90.3 - Contractor Name - (Rev. 1, 08-30-02) 
A1-1212.3, B1-4212.3 
 
The contractor organization's official name. 
 
90.4 - Activity Code - (Rev. 1, 08-30-02) 
A1-1212.4, B1-4212.4 
 
A 5-digit code identifying each activity. A listing of codes is available within CAFM II. 
The first digit of an activity code identifies the activity as a PM activity (odd numbers) or 
a MIP activity (even numbers). The second digit identifies the Medicare function, e.g., 
claims processing, appeals, etc. The last three digits refer to the specific activity or 
project within each function. 
 
90.5 - Funding FY - (Rev. 1, 08-30-02) 
A1-1212.5, B1-4212.5 
 
The FY for which funds are requested or to which costs are being reported. 
 
90.6 - Reporting FY - (Rev. 1, 08-30-02) 
A1-1212.6, B1-4212.6 
 
The FY during which the funds are requested or during which costs are being reported. 
  90.7 - Report Month - (Rev. 1, 08-30-02) 
A1-1212.7, B1-4212.7 
 
The calendar month during which costs are being reported. 
 
90.8 - Acceptance Date - (Rev. 1, 08-30-02) 
A1-1212.8, B1-4212.8 
 
The date CAFM II accepts the report. 
 
90.9 - Cost Categories - (Rev. 1, 08-30-02) 
A1-1212.9, B1-4212.9 
 
The contractor shall report costs as defined below unless defined differently in its 
contract. 
 
A.   Salaries/Wages 
 
It shall include salaries, wages, bonuses, and incentive compensation payments to 
directors, officers, and employees. It shall include charges made by agencies furnishing 
temporary help and premium pay for time worked; overtime premium including premium 
for Saturdays, Sundays, and holidays; and shift premiums. It shall include pay for time 
not worked, i.e., rest periods, lunch periods, jury, and voting allowance. It shall include 
vacations, sick leave, holidays, and military leave. It shall report salaries and wages in 
accordance with the FAR 52.216-7(b). It shall report fringe benefits on the fringe benefit 
line. It shall include all employees' salaries and wages except as noted in 90.9H 
(Overhead), 90.9I (General and Administrative), and 90.9P (Hours-Direct, Indirect, 
Subcontracts, and Overhead /G&A - Exception). 
 
B.  Fringe Benefits 
 
It shall include payments made to, or for the benefit of, employees over and above 
normal salaries and wages. For example, contributions to employee insurance and 
pension plans, post retirement benefits other than pensions, payroll taxes, supplemental 
unemployment benefit plans, death benefits, and separation pay allowances. It shall 
include such costs for all employees except as noted in 90.9H (Overhead), 90.9I 
(General and Administrative), and 90.9P (Hours-Direct, Indirect, Subcontracts, and 
Overhead/G&A - Exception). 
 
C.   Electronic Data Processing (EDP) Equipment 
 
It shall include rental/leases, depreciation, or the cost of maintenance and repairs, 
insurance (if separately identifiable), systems software charges, personal property taxes, 
and use charges. It shall include costs of mainframe and mainframe peripherals, personal 
computers, local area networks (LAN), imaging equipment, printers, optical discs, optical  character recognition (OCR) equipment, and lap top computers. It shall report facilities 
management (FM) subcontracts under subcontracts. 
 
D.   Subcontracts 
 
It shall include all subcontract costs such as those involving computer operations, EDP 
software, data entry, and provider auditing which require notification per the Medicare 
contract/agreement. In addition, it shall include subcontracts in excess of $25,000 for 
services related to all functions and duties whether approval is required or not. It shall 
exclude services for janitorial, cafeteria, maintenance and other subcontracts such as 
leases and rentals (see Other Direct Costs). It shall exclude EDP equipment subcontracts 
that are charged to EDP equipment but include FM subcontracts and shared processing 
arrangements. 
 
E.   Other Direct Costs 
 
It shall include all other costs not included in the categories described above. This 
includes, but is not limited to: leases for space and equipment, depreciation for company 
owned space and equipment (except EDP equipment), return on investment, taxes (except 
personnel taxes reported in fringe benefits), insurance (other than that reported in fringe 
benefits or EDP equipment), dues to professional, trade, and business associations, net 
food service costs (cafeteria and subsidized eating facilities), travel, communications, 
postage, office supplies, material, medical review consultants and other consultants under 
$25,000, printing costs excluding equipment, and general maintenance, janitorial and 
security activities. 
 
F.  Other Costs 
 
It shall use this category only with the concurrence of CMS. Most contractors are not 
required to use this category. This category may include other indirect costs, excluding 
overhead and general and administrative costs that a contractor might propose. 
 
G.   Non-COB Credits 
 
It shall include the applicable portion of any income, rebate, allowance, or other credits 
related to total operations. It shall not report COB credits in this category (See 190, 
Certification Form.) 
 
H.   Overhead 
 
It shall include all personal and non-personal service costs related to service departments 
and financial, accounting, and statistical activities as described below. 
 
1. Service Departments 
  It shall include all data related solely to the following service areas which support other 
operations: 
 
  Personnel - Recruiting, testing, hiring, orientation, centralized training staff, 
maintaining employment files, administration of employee services such as 
library, recreation unit, cafeteria, health unit, and employee publications. 
 
  Methods and Procedures - Review and analysis of manual (non-EDP) 
systems. 
 
  Storeroom - Receipt, maintenance, and issuance of materials and supplies. It 
shall not include the cost of the materials or supplies. They are included in 
the areas where used. 
 
  Printing and Duplication - To the extent possible, it shall distribute the costs 
related to printing to the appropriate line item responsible for the end 
product. 
 
  Purchasing - If a separate unit, it shall include all activities related to 
procurement of materials, supplies, furniture, equipment, and services. This 
involves only the purchasing activity, not the cost of the purchases. 
 
  Switchboard - If a separate centralized unit, it shall not include the costs of 
telephone service identified with other operations. 
 
  Mailroom and Interoffice Messengers - It shall include the cost and other 
data related to the activity, unless they can be directly assigned to specific 
lines. It shall include the cost of activities such as incoming (receipt, open, 
sort, batch, and deliver) as well as outgoing mail. It shall not include the cost 
of postage identified with other operations. 
 
  Word Processing Centers 
 
2.  Financial, Accounting, and Statistical Departments 
 
Includes accounting for and control of benefits, record keeping, and other fiscal tasks. 
 
  Accounting for and Control of Benefits - It shall include benefit 
disbursements, reissued checks, bank reconciliations, postpayment review of 
benefit disbursements for internal control purposes, and overpayment 
recoupments relating to individual billings. 
 
  Record Keeping Tasks - It shall include general and cost accounting, payroll, 
inventories (financial, not bills), and receipt of other funds, maintenance of 
petty cash, and other non-benefit-related disbursements. 
    Other Fiscal Tasks - It shall include budget preparation and cost reporting, 
internal fiscal audits, company wide audit by CPA firms, and statistics 
maintained and reports prepared in this operation, and external audit liaison 
with the OIG and GAO. 
 
3. Legal 
 
General corporate legal costs allowable and allocable to Medicare, excluding provider 
cost report appeals, and other activities directly identifiable to other operations (e.g., 
reconsiderations, reviews and hearings). 
 
I.   General and Administrative 
 
It shall include total cost allocated to Medicare for the following: 
 
1. General Management 
 
Individuals responsible for overall corporate or Medicare matters. It shall prorate the cost 
of individuals responsible for more than one operation, but not responsible for overall 
corporate or Medicare matters to the operations for which they are responsible. It shall 
charge the Medicare Coordinator (the person responsible for the overall Medicare 
operation) to General and Administrative. 
 
2. Contractor Operations Specialist 
 
It shall include the cost of contractor operations specialists, CMS on-site representatives, 
including the cost of services and space furnished to CMS. 
 
J.   Fee/Profit 
 
It shall include only if allowed by contract/agreement, but only when payable from the 
Government. (Also see Other Adjustments below.) 
 
K.   Total Cost 
 
The sum of A-J above. Total cost excludes those accruals included in Other Adjustments 
and Forward Funding, as defined below. 
 
L.   Other Adjustments 
 
It shall include items for which reimbursement is not yet due per 48 CFR 52.216-7(b), 
but which should be accrued to the period being reported. For example, it shall include 
subcontract costs for which services have been received, but payment has not been made 
to the subcontractor or fees which have been earned (non-COB credits and fee/profit), but 
for which payment is not payable by CMS. CMS will provide guidance as to which 
activity to report for fee/profit.   
M.   Forward Funding 
 
It shall include the outstanding costs to be incurred for CMS-approved items for which 
funding has been received, but the services extend into the subsequent FY. As costs are 
incurred, these costs should be reported in A through J thus reducing the forward funding 
balance. This category is not applicable to the budget request. If CMS has approved 
projects for forward funding, then costs must be reported on the September IER and the 
FACP. 
 
N.   Total Adjusted Cost 
 
The sum of K through M above. See Note in Chapter 2, 130 for instructions for 
administrative draws. 
 
O.   Workloads 1-2-3 
 
Some activities may not have discrete workloads; other activities may have several 
workloads and some only one workload. The contractor shall not fill in unless directed by 
CMS. Workloads for bills/claims, inquiries, and appeals will be pre-filled from workload 
reporting data drawn from Contractor Reporting of Operational and Workload Data 
(CROWD) reports. Other workloads will be input by the contractor as directed by CMS. 
See 100 for specific workloads to report. 
 
P.   Hours-Direct, Indirect, Subcontracts, and Overhead/G&A 
 
It shall separately identify productive hours associated with salaries and wages and 
overhead/G&A. It shall compute estimated hours per employee in accordance with the 
Schedule of Net Hours Available, Form CMS-3258. (See 200.) It shall round net 
productive hours to the nearest hour. It shall use Indirect and Subcontracts Hours only 
with the concurrence of CMS. 
 
It shall include hours directly assigned or otherwise allocated to a particular activity 
during the FY. It shall include or exclude, as appropriate, personnel hours loaned and 
borrowed by each operation. It shall include hours incurred by temporary help furnished 
by outside organizations. For this reporting requirement, temporary help must meet all 
the following criteria: 
 
  Directly supervised by contractor personnel; 
 
  Services performed on contractor premises; 
 
  Used for limited time periods; and  
 
  Obtained from an outside agency. 
  The contractor shall distinguish between temporary help and certain types of 
subcontractors, such as data entry, where the services are used as an interim measure to 
alleviate peak period workloads. Subcontract personnel provide a product or service, but 
do not meet the criteria for temporary help. Examples of subcontractors are: programmers 
who contract to provide software, but are not under direct control of contractor personnel, 
and clerical personnel working offsite. 
 
Exception: The contractor shall not report hours for employees assigned to general 
maintenance, janitorial and security activities as they relate to its facility's upkeep and 
protection. It shall include related personal service costs (salaries, wages, and fringe 
benefits) as part of Other Direct Costs. 
 
90.10 - Allocation of Overhead and General and Administrative Costs 
(Rev. 26, 12-08-03) 
 
A1-1212.10, B1-4212.10 
 
The contractor shall allocate overhead and general and administrative costs to all 
activities. with the exception of productivity investment (PI) activities.  Incremental 
overhead and general and administrative costs attributable to PI projects should be 
eliminated from the allocation pool and included in the overhead and general and 
administrative cost line items of the PI project.  These allocations should be based on the 
ratio of each activity's total costs to the sum of all activity costs. Included in costs are 
salaries and wages, fringe benefits, EDP Equipment, other direct costs, other costs (if 
applicable), and non-COB credits. It shall exclude subcontract costs from the calculation. 
 
For example, the only ongoing activities the contractor performs is for Bills/Claims 
Payment and Appeals. The Total Costs prior to " other adjustments" of salaries and 
wages, fringe benefits, EDP equipment, other direct costs, other costs, and non-COB 
credits equals $1,000,000 for the Bills/Claims Payment and the Subcontract cost is 
$100,000.  The same costs are $250,000 and $25,000 for Appeals and $50,000 and 
$75,000 for Productivity Investments.  Overhead for this period totaled $77,000 and 
general and administrative (G&A) costs totaled $26,000. 
 
Subcontract costs, other adjustments and forward funding are not considered in this 
allocation. 
 
  Salaries & Overhead P ercent   G&A   Percent   Sub-  Total  
Wages,  Allocated Allocated Allocated Allocated contracts Cost 
etc. 
Bills/Claims $1,000,000  $60,000  80%  $20,000  80% $100,000 $1,180,000 
Payment 
Appeals  250,000  15,000  20%  5,000  20%  25,000  295,000 
Prod.  50,000  2,000  0%  1,000  0%  75,000  128,000 
Investments 
(PI)  Total Cost  $1,300,000  $77,000  100%  $26,000  100% $200,000 $1,603,000 
Less PI     (50,000)            
Basis for  1,250,000             
Allocation 
Less PI    (2,000)    (1,000)       
Overhead & 
G&A 
Allocable                25,000       
Overhead &  75,000 
G&A 
 
The basis for this allocation excludes the direct PI cost and the incremental Overhead and 
G&A costs attributable to the PI.  In this example, 80% of the non-incremental Overhead 
and G&A were allocated to Bills/Claims Payment because this activity comprises 80% of 
the cost the total allocation base for Salaries & Wages, etc. ($1,000,000/$1,250,000). 
 
In this example, 80 percent of the overhead and 80 percent of the general and 
administrative costs were allocated to Bills/Claims Payment because salaries & wages, 
etc. are that percentage of the basis. Subcontract costs, other adjustments and forward 
funding are not considered in this allocation. 
 
100 - Description of Operations - (Rev. 1, 08-30-02) 
A1-1213, B1-4213 
 
The following provides short descriptions of each function. Operations are first separated 
into PM or MIP and then by function into activities. Each function may include multiple 
activities. A list of activity codes is available in CAFM II. The contractor shall always 
refer to the General Instructions and/or the BPRs for the most current description of the 
activities for each function. 
 
Once operational costs are segregated into PM or MIP, activities may be reported as 
either: 
 
  An operational functional activity; 
 
  A PI activity; or 
 
  A special project activity. 
 
In addition, as directed by CMS, certain specific costs must be identified and 
accumulated from one or more of the activities and reported a second time for 
informational purposes on the Miscellaneous Schedule. (See 160.1.) 
 
After the appropriate activity is selected, cost items are reported in categories on the 
Activity Form in CAFM II. See 90.9 for a description of cost categories. Each activity 
includes the usual direct and indirect charges associated with it. When staff personnel  have more than one area of responsibility, the contractor shall allocate their time and cost 
equitably to the operations involved. 
 
A variety of notification methods will be used to update required cost reporting (i.e., 
CAFM II "News," the BPRs, and other performance instructions). CAFM II will have a 
current list of updated activities, including additions or changes in the PI activities, 
special project activities, functional activities, and informational reporting on the 
Miscellaneous Schedule. 
 
100.1 - Bills/Claims Payment Function (Summary Level Code 11000) - 
(Rev. 1, 08-30-02) 
A1-1213.1, B1-4213.1 
 
The contractor shall include the following: 
 
The bills/claims payment function includes the costs and workload(s) associated with 
processing Medicare bills/claims. The activities included in this function range from 
provider enrollment, the receipt of initial bills/claims to the production of check or EFT 
payment and remittance advice and Medicare Summary Notice. This function also 
includes the costs for the common working file host and the UPIN Registry. 
 
100.2 - Appeals Function (Summary Level Code 12000) - (Rev. 1, 08-30-
02) 
A1-1213.2, B1-4213.2 
 
The appeals function includes the costs and workload(s) to efficiently and effectively 
control and respond to requests for appeal of Medicare determinations. This includes all 
Part A reconsiderations and ALJ hearings processed and all activities related to the Part B 
review and hearing process. For intermediaries, the costs of provider appeals related to 
cost report settlements should be included as part of the Provider Settlements activity in 
the Audit function. 
 
100.3 - Inquiries Function (Summary Level Codes 13000 and 33000) - 
(Rev. 1, 08-30-02) 
A1-1213.3, B1-4213.3 
 
The inquiries function includes the costs and workload(s) associated with inquiries 
including Medicare customer service or billing/claims inquiries from beneficiaries or 
providers by telephone, correspondence, walk-in or on-line inquiry. The costs of inquiries 
received in the medical review (MR), Medicare Secondary Payer (MSP), and Benefit 
Integrity (BI) departments should be charged to those activities. The carrier shall charge 
the cost of beneficiary inquiries to obtain participating physician/supplier information to 
participating physicians. However, it shall charge the costs of toll-free lines and 
equipment to receive phone or electronic inquiries relating to the participating physician 
activity and the costs of general inquiries from physicians to Inquiries.   
100.4 - PM - Provider Education and Training (PET) Function 
(Summary Level Code 14000) - (Rev. 1, 08-30-02) 
A1-1213.4, B1-4213.4 
 
The PM - PET function includes the costs for education and training directed at 
providers, groups of providers, and in some cases, individual providers depending on the 
scope of the problems or need for education. Costs of PET are allocated to both PM and 
to MIP. Refer to 100.11 for MIP PET discussion. 
 
100.5 - Provider Reimbursement Function (Summary Level Code 
16000) - (Rev. 1, 08-30-02) 
A1-1213.5 
 
See 340.3. The Provider Reimbursement function (intermediaries) includes costs and 
workload(s) for establishing and maintaining providers' accounting systems, submitting 
cost reports for quality assurance and provider audits, maintaining records and files for 
hospital-based physicians, and performing hospital cost reporting activities. 
 
100.5.1 - Participating Physicians Function (Summary Code 15000) 
(Rev. 1, 08-30-02) 
 
B1-4213.5 
 
The participating physician function (carriers) includes the costs for the continuation of 
the annual participating enrollment, limiting charge monitoring activities and the 
dissemination of participation information. 
 
100.6 - Productivity Investments (PI) Function (Summary Level Code 
17000) 
(Rev. 26, 12-08-03) 
 
A1-1213.6 
 
The contractor shall include the cost of activities related to the development and 
implementation of approved PIs and administrative enhancements as directed by CMS. 
 
A.   Activity Codes for Pis 
 
Activity codes for PIs will be assigned to approved projects. A list of approved PIs will 
be available in CAFM II. The contractor shall use only approved PI codes. The 
miscellaneous PI activity code may be used only on the initial BR and the SBR for 
projects that have not been approved and do not have an assigned PI activity code. It shall 
not use the miscellaneous PI Activity Code on an IER or FACP. 
  1.   PIs include administrative enhancements and legislative mandates directed by CMS 
that are considered essential for maintenance of effective program operations. They do 
not necessarily generate program savings. 
 
2.   PIs may include activities that affect more than one Medicare function and are 
administered as a PI. 
 
3.   PIs also include systems conversions and transitions. See D below. 
 
B.   PI Funding 
 
The PI funding is generally for first year start up costs only. Funding for subsequent years 
is generally treated as an ongoing cost, not a PI, and should be included as an ongoing 
operational cost in the contractor's BR. If PI funding after the first year is requested, a 
schedule with funding for each FY should be included in the initial request for funding. If 
CMS determines that PI funding for subsequent FYs is authorized, the contractor should 
include the PI funding authorized in its BR every year it is authorized. 
 
C.   PI Costs 
 
The contractor shall report incremental direct costs and incremental overhead and general 
and administrative costs.  If some of the non-incremental direct costs are incurred due to 
reallocation of staff time, document it but do not request funding.  Incremental direct 
costs and incremental overhead and general and administrative costs may include: 
 
  Incremental personal service costs of staff and management directly involved in 
the project (including programmers). 
 
  Materials and supplies used for the project 
 
  Subcontract services, such as feasibility studies done under contract. 
 
  EDP costs including data conversion, computer time and EDP support services 
that are incurred only if the project is done.  These costs should be spread to the 
appropriate cost categories on the Activity Form.  See Section 90.9.  Include 
special charges under a facilities management contract for programming changes.  
Depreciation on equipment purchased in conjunction with the project should be 
shown in the EDP equipment cost category; and  
 
  Incremental overhead and general and administrative costs caused by any 
increase: 
 
  in the cost incurred for overhead or general and administrative functions 
(described in 90.9.H and 90.9.I) as a result of the PI project 
implementation , or  
    in the Medicare allocation from the corporate overhead or general and 
administrative pool due to an increase in the cost allocation base 
 
D.   System Conversions and Transitions 
 
The following costs are included in systems conversions and transitions and may also 
apply to other projects: 
 
  Project Management Costs - Costs of essential staff/management project support; 
 
  Software Installation Costs - Costs for installing and testing the software; 
 
  File Conversion Costs - Costs for converting to the new system including the 
costs of mapping, software development and testing; 
 
  Interface Development and Implementation Costs - Costs to interface with 
external programs e.g., for electronic data interchange, check writing, 1099 
preparation, other reports and forms; 
 
  Training Costs - Costs of staff training including train the trainer, technical staff 
and user staff training costs; and  
 
  Other Costs - Costs of provider education, outreach, and post- implementation 
problem resolution. 
 
E.   Cost-Benefit Documentation for PI Projects 
 
1.   General 
 
Before funding will be approved for a project that is proposed by a contractor, it must be 
demonstrated to be cost-beneficial. A project will generally only be approved if the net 
present value (NPV) for the project is equal to or greater than zero. The present value of 
the savings is at least equal to the costs of implementation when both are discounted to 
the same start date. As a general rule, CMS will consider only projects having a positive 
NPV over 2 years. However, the contractor shall provide probable costs and savings 
taken over all years of the project. 
 
This documentation does not supplant the existing prior approval process or the threshold 
amounts specified in the Medicare contract/agreement for system enhancements and 
subcontracts. 
 
2.   Applicability 
 
The contractor shall include cost-benefit documentation with all requests for PI funds. 
The amount of the documentation required depends on the estimated cost and complexity  of the project. Administrative enhancements and systems transitions directed by CMS are 
not subject to this cost-benefit test unless specifically required by CMS. 
 
3.   Documentation 
 
The contractor shall document cost-benefit analysis using NPV calculations of costs and 
savings discounted to the start date. A narrative explanation of cost-benefit analysis 
should identify the assumptions for the analysis such as the start date, discount rate, and 
costs and savings in each fiscal year. The contractor shall include the following items in 
documentation: 
 
  Estimated Cost - The contractor shall show cost items in categories reported for 
activities. See 90.9 for cost categories. It shall provide underlying cost details 
and the assumptions on which they are based for each material cost item. It shall 
include personnel, machine time, materials and outside services in the estimate of 
costs. It shall also include EDP charges and overhead. For capital expenditures in 
excess of $500, it shall use standard procedures for establishing the asset's useful 
life and for the depreciation schedule. CMS pays expenses when incurred; the 
contractor shall include the proper depreciation and return on investment for the 
period before implementation in its analysis. 
 
  Administrative Cost Savings - The contractor shall outline any savings in staff 
time, postage, and computer time. It shall include only cost reductions, not cost 
avoidance. It shall reduce these savings by increases in administrative costs 
attributable to the project (e.g., temporary productivity losses due to learning 
curve, "downtime" for problem resolution, and depreciation for equipment 
purchased). 
 
  Benefit Savings - The contractor shall estimate the amount of benefit savings, if 
any, which result from preventing or recovering erroneous payments, based on 
policy in effect at the time of the analysis. 
 
  Discount Rate - The contractor shall use the interest rate applicable under the 
Prompt Payment Act to discount both the savings and costs to the start date. The 
interest rate is published in the "Federal Register." 
 
  Start Date - This is the point in time where the project first incurs costs and is the 
date in time used to determine the Net Present Value of the project. 
 
F.   PI Workload 
 
The contractor shall report no workload unless directed by CMS. 
 
100.7 - Provider Enrollment - Medicare Program Administration 
Function (Summary Level Code 19000) - (Rev. 1, 08-30-02) 
A1-1213.7, B1-4213.7   
The contractor shall use this summary level code only with the concurrence of CMS. 
 
100.8 - Medical Review (MR) Function (Summary Code 21000) - (Rev. 
1, 08-30-02) 
A1-1213.8, B1-4213.8 
 
MR is the efforts taken to prevent, identify, and address claim errors made by providers 
including manual or automated review of claims to ensure that payments are made for 
services that are covered and correctly coded. (For further information see the Program 
Integrity Manual) 
 
100.9 - Medicare Secondary Payer (MSP) Function (Summary Level 
Code 22000) - (Rev. 1, 08-30-02) 
A1-1213.9, B1-4213.9 
 
The MSP function includes the costs and workload(s) for recovery activities related to 
working aged; disabled; ESRD; workers' compensation; auto/liability/no fault; and other 
activities related to MSP and identified by CMS. 
 
100.10 - Benefit Integrity (BI) Function (Summary Level Code 23000) - 
(Rev. 1, 08-30-02) 
A1-1213.10, B1-4213.10 
 
The Benefit Integrity function includes the costs and workload(s) associated with 
receiving and processing complaints or allegations of Medicare fraud and abuse and 
maintenance of associated databases. BI also includes self-initiated data analysis to detect 
potential fraud and maintenance of associated databases, and the development of cases 
for referral or further action. See work specifically required in 3900. 
 
100.11 - MIP - Provider Education and Training (PET) Function 
(Summary Level Code 24000) - (Rev. 1, 08-30-02) 
A1-1213.11, B1-4213.11 
 
The MIP - PET function includes the costs for education and training directed at 
providers, groups of providers and, in some cases, individual providers depending on the 
scope of the problems or need for education to avoid and detect waste, fraud, and abuse. 
Costs of PET are allocated to both PM and to MIP. 
 
100.12 - Audit Function (Summary Level Code 26000) - (Rev. 1, 08-30-
02) 
A1-1213.12 
 
The Audit function (intermediaries) includes the costs and workload(s) for Provider Desk 
Reviews, Audits and Settlements. See 290.   
100.13 - MIP Productivity Investments Function (Summary Level Code 
27000) - (Rev. 1, 08-30-02) 
A1-1213.13, B1-4213.12 
 
The contractor shall use these lines only with specific authorization by CMS for MIP PI. 
See the see the Program Integrity Manual for discussion of the PI activities. 
 
100.14 - MIP-Medicare Program Administration (Summary Level Code 
29000) - (Rev. 1, 08-30-02) 
A1-1213.14, B1-4213.13 
 
The contractor shall use this summary level code only with the concurrence of CMS. 
 
110 - Exhibit of Special Projects Form - (Rev. 1, 08-30-02) 
A1-1214, B1-4214 
 
Click here to view Exhibit of Special Projects Form. 
 
110.1 - Completing the Special Projects Form - (Rev. 1, 08-30-02) 
1214.1, B1-4214.1 
 
A.   General 
 
This schedule is used to identify special project activities. Special projects are defined as 
those activities which may be of critical importance from an operational standpoint but 
which are not materially significant from a financial standpoint viewed in the context of 
the contractor's contract/agreement and its requirements. Therefore, reduced budget and 
cost reporting is required. Special projects may relate to any underlying Medicare 
function and/or to a specific activity. Because of the non-material (financial) nature of the 
activity, the contractor shall charge only direct costs and specifically identifiable and 
incremental overhead/G&A costs to the activity. 
 
B.   Uses 
 
The schedule will be used only if there are special project activities to report. It will 
generally not be used for the BR but may be used for any or all of the following: SBR, 
NOBA, IER, and FACP. It shall not be used for cost reporting purposes unless funds are 
provided in the NOBA. 
 
C.   Explanation of Entries on Special Projects Schedule 
 
1.   Code - Special projects are assigned to the 18000 series for PM activities and to the 
28000 series for MIP activities. See 90.4 for a further discussion of activity codes. 
  2.   Description - Brief description of the activity. 
 
3.   Productive Hours -The contractor shall include all productive hours. (See 90.9P.) 
 
4.   Salaries/Fringe Benefits - The contractor shall include all salaries, wages and fringe 
benefits. (See 90.9 A-B.) 
 
5.   Subcontracts - The contractor shall include all subcontract costs. (See 90.9D.) 
 
6.   Other Costs - The contractor shall include all costs and, if applicable, non-COB 
credits not included in personal service costs and subcontracts. This may include: EDP 
equipment, other direct costs, other costs, non-COB credits and incremental 
overhead/G&A. It should not confuse this cost category with the "other costs" reported 
on the Activity Screen. See 90.9C and 90.9E-I. It shall also include any adjustments or 
forward funding when appropriate on the FACP. (See 90.9L-M.) 
 
7.   Total Cost - The sum of salaries/fringe benefits, subcontract and all other costs above. 
Note that special project activity costs are NOT included in any other activity and must 
be separately reported on this schedule and that total costs should equate to total costs as 
defined in 90.9K and not to Total Adjusted Cost as defined in 90.9N. 
 
8.   Workload - The contractor shall report the related workload if appropriate. 
 
120 - Exhibit of Schedule of Other Direct Costs (Schedule A) - (Rev. 1, 
08-30-02) 
A1-1215, B1-4215 
 
Click here to view Exhibit of Schedule of Other Direct Costs (Schedule A) 
 
120.1 - Completing the Schedule of Other Direct Costs (Schedule A) - 
(Rev. 1, 08-30-02) 
A1-1215.1, B1-4215.1 
 
A.   General 
 
The contractor shall use this schedule to identify specific other direct costs included in 
the Other Direct Costs line of the Activity Screen as defined in 90.9 E. A separate 
Schedule A is completed for each activity requiring the specific identification of Other 
Direct Costs. 
 
B.   Uses 
 
The contractor shall complete this schedule only with the concurrence of CMS. It may 
not be required of all contractors. If required, the schedule may be used for the BR, SBR, 
IER and/or FACP. 
  C.   Explanation of Entries on the Schedule A 
 
1.   Code - A three-digit code identifying each cost item. The contractor shall use 999 to 
identify all remaining costs not requiring specific identification. 
 
2.   Description - A brief description of the discrete cost item. Types of costs to be 
reported are described in 90.9 E and may also include such items as consultant fees, cost 
of money and travel depending on the nature of the contractor's contract. Those items 
requiring identification will depend on contract needs, materiality and other 
considerations. The classification of costs in the contractor's cost accounting system, 
government regulations and the contract will determine whether the cost is classified as 
an Other Direct Cost. 
 
3.   Total Cost - The contractor shall report the total cost for each item. The total for all 
Other Direct Costs, including those reported under 999 if applicable, must agree with the 
total reported on the Other Direct Costs line of the Activity Screen. 
 
130 - Exhibit of Schedule of Other Costs (Schedule B) - (Rev. 1, 08-30-
02) 
A1-1216, B1-4216 
 
Click here to view exhibit of Schedule of Other Costs (Schedule B) 
 
130.1 - Completing the Schedule of Other Costs (Schedule B) - (Rev. 1, 
08-30-02) 
A1-1216.1, B1-4216.1 
 
A.  General 
 
The contractor shall use this schedule to identify specific other costs included in the 
Other Costs line of the Activity Screen as defined in 90.9 F. A separate Schedule B is 
completed for each activity requiring the specific identification of other costs. 
 
B.  Uses 
 
The contractor shall complete this schedule only with the concurrence of CMS. It may 
not be required of all contractors. If required, the schedule may be used for the BR, SBR, 
IER and/or FACP. 
 
C.  Explanation of Entries on the Schedule B 
 
1.  Code - A three-digit code identifying each cost item. The contractor shall use 999 to 
identify all remaining costs not requiring specific identification. 
 
2.  Description - A brief description of the discrete cost item. Types of costs to be 
reported are described in 90.9 F. Those items requiring identification will depend on the  nature of the contractor's contract/agreement, materiality and other considerations. The 
classification of costs in its cost accounting system, government regulations and the 
contract/agreement will determine whether the cost is classified as an Other Cost. 
 
3.  Total Cost - The contractor shall report the total cost for each item. The total for all 
Other Costs, including those reported under 999 if applicable, must agree with the total 
reported on the Other Direct Costs line of the Activity Screen. 
 
140 - Exhibit of Schedule of Non-COB Credits (Schedule C) - (Rev. 1, 
08-30-02) 
A1-1217, B1-4217 
 
Click here to view exhibit of Schedule of Other Costs (Schedule C). 
 
140.1 - Completing the Schedule of Non-COB Credits (Schedule C) - 
(Rev. 1, 08-30-02) 
A1-1217.1, B1-4217.1 
 
A.   General 
 
The contractor shall use this schedule to identify specific Non-COB Credits included in 
the Non-COB Credit line of the Activity Screen as defined in 90.9 G. A separate 
Schedule C is completed for each activity requiring the specific identification of Non-
COB Credits. 
 
B.   Uses 
 
The contractor shall complete this schedule only with the concurrence of CMS. It may 
not be required of all contractors. If required, the schedule may be used for the BR, SBR, 
IER and/or FACP. 
 
C.   Explanation of Entries on the Schedule C 
 
1.   Code - A three-digit code identifying each credit item. The contractor shall use 999 to 
identify all remaining credits not requiring specific identification. 
 
2.   Description - A brief description of the discrete credit item. Types of credits to be 
reported are described in 90.9 G. Those items requiring identification will depend on the 
nature of the contractor's contract, materiality and other considerations. 
 
3.   Total Credits - The contractor shall report the total credit for each item. The total for 
all Non-COB Credits, including those reported under 999 if applicable, must agree with 
the total reported on the Non-COB Credits line of the Activity Screen. 
 
150 - Exhibit of Schedule of Other Adjustments (Schedule D) - (Rev. 1, 
08-30-02)  A1-1218, B1-4218 
 
Click here to view exhibit of Schedule of Other Adjustments (Schedule D) 
 
150.1 - Completing the Schedule of Other Adjustments (Schedule D) - 
(Rev. 1, 08-30-02) 
A1-1218.1, B1-4218.1 
 
A.   General 
 
The contractor shall use this schedule to identify specific Other Adjustments included in 
the Other Adjustments line of the Activity Screen as defined in 90.9L. A separate 
Schedule D is completed for each activity requiring the specific identification of Other 
Adjustments. 
 
B.   Uses 
 
The contractor shall complete this schedule only with the concurrence of CMS. It may 
not be required of all contractors. Although described in this section, the schedule will 
not be used in budget preparation. It may be used for the IER and/or FACP. 
 
C.   Explanation of Entries on the Schedule D 
 
1.   Code - A three-digit code identifying each adjustment item. The contractor shall use 
999 to identify all remaining adjustments not requiring specific identification. 
 
2.   Description - A brief description of the adjustment item. Types of adjustments to be 
reported are described in 90.9 L. Those items requiring identification will depend on the 
nature of the contractor's contract, materiality and other considerations. 
 
3.   Total Adjustments - The contractor shall report the total adjustment for each item. 
The total for all Other Adjustments, including those reported under 999 if applicable, 
must agree with the total reported on the Other Adjustments line of the Activity Screen. 
 
160 - Exhibit of the Miscellaneous Cost Schedule - (Rev. 1, 08-30-02) 
A1-1219, B1-4219 
 
Click here to view exhibit of the Miscellaneous Cost Schedule 
 
160.1 - Completing the Miscellaneous Cost Schedule - (Rev. 1, 08-30-02) 
A1-1219.1, B1-4219.1 
 
A.   General 
  The contractor shall use this schedule to identify specific "miscellaneous cost items." 
This is a single stand-alone schedule and it does NOT tie to any Activity Screen. CMS 
will specify any miscellaneous cost items to be reported. 
 
B.   Uses 
 
The schedule is for tracking ANY miscellaneous costs within one or more activities that 
need to be separately identified but are already included in the total costs of those 
activities. It is used for the following specific annual, periodic, and monthly reports the 
contractor submits to CMS. 
 
  Budget request - See 230 
 
  Interim Expenditure Report - See Chapter 2, 60. 
 
  Final Administrative Cost Report - See Chapter 2, 60. 
 
C.   Explanation of Entries 
 
1.   Code - A miscellaneous code is assigned within the 10000 series for PM activities, 
the 20000 series for MIP activities, and the 51000 series if it pertains to both PM and 
MIP. The code is followed by a 2-digit code to identify specific cost items. CMS will 
identify miscellaneous codes to report. See 90.4 for further discussion of activity codes. 
 
2.   Description - Brief description of the activity. 
 
3.   Costs - The contractor shall include personal service, subcontract and all other costs 
as appropriate. Miscellaneous costs should include accruals. 
 
4.   Workload - The contractor shall report the related workload if appropriate. 
 
5.   Net Hours Available - The contractor shall report the number of net hours available 
per employee. (See 200.1.) 
 
170 - Exhibit of Cost Classification Report, Form CMS-2580 - (Rev. 1, 
08-30-02) 
A1-1220, B1-4220 
 
Click here to view exhibit of Cost Classification Report Form 
 
180 - Completing the Cost Classification Report, Form CMS-2580 - 
(Rev. 1, 08-30-02) 
A1-1221, B1-4221 
  The contractor shall submit the Cost Classification Report (CCR), Form CMS-2580, with 
estimated costs identified by major classifications. It shall submit it with both the BR and 
the FACP. 
 
NOTE:  Only one combined PM/MIP CCR is required with the BR and the FACP. 
 
The contractor shall round entries to the nearest $100 for the budget request and nearest 
$1 for the FACP. 
 
180.1 - Column A - (Rev. 1, 08-30-02) 
A1-1221.1, B1-4221.1 
 
This column will sum all activities to equal Total Adjusted Cost less Overhead, General 
and Administrative and Other Adjustments. The following fields will be pre-filled: 
Salaries and Wages, Fringe Benefits, EDP Equipment, Subcontracts, Credits and Forward 
Funding. The contractor will identify and enter Other Direct Costs among the following 
applicable cost classification categories: Facilities and Occupancy, Outside Professional 
Services, Telephone and Telegraph, Postage and Express, Furniture and Equipment, 
Materials and Supplies, Travel, Return on Investment, Miscellaneous and Other. See 
90.9 and 180.5 for a description of each cost classification category. 
 
180.2 - Column B - (Rev. 1, 08-30-02) 
A1-1221.2, B1-4221.2 
 
The contractor shall use this column to allocate total Overhead and General and 
Administrative costs from all activity forms to the applicable cost classification 
categories. See 90.9 and 180.5. 
 
180.3 - Column C - (Rev. 1, 08-30-02) 
A1-1221.3, B1-4221.3 
 
The contractor shall use this column to allocate total Other Adjustments from all Activity 
Forms to the applicable cost classification categories. (See 90.9 and 180.5.) It shall not 
use this column in the budget request (BR). 
 
180.4 - Column D - (Rev. 1, 08-30-02) 
A1-1221.4, B1-4221.4 
 
The sum of columns A-C to equal Total Adjusted Costs for all Activity Forms. 
 
180.5 - Cost Classification Categories - (Rev. 1, 08-30-02) 
A1-1221.5, B1-4221.5 
 
A.  Salaries and Wages  See 90.9. 
B.  Fringe Benefits  See 90.9. The contractor shall include the portion of  fringe benefits allocated for contributions to employee 
pension plans. Also, it shall separately identify pension 
plan expense. 
C.  Facilities and  The contractor shall include: 
Occupancy   
Rent-leasehold; 
 
Amortization-leasehold improvements; 
 
Depreciation or rental of company-owned buildings; 
 
Real estate and property taxes; 
 
Insurance on property; 
 
Power, heat and light; 
 
Personal service costs and/or facility service agreements 
related to general maintenance, janitorial and security; 
 
Repairs; and  
 
Other - licenses or permits related to buildings or their 
components. 
D.  EDP Equipment  See 90.9. 
E.  Subcontracts  See 90.9. 
F.  Outside Professional  The contractor shall include charges for professional 
Services  services rendered by outside consultants. This includes 
medical and management-type consultants. 
G.  Telephone and  Self explanatory 
Telegraph 
H.  Postage and Express  Self explanatory 
I.  Furniture and  The contractor shall include: 
Equipment, Other   
Than EDP  Rental or depreciation; 
 
Expense items under $500; 
 
Maintenance and repairs; and 
 
Use charges. 
  Examples of items that fall within the category of 
furniture and equipment are: 
 
Desks and chairs; 
 
Office machines--typewriters, calculators; 
 
Filing cabinets; and 
 
Microfilm equipment. 
 
The contractor shall capitalize and depreciate furniture 
and equipment costing $500 or more per item and with a 
useful life of more than 1 year. It shall not include the 
expense of leased and company-owned autos. 
J.  Materials and  The contractor shall include all expendable items such as 
Supplies  general office supplies and EDP supplies. 
K.  Travel  The contractor shall include costs for transportation, 
meals, and lodging. It shall include the cost of leased 
autos and all costs associated with company-owned 
vehicles. It shall not include personal service costs related 
to individuals in travel status. 
L.  Return on  If applicable, the contractor shall include 
Investment (ROI)  charges related to application of the 
investment rate of return to the average 
undepreciated balance of capitalized assets 
 
for the period. It shall calculate ROI using 
the portfolio rate of return for the contract 
period instead of the treasury rate. It shall 
include the following ROI schedule. 
  ROI Calculations FY:   
Average undepreciated balance of assets 
 
allocable to Medicare.  ( $ A) 
  Contractor's portfolio rate of return for the 
contract period  (B) % 
  Total ROI (A x B).  $ ______ 
M.  Miscellaneous  The contractor shall include: 
 
Taxes, other than personnel and real property; 
 
Insurance, other than that included in 180.2, 180.3, and 
180.4;   
Dues to professional, trade, and business associations; 
 
Net food service costs (cafeteria and subsidized eating 
facilities); and  
 
All other costs not specifically identified elsewhere. 
Contractor shall specifically identify all other costs over 
$2,500 in Remarks. 
N.  Other  The contractor shall identify in Remarks Section. 
This is reserved and should not be used without explicit approval of CMS. 
O.  Credits  The contractor shall include the applicable portion of any 
income, rebate, allowance, or other credits related to total 
operations. This includes, but is not limited to, Medicare 
data used for complementary health insurance and/or 
Medicaid claims processing by it or another organization. 
The credits reported must equal the total COB credits 
reported on the certification schedule, plus the sum of 
non-COB credits included on the activity forms. (See 
90.9G and 190.C.) 
P.  Forward Funding  See 90.9. The contractor shall use this category only 
with the FACP. 
 
180.6 - Total - (Rev. 1, 08-30-02) 
A1-1221.6, B1-4221.6 
 
The sum of the items on Form 2580. The amount in Column D must be identical to the 
Total Cost of the Budget Request or Total Adjusted Costs of the FACP. 
 
180.7 - Pension Costs - (Rev. 1, 08-30-02) 
A1-1221.7, B1-4221.7 
 
The contractor shall identify pension plan expenses included in fringe benefits, Column 
D. 
 
180.8 - Remarks - (Rev. 1, 08-30-02) 
A1-1221.8, B1-4221.8 
 
The contractor shall include any appropriate comments. 
 
190 - Exhibit of Certification Form - (Rev. 1, 08-30-02) 
A1-1222, B1-4222 
  Click here to view exhibit of Certification Form. 
 
190.1 - Completing the Certification Form 
(Rev. 149; Issued:  03-27-0; Effective Date:  Upon the start of the contractors next 
option year; Implementation Date:  04-27-09) 
 
A.  General 
 
There are four sections that are utilized by the user to generate the PM certification. They 
are: Credit, Activity Summary by Function, Administrative Funds Drawn and 
Certification Screen. For MIP, there are three sections. They are: Activity Summary by 
Function, Administrative Funds Drawn and Certification Screen. 
 
For PM, the user will enter the COB credits. After the user has entered all COB credit 
information, the system will sum the data to a "face sheet" amount by Medicare function, 
for Total Cost and Total Adjusted Cost, including a separate line for COB credits. The 
contractor will attest to the accuracy of the data included in the report by completing a 
certification statement. 
 
B.  Uses 
 
The form will be used for the BR, SBR, IER, and FACP. 
 
C.  Completing the Certification Section 
 
1.  Credit Amount 
 
The contractor shall enter the separate cumulative amounts of cash received for 
Complementary Credit and Medicaid to equal total credits. The user must also enter the 
separate amounts of accrued credits in total. Accrued credits represent outstanding 
receivables (invoices that have been billed but payments have not been received as of 
report date). This section must be completed prior to generation of the Certification 
Section. 
 
The complementary credits shall be reported in the following manner: 
 
Complementary Credit  Not applicable unless the Medicare contractor receives late 
payment for a transitioned COBA trading partner. 
 
Medigap  the contractor shall report all complementary credits received from trading 
partners as a result of crossing over claim-based Medigap claims to trading partners.  An 
agreement may be in place for transmission purposes. 
 
COB Credits  the contractor shall report only the cash received from the COBC for 
claims crossed over in COBA production. 
  Accrued Credits  the contractor shall report all receivables due from trading partners 
that the contractor invoiced for themselves. 
 
Accrued COB Credits  the contractor shall report all receivables due from the COBC 
for claims transmitted to the COBC for crossover in COBA production (adjusted by 
reimbursement, error reports, including accepted trading partner disputes that were 
returned to the contractors, and other adjustments reported on the contractor remittance 
advice). 
 
2.  Activity Summary By Function Section 
 
This is a system-generated area. The system will sum the data to a total face sheet by 
Medicare function. No input is required by the user; however, the total must tie to 
subsidiary records. 
 
3.  Administrative Funds Drawn Section 
 
This section is completed only for the IER.  (See Chapter 2, section 60.6.) 
 
4.  Certification Section 
 
The contractor shall enter name of Certifying Official and Title. An authorized official 
signs and dates the hard copy report and retains a copy in file. 
 
5.  Remarks Section 
 
The contractor shall complete this section when appropriate. 
 
Medicare Administrative Contractors and Durable Medical Equipment Medicare 
Administrative Contractors ONLY 
 
A.  General 
 
Contractors shall report all workloads, net errors reported to them by COBC via the 
shared system for crossover claims to their respective project officers.  Cash received 
from the COBC shall be recorded in the Analysis Reporting and Tracking System (ARTs) 
monthly. 
 
Contractors shall utilize cash base accounting methodology to validate the COBCs 
complementary credit data effective with the start of contractor new option year. 
 
200 - Exhibit of Schedule of Net Hours Available, Form CMS-3258 - 
(Rev. 1, 08-30-02) 
A1-1223, B1-4223 
 
Click here to view exhibit of Schedule of Net Hours Available, Form CMS-3258.   
200.1 - Completing the Schedule of Net Hours Available - (Rev. 1, 08-30-
02) 
A1-1223.1, B1-4223.1 
 
This form is not a required attachment to the initial Budget Request unless specifically 
requested by the contractor's RO. It is provided here for illustration purposes since the net 
hours available figure must appear on the BR. It is calculated as described below. 
 
NOTE: The net hours available reported on each IER and the FACP will be based upon 
the net hours available shown on the contractor's initial BR. 
 
A.  Contractor  Contractor enters the organization's official name and 
Name and Address  address. 
B  Identification  Contractor enters the five-digit Medicare-assigned 
Number  contractor number. 
C.  Fiscal Year  Contractor enters the fiscal year that corresponds to 
the administrative budget and cost report 
D.  Line 1 - Period  Contractor indicates the months involved. 
E.  Line 2 - Cumulative Days  Contractor indicates the calendar count of days 
per Period  involved 
F.  Line 3 - Weekends  Contractor indicates the calendar count of weekend 
days involved. 
G.  Line 4 - Holidays  Contractor indicates the calendar count of holidays 
involved. 
H.  Line 5 - Average   Contractor indicates the average vacation per 
Vacation  employee based on personnel records. 
I  Line 6 - Average   Contractor indicates the average sick days per 
Sick Days  employee based on personnel records. 
J.  Line 7 - Other Leave  Contractor indicates the average days used for other 
Average  leave per employee based on personnel records. 
K.  Line 8 - Total Days Off  Sum of lines 3, 4, 5, 6, and 7. 
L.  Line 9 - Days Available  Line 2 minus Line 8 
M.  Line 10 - Working Hours  Contractor enters the normal working hours per day. 
Per Day 
N.  Line 11 - Authorized Break-  Contractor enters the amount of time employees are 
time  authorized to use for nonproductive purposes, e.g., 
coffee breaks.  O.  Line 12 - Net  Line 10 minus Line 11. 
Cumulative Daily Hours 
Available 
P.  Line 13 - Net Hours  Line 12 multiplied by Line 9. 
Available Per Employee 
 
210 - Contractors Performing Services for Other Medicare Contractors 
- (Rev. 1, 08-30-02) 
A1-1230, B1-4230 
 
Where services such as bill processing, EDP services, provider audit, or appeals 
processing are performed by one contractor for another, the following budget preparation 
procedures apply. 
 
210.1 - Servicing Contractor - (Rev. 1, 08-30-02) 
A1-1230.1, B1-4230.1 
The servicing contractor furnishes the receiving contractor an appropriate estimate of the 
costs described in 100 by activity. 
 
The estimates are submitted on the Activity Form by cost category. For provider audit, it 
furnishes the Contractor Auditing and Settlement Report with applicable activities and 
columns completed. ( See 290.) The estimate for these services includes all direct, and 
an equitable share of indirect, costs expected. All estimates are in accordance with the 
principle that neither the contractor providing the service nor the contractor receiving the 
service incurs a profit or loss on the transaction. The contractor shall not include related 
estimated costs as part of its budget submission. It shall furnish this information to the 
receiving contractor. 
 
210.2 - Receiving Contractor - (Rev. 1, 08-30-02) 
A1-1230.2, B1-4230.2 
 
The receiving contractor includes the estimated costs, furnished by the servicing 
contractor, as a subcontract cost and identifies the servicing contractor in the Remarks 
section of that Activity Form. 
 
220 - Budget Justification - (Rev. 1, 08-30-02) 
A1-1240, B1-4240 
 
The annual BPRs describes the statement of work and level of effort for each Medicare 
function to which the contractor must adhere. The General Instructions section of the 
BPRs details the narrative, analysis, worksheets and data requirements that constitute the 
general instructions for the budget justification. Additional requirements may be 
identified in each functional area. The contractor shall refer to the BPRs for the current 
year's budget justification requirements. 
  230 - Completing the Budget Request - (Rev. 1, 08-30-02) 
A1-1255, B1-4255 
 
The contractor uses this basic document for submitting the annual estimate of costs for 
administrative functions and duties related to the Medicare program. The format and 
related explanations must furnish sufficient information to permit a meaningful review of 
the estimates. The information requested and as supplemented by the BPRs form the 
basis for the budget data for each FY. 
 
The base period for preparation and comparison of the BR is the prior year's budget 
unless otherwise stated in the BPRs. The contractor shall consider its most recent 
experience in preparing financial cost estimates. 
 
230.1 - Transmittal - (Rev. 1, 08-30-02) 
A1-1255.1, B1-4255.1 
 
The contractor shall transmit the complete BR consisting of the activity forms and 
supporting schedules via CAFM II. 
 
230.2 - Hard Copy Requirements - (Rev. 1, 08-30-02) 
A1-1255.2, B1-4255.2 
 
The contractor shall submit the original to the RO and one copy to CO of all forms, all 
supporting schedules, and all narrative justifications that are not transmitted via CAFM 
II. It shall address CO hard copies to: 
 
Centers for Medicare & Medicaid Services 
Division of Financial Operations, OFM 
7500 Security Boulevard 
Baltimore, Maryland 21244 
 
230.3 - Activities - (Rev. 1, 08-30-02) 
A1-1255.3, B1-4255.3 
 
Descriptions of these items are in 100. 
 
230.4 - Hours - (Rev. 1, 08-30-02) 
A1-1255.4, B1-4255.4 
 
The contractor shall enter hours as developed using instructions in 90.9P. It shall round 
to the nearest hour 
 
230.5 - Costs - (Rev. 1, 08-30-02) 
A1-1255.5, B1-4255.5 
  The contractor shall enter costs and credits as in 90.9. It shall round entries to the 
nearest hundred dollars. 
 
230.6 - Workload - (Rev. 1, 08-30-02) 
A1-1255.6, B1-4255.6 
 
The contractor shall enter the workloads for the budget period. (See 90.9O.) 
 
230.7 - Net Hours Available (Miscellaneous Section) - (Rev. 1, 08-30-02) 
A1-1255.7, B1-4255.7 
 
The contractor shall enter the number of net productive hours required to convert total 
productive hours to equivalent staff-years for the budget period. (See 200.) 
 
230.8 - Narrative and Financial Analysis Requirements - (Rev. 1, 08-30-
02) 
A1-1255.8, B1-4255.8 
 
The contractor shall include a narrative analysis (budget justification) that summarizes 
the funding and workload requested for each line of operation. The analysis shall provide 
information that fully justifies its request, includes all required forms as defined herein, 
and meets the requirements stated in the annual BPRs. Operations personnel should 
actively participate in the development of the BR. 
 
If CMS workload volumes are supplied and those volumes are acceptable, no volume 
analysis is required. Requests for changes in workload from any CMS provided volumes 
must be supported by a volume analysis that includes the historical data used to make the 
projection, a description of the forecast methodology used and the actual forecast 
computation. This applies to all line items with identifiable workload volumes. 
 
230.9 - Financial Information Survey - (Rev. 1, 08-30-02) 
A1-1255.9, B1-4255.9 
 
This survey must be completed and submitted in hard copy as an attachment to the 
contractor's initial BR. 
 
If the contractor has a new severance policy in place or its previous severance policy has 
been updated, it shall: 
 
  State the effective date for the new or updated severance policy. 
 
  Summarize its severance/separation pay policy including both management and 
staff. State the length of service criteria, types of cost covered by the policy, the 
effective date of the policy and any other criteria used in determining the amount 
of payment. Identify and discuss any related benefits which may be payable to or 
on behalf of the employee beyond the standard severance payment(s).   
  Attach a dated extract of its corporate severance pay policy and any related 
benefits payable to or on behalf of the employee related to the severance or 
separation. 
 
  If there is no change since the submission of the initial BR for last year, state "No 
Change." 
 
The contractor shall estimate the number of direct Medicare employees (excluding 
temporaries) in this BR FY, the average number of years that staff and management have 
been employed full time on the Medicare contract and average number of years each has 
been with the corporation: 
 
  No. of direct Medicare employees:  Staff _____  Management _____ 
  Avg. yrs. employed Full Time with 
Staff _____  Management _____ 
Medicare:  
  Avg. yrs. employed with corporation:   Staff _____  Management _____ 
 
The contractor shall indicate whether, during the last two years or for this BR, it has 
acquired or intends to acquire (through lease or purchase) any Electronic Data Processing 
Equipment (as reported on the Cost Classification Report, see 180.4) or any EDP 
operations change which will result in a TOTAL charge (not annual depreciation) to the 
Medicare program exceeding $500,000? 
 
Yes or No _________ 
 
If yes, it shall state the following: 
 
  Month and year of acquisition: 
 
  Type of acquisition (new lease, replacement lease, purchase): 
 
  Reason for acquisition (obsolescence, overcapacity): 
 
  Amount included in this BR for the equipment or operations change: $_______. 
 
  Total number of depreciable years _________ 
 
  Number of depreciable years remaining:__________ 
 
NOTE:  Any response to the above does not constitute prior notice/approval as required 
by the contract. 
  The contractor shall provide a breakdown of the "average un-depreciated balance of 
assets" allocated to Medicare as included in the Cost Classification Report (CCR) for this 
BR (See 180.51.) 
 
Facilities or Occupancy:  $ ______ 
Furniture and Equipment:  $ ______ 
Electronic Data Processing Equipment:  $ ______ 
Other (specify):  $ ______ 
Total (agree to CCR):  $ ______ 
 
The contractor shall identify all leases or rentals in effect in this BR FY for 
facilities/occupancy, furniture and equipment, EDP equipment, and Other where the 
annual charge to Medicare for this BR FY will equal or exceed $500,000. It shall provide 
the annual amount included in the FY BR and lease/rental expiration month and year. If 
none, it shall state none. 
 
NOTE:  The contractor's RO may require a listing of all subcontracts/leases for review. 
The contractor shall contact its RO if it is in doubt. 
 
In conjunction with the facilities and occupancy costs, provided as Item 3 on the Cost 
Classification Report, the contractor shall summarize the Medicare costs by general 
categories below. It shall include base and budget period costs: 
 
It shall complete the following information: 
 
Indicate Base Period you are using: ___________ 
 
1.   Depreciation and Rent or Lease: 
Base Period:_______  Budget Year: _______ 
  Depreciation  
(Use when buildings and land are owned. Building costs are total costs excluding interest 
expenses, but including parking lots, landscaping, etc.) 
Base Period: _______  Budget Year: _______ 
  Rent or Lease:  
(Use when facilities are rented either from an outside source or an affiliate. These costs 
include amortization of leasehold improvements.)  2.  Utility Costs:  Base Period: _______   Budget Year:________ 
(Report power, heat, and light for owned space and where not included in rental or lease 
costs.) 
3.  Other Costs:   Base Period: _______   Budget Year: _______ 
(This includes items such as janitorial services, security, carpentry, plumbing, electrical 
and all work associated with non-permanent type partitioning and moving operations 
within the building, if not included in the rental or lease cost.) 
4.  Total Costs:  Base Period: _______   Budget Year: _______ 
(Total cost of 1 through 3 to agree with Facility and Occupancy costs reported on the 
Cost Classification Report.) 
5.  Cost Per Net Usable Square Foot: See Appendix B, Article X.B. of the Medicare 
contract/agreement for the definition of net usable space. 
Base Year:  Total Cost: ______   Square Feet: _____   Cost Per Sq. Foot: ____ 
Budget Year:  Total Cost: ______   Square Feet: _____   Cost Per Sq. Foot: ____ 
 
240 - Additional Instructions Pertaining To Supplemental Budget 
Requests (SBRs) - (Rev. 1, 08-30-02) 
 
A1-1256, B1-4256 
 
A.  General 
 
These instructions pertain to SBRs filed after action is taken on the initial BR discussed 
in 230. An SBR is a contractor's request for additional funding after the FY has begun. 
The SBR is a request for additional funding for one or more activities. To the extent that 
the request, if approved, would result in a reclassification of the non-incremental costs 
and hours charged to other activities/functions, the contractor shall submit a schedule of 
non-incremental costs in accordance with 100.6C. It is not copied from either the 
NOBA or the BR. The contractor shall use the BPRs as a basis for providing its SBR 
justification. A SBR is generally filed after the contractor receives a NOBA for the full 
FY and it determines that there are insufficient funds to perform the statement of work 
outlined in the BPRs and the NOBA. A SBR may also be required if there is a special 
project for which it would like to request funding. Refer to 100.6 regarding PIs. 
 
An SBR may also be required in response to a CMS-generated request that a contractor 
perform a specific task. Such a CMS-generated request should be in writing and may 
include written procedures, manual issuances or any written request for work pertaining 
to special projects. 
  A copy of the SBR, with rationale, must be sent to both the contractor's RO and CO at the 
time the SBR is transmitted via CAFM II. It shall send a copy to CO to the same address 
that it sends its BR. See 230.2 for address. 
 
B.  Definitions 
 
The contractor shall base the SBR on the latest released NOBA or negotiated budget and 
any outstanding SBRs. An SBR is appropriate if there is a need for a change in total 
funding, a transfer of funds among functions, and/or a change in workload. The 
contractor shall select the correct activity code and enter incremental costs including 
hours and workload. It shall annotate in the Remarks section of the Activity Screen the 
NOBA number on which the current SBR is based. 
 
EXAMPLE:  An SBR requesting additional claims funding of $200,000, workload of 
150,000 along with additional telephone inquiries funding of $100,000 and workload of 
25,000 would be transmitted as follows: 
 
Activity Code 11001, (Bills/Claims Processing):  $200,000  Workload 150,000 
Activity Code 13001, (Telephone Inquiries):  $100,000  Workload 25,000 
Remarks: This SBR is based on NOBA #1. 
 
The contractor shall not include funding previously requested and denied unless it is 
specifically re-requesting funding for this item and has provided a revised budget 
justification to support the request. 
 
C.  Shared Systems 
 
The CMS requires that each user group designate one of its members to submit SBRs for 
systems improvements on behalf of the group or, if the servicing subcontractor (the 
subcontractor performing the systems improvement work) is also a Medicare contractor, 
that the SBR be submitted by that Medicare contractor. 
 
If the servicing subcontractor is a commercial vendor, the SBR must be submitted by the 
designee on behalf of the group through the designee's parallel RO or the designated RO 
with a copy to CO. If the servicing subcontractor is another Medicare contractor, that 
contractor submits the SBR to its parallel RO or the designated RO with a copy to CO. 
 
In all cases, the SBR submitted is consolidated to include the request for the servicing 
subcontractor and any related funds requested by the other user group members. 
However, the consolidated SBR will clearly state the amount(s) requested on behalf of 
each user as well as the servicing subcontractor, any unique user expenses for each user 
pertaining to the shared system activity, and delineate projected savings for each user. 
 
All funding through the NOBA is to the designee or Medicare contractor. Cost reporting 
corresponds to the NOBA. User unique expenses such as training and/or related travel are  funded directly to each user with costs reported accordingly. This applies even though the 
requested funds are included in the consolidated SBR. 
 
The designated contractor is responsible for amending its subcontract with the 
maintenance vendor, requesting prior approval if the project costs exceed its threshold in 
the prime contract and accounting for proper expenditure of the project funds. 
 
D.  Minimum Documentation Requirements  Justification 
 
A complete SBR must include transmission on CAFM II and submission of a written 
justification supporting the request. An appropriate official must submit the justification. 
The justification must provide sufficient detail for each cost category (see 90.9 and 
below) and explicitly link the request to the BPRs and/or general instructions that require 
the work and cost. 
 
If the request equals or exceeds the smaller of $100,000 or 5 percent of the total PM or 
MIP NOBA, whichever is applicable, the contractor shall define the major steps 
necessary to accomplish the proposed effort (at least 3 steps) and provide an operational 
and financial rationale which addresses each of the cost categories for each step. If the 
activity cannot be broken down into at least 3 steps, it shall explain why not. 
 
The operational rationale should explain the scope and types of efforts contemplated. The 
financial rationale should explain how the estimated funding needs were determined for 
each cost category through the identification of assumptions, supporting information and 
calculations used to arrive at the estimated amounts. 
 
1.  Salaries/Wages and Fringe Benefits 
 
The contractor shall provide job classes, number of employees (actual or FTEs), rates, 
period of work, major deliverables and/or milestones with dates. It shall discuss any 
premium payments. (These two cost categories may be combined.) 
 
2.  EDP Equipment 
 
The contractor shall discuss how the amount was determined or allocated and identify 
any extraordinary items required. If any equipment is to be leased or purchased, it shall 
provide details and, if appropriate, include a cost-benefit analysis. 
 
3.  Subcontracts 
 
The contractor shall identify subcontractor, scope, major deliverables, period of work and 
rates. 
 
4.  Other Direct Costs 
  The contractor shall discuss how the amount was determined or allocated and any 
extraordinary items required. If any items are to be leased or purchased, it shall provide 
details and, if appropriate, include a cost-benefit analysis. 
 
5.  Overhead/G&A 
 
The contractor shall discuss how the amount was determined or allocated and any 
extraordinary items required. (These two cost categories may be combined.) 
 
6.  Hours 
 
The contractor shall identify and discuss both direct and subcontract hours. 
 
7.  Workloads 
 
The contractor shall identify and discuss all significant workloads. 
 
250 - The Notice of Budget Approval (NOBA) - (Rev. 1, 08-30-02) 
A1-1261, B1-4261 
 
A NOBA is issued by CMS to notify contractors of approved amounts for PM and MIP 
administrative expenses for the FY, including the amount of funds certified to be 
available. Contractors are not authorized to incur expenses in excess of the total certified 
amount for PM or MIP. PM and MIP funding must not be co-mingled and this limitation, 
therefore, applies to each separately. In addition, the contractor shall refer to the BPRs 
and/or the contract/agreement for the authority to shift funds among PM or MIP 
functions. 
 
The first NOBA issued for a FY is given a supplemental number of "0". Subsequent 
NOBAs are numbered sequentially. Where agreement on a budget cannot be reached, 
CMS issues a NOBA for less than the full FY year pending completion of negotiations. 
These NOBAs are annotated as a partial approval in the "Remarks" section and numbered 
as above. CMS may issue NOBAs for less than a full FY when necessary. 
 
All dollar amounts will be rounded to the nearest hundred, hours to the nearest hour, and 
bills payment workload to the nearest hundred. The end of FY NOBA is not rounded. 
There are separate summary screens and certifications for PM activities and MIP 
activities. 
 
The NOBA displays information by function and activity. See 100 for definitions of 
functions and activities. For each function and activity, hours, total cost, and workload 
will be displayed. The hours, total cost, and workload shown for a function is the sum of 
the data input for the activities for that function. 
 
250.1 - End of FY NOBA - (Rev. 1, 08-30-02) 
A1-1261.1, B1-4261.1   
When claimed costs are less than the total approved for the FY, CMS issues a revised 
NOBA reducing the FY funding to the amount claimed on the FACP. This reduction 
keeps the amount of obligated funds to a minimum, thereby permitting maximum 
flexibility in the use of appropriated funds. If the contractor subsequently finds that not 
all costs have been claimed, it submits a revised FACP. 
 
If the administrative cost reported in the October - September IER or FACP exceeds the 
total approved budget, the contractor shall justify the over expenditure to the RO with a 
copy to CO. CMS reviews the over expenditure for adherence to contract provisions on 
prior notice and abatement and other considerations and, where appropriate, issues a 
revised NOBA that enables the contractor to draw additional funds. 
 
The incidences of such end-of-year over-expenditures are few since notification is 
necessary more than 60 days prior to the end of the FY if either CMS or the contractor 
expects that the budgeted amounts are not sufficient to cover administrative costs. 
 
250.2 - Cumulative Quarterly Distribution - (Rev. 1, 08-30-02) 
A1-1261.2, B1-4261.2 
 
This indicates the approved cumulative quarterly distribution for PM and/or MIP. Funds 
should not be drawn in excess of the lesser of the quarterly distribution or the contractor's 
expenses. The quarterly distributions for PM and MIP are separate. 
 
The PM and MIP distributions and costs must be treated separately in determining the 
amounts to draw for administrative expenses for each. 
 
250.3 - Certifying Official - (Rev. 1, 08-30-02) 
A1-1261.3, B1-4261.3 
 
This signature indicates approval of the NOBA by the delegated RO official. In many 
cases the contractor will not receive a signed copy of the NOBA. The RO will "release" 
the NOBA within CAFM II, which signifies certification and will include the official's 
name and title. An explanation of the nature of the NOBA will be included in the 
Remarks section on this certification page. The RO will notify the contractor via phone or 
e-mail when the NOBA has been certified and released in CAFM II. 
 
Click here to view exhibit of Schedule of Net Hours Available, Form CMS-3258 
 
270 - Budget Preparation Check List for Program Management And 
Medicare Integrity Program 
(Rev. 128; Issued:  07-13-07; Effective:  10-01-06; Implementation:  08-13-07) 
 
 
  FORM NAME  DUE TO  DUE DATE 
Initial Budget Request - Activity Forms - (with  CMS  June/July 
following attachments as required by CMS) 
Miscellaneous Schedule     
Special Projects Schedule (if applicable) 
Certification Schedule 
Cost Classification Report (CMS-2580) 
Other Information as Requested in the 
BPRs 
Notice of Budget Approval  Contractor  October 1 and 
thereafter as 
needed 
Activity Summary Certification Schedule     
Supplemental Budget Request - See 240     
 
280 - Exhibit of Contractors Auditing and Settlement Reports Form 
CMS-1525A 
(Rev. 1, 08-30-02) 
A1-1268 
 
Click here to view exhibit of Schedule of Net Hours Available, Form CMS-3258. 
 
300 - Exhibit of Audit Selection Criteria Report - Intermediaries Only - 
(Rev. 1, 08-30-02) 
A1-1270 
 
Reserved for Audit Selection Criteria Report 
 
310 - Completing the Audit Selection Criteria Report (ASCR) - (Rev. 1, 
08-30-02) 
A1-1271 
 
A.   General Instructions 
 
Contractor shall use the report to show all the provider cost reports from high to low, by 
Medicare dollars at risk. The ASCR will be extracted from the System Tracking for Audit 
and Reimbursement (STAR) and submitted to the CMS BPO Bulletin Board 30 days 
after the end of the fiscal year, i.e., October 30.   
B.   Specific Instructions 
 
The contractor shall complete the columns on the ASCR as follows: 
 
  Provider Number - It shall enter provider's number; 
 
  FYE - It shall enter provider's year end; 
 
  Provider Type - It shall enter appropriate STAR code and appropriate audit 
selection criteria (ASC) code(s); 
 
  POA Code - Indicates the designated activity; (P) problem resolution, (O) on-site 
review, or (A) audit. A blank indicates desk reviewed only. 
 
  Medicare Dollars Claimed - It shall enter the Medicare dollars claimed from the 
audited cost report. Use DRG column for DRG and outlier benefit payments. It 
shall use pass-through column for PPS pass-through costs, and Cost-Based 
column for all other provider costs claimed; 
 
  Utilization - It shall enter days or visits, as appropriate, for the total patient 
population and for the Medicare population. It shall indicate the percent of 
Medicare utilization; 
 
  Notice of Amount of Program Reimbursement (NPR) Date - It shall enter date of 
NPR; and 
 
  Cost Savings/Dissavings - It shall enter the dollar amount of adjustments to 
payment as a result of the NPR. 
 
310.1 - Audit Selection Priorities - (Rev. 1, 08-30-02) 
A1-1271.1 
 
A.   General 
 
The contractor shall use the ASCR to decide which providers to audit. This determines 
the audit matrix within the BPRs. It shall base audit decisions upon the results (problems 
discovered) of its uniform desk review, professional surveys of filed cost reports, and 
prior audit/review findings. 
 
B.   Audit Group 
 
The audit group provides for planning audits/initiatives that must be performed either 
because a special circumstance requires immediate audit attention, e.g., termination, 
merger, fraud or abuse, new providers, or because of special CMS instructions. The audit 
group is defined yearly in the CMS Budget Performance Requirements (BPR guidelines).  Generally, existence of a special circumstance dictates that an audit is necessary. 
However, the contractor shall use discretion in this area, especially where there is a short 
period cost report from a new provider, a relatively small amount of Medicare payment, 
low Medicare utilization, or involvement of OIG or GAO, prohibiting an audit. 
 
310.2 - Level of Audit Effort - (Rev. 1, 08-30-02) 
A1-1271.2 
 
Instructions require that the level of audit effort be determined by the results of the desk 
review or professional survey process, taking into account the priority, audit cost-to-audit 
savings ratio, and the level of budget resources available. In most situations, audits are 
limited. However, compliance with the Government Auditing Standards must be 
considered in all provider audits. 
 
350 - Instructions for Using the System for Tracking Audit and 
Reimbursement (STAR) 
(Rev. 128; Issued:  07-13-07; Effective:  10-01-06; Implementation:  08-13-07) 
 
A.   General 
 
The STAR is an automated system developed for the purpose of tracking the Medicare 
cost reporting process. STAR captures historical and current Medicare provider 
information for each cost report. The STAR User's Manual serves as the contractor's 
instructions for implementing the program functions within the STAR system.  
 
The CMS created the STAR Alert newsletter to clarify instructions in the STAR User's 
Manual and the intermediary manual pertaining to output reports created by STAR. The 
STAR Alert is issued several times a year and addresses concerns about various audit 
issues that may arise during the fiscal year (FY). 
 
B.   STAR Time System (Not required by the MACs) 
 
  All FIs must use the Time System; 
 
  The FI enters time spent by employees on a particular administrative function, 
e.g., desk reviews, field audits, and settlements, in accordance with the STAR 
User's Manual; and  
 
C.   Required Fields in STAR 
 
The FI completes the following screens, with their corresponding fields, in the STAR 
program to ensure that all providers are properly documented in the system and that the 
resulting reports and/or records are current and accurate: 
 
1.   Screen Number 1 
  Provider Number 
 
Change of Ownership (COO) Code (assigned by system) 
 
Long Name 
 
Short Name 
 
Provider Address 
 
Provider Type 
 
Control Type 
 
Tax Number 
 
Chain Number and Name (If Applicable) 
 
Certification Date 
 
Tie-In Date 
 
Tie-Out date and reason (If Applicable) 
 
Previous FI (if Known) 
 
Transferred to FI (if Known) 
 
Office Codes 
 
2.   Screen Number 2 
 
Default Address 
 
3.   Screen Number 3 
 
Interim Payment Pay Method 
 
Periodic Interim Payment In and Out Dates 
 
4.   Screen Number 4 
 
Cost Report Due 
 
Cost Report Received 
  Cost Report Rejected 
 
Refiled Cost Report Received 
 
Desk Review Completed 
 
Problem Resolution/Onsite/Audit (POA) Status Code 
 
POA Start 
 
POA Complete 
 
Suspension by CMS 
 
Reason of Suspension 
 
Audit/No Audit Hours 
 
Audit/Travel Hours 
 
Audit/Travel Costs 
 
FI Hearing Start 
 
FI Hearing Complete 
 
Provider Reimbursement Review Board (PRRB) Hearing Start 
 
PRRB Hearing Complete 
 
Tentative Date 
 
Bill Date (If Applicable) 
 
Amount Approved 
 
5.   Screen Number 5 
 
FY Start (If not a full year) 
 
Fiscal Year End Last Audited 
 
Beds 
 
Appeal Cost 
  Low/No Utilization 
 
As Filed 
 
Reimbursement Cost (All providers except Home Office (HO)) 
 
Total Cost (HO only) 
 
6.   Screen Number 6 
 
Complete screen with DRGs, pass-thrus, and cost-based amounts for all PPS 
hospitals and their excluded units (provider types 05,06, and 08), finalized after 
10/1/90. Reopening information is required only if the Notice of Change-Program 
Reimbursement (NOC-PR) is within same fiscal year as the original NPR. 
 
7.   Screen Number 7 
 
PPS/Exempt/Waiver (PEW) Code 1234 
 
Metropolitan Statistical Area (MSA) Area 
 
(9999 if Rural--only Rural codes must be entered) 
 
8.   Screen 8 
 
Finalized and Reopenings 
 
Patient Days/Visits 
 
Title 18 Days/Visits 
 
Sequestration 
 
Reimbursement Cost (All Providers except HO) 
 
Total Cost (HO only) 
 
Interim Payments 
 
TEFRA Incentive 
 
Notice of Program Reimbursement/Notice of Correction-Program Reimbursement 
 
Reopening Letter Date 
 
Reopening Reason   
STAR Time Codes 
 
The STAR Time System is mandated because time recorded in the STAR Time 
System for providers is used by CASR, CRS and CPEP programs. Time codes are 
stored in each user's lookup.dbf file. 
 
D.   Required Output Records in STAR 
 
The FI produces the following output records using STAR: 
 
 
1.  Hearing and Reopening Log. 
 
Due Upon request from Central Office (CMS). 
 
2.  Tentative Settlement Logs.  
 
Due upon request from CMS. 
 
3.  Hearing and Reopening Aging Report. 
 
Due upon request from CMS. 
 
4.  Cost Report Settlement Log (CRSXXXXX.DBF, where X is the FI's five digit 
contractor number). 
 
5.  PRRB Negative Savings Audit Trail. 
 
Due upon request from CMS. 
 
6.  Other Files as requested by CMS. 
 
370 - General Principles of Reimbursement for Administrative Costs - 
(Rev. 1, 08-30-02) 
A1-1100, B1-4100 
 
The principles for determining allowable administrative costs are listed in Part 31 of the 
Federal Acquisition Regulation (FAR), as codified in Title 48 of the Code of Federal 
Regulations (CFR), along with the contract as interpreted and modified in Appendix B. 
Costs will be allocated separately by program management (PM) and Medicare integrity 
program (MIP) functions and activities. 
 
Notice is hereby given to all Medicare contractors that on-going operations and projects 
should be completed at or under budget. If a contractor exceeds either its PM or its MIP 
budget, the U.S. Government will be under no obligation to fund the cost overrun except  in strict accordance with the Medicare contract/agreement. Contractors are required to 
provide CMS timely notice of at least 60 days prior to the date funds are exhausted, along 
with a fully documented and justified Supplemental Budget Request that provides CMS 
time to analyze and recommend action to avoid the projected cost overrun. In your 
assessment of when funds will be exhausted, PM and MIP must be evaluated separately. 
(See 240.) 
 
380 - Interest Rates In Calculating Debt Due To The Government - 
(Rev. 1, 08-30-02) 
A1-1110, B1-4110 
 
Notice of interest rates for debts due the government pursuant to Federal debt collection 
procedures in the Prompt Payment Act are supplied to contractors by CMS for each rate 
period and as published in the "Federal Register." Do not confuse these rates with those 
for overpayment or underpayment determinations established under 117 of the Tax 
Equity and Fiscal Responsibility Act. 
 
390 - Travel Costs - (Rev. 1, 08-30-02) 
A1-1120, B1-4120 
 
Travel costs are generally limited to the rates as set forth in the Federal Travel 
Regulations (FTR). See FAR 31.205-46 for complete information, limitations, and 
exceptions. The FTR per diem limits from January 1995 to present can be found at the 
GSA website: www.policyworks.gov under the Office of Government-wide Policy. Only 
the most current mileage rate for use of privately owned automobiles is included on this 
website. Mileage rates for prior periods are listed below: 
 
Period  Rate 
September 17, 1989 to June 29, 1991  24 cents per mile 
June 30, 1991 to December 31, 1995  25 cents per mile 
January 1, 1995 to June 6, 1996  30 cents per mile 
June 7, 1996 to January 13, 2000  31 cents per mile 
January 14, 2000  32 cents per mile 
 
400 - Calculating Return on Investment Where the Contractor's Year 
for Insurance Commission Filing Differs from the Medicare Contract 
Year - (Rev. 1, 08-30-02) 
A1-1130, B1-4130 
 
The contractor shall compute the rate of return on investment in accordance with 
Appendix B of the contract/agreement. If the contractor's accounting year is different  from its Medicare contract year, CMS recommends the following weighted average 
calculation: 
 
Assumption:  Rate of return for October 1, 1998, to December 31, 1998, is 10 
percent. 
Rate of return for January 1, 1999, to September 30, 1999, is 8 
percent. 
Calculation of weighted average: 
  10 (Percent) x 3 (months) = 30%  
8 (Percent) x 9 (months) = 72%  
Total 102%  
102% divided by 12 (months) = 8.5% (weighted average) 
 
410 - Cost of Project Exceeds Estimates - (Rev. 1, 08-30-02) 
A1-1140 
 
Contractors are expected to complete productivity investment projects at, or under, 
budget. In some cases (e.g., large consolidations) it may be appropriate for the regional 
office (RO) to negotiate a Memorandum of Advance Agreement that sets out the 
statement of work and sets an upper limit for allowable costs. 
 
410.1 - Financial Policies for Coordination of Medicare and Other 
Insurance Programs 
(Rev. 1, 08-30-02) 
 
440 - Introduction to Financial Policies for Coordination of Medicare 
and Other Insurance Programs - (Rev. 1, 08-30-02) 
A1-1600, B1-4600 
 
This chapter sets forth the financial policies and principles used by Medicare contractors 
furnishing title XVIII claims information for complementary health insurance or Federal 
grants-in-aid program purposes and for integrating the Medicare program with these 
programs. 
 
450 - Coordination of Medicare and Complementary Insurance 
Programs 
(Rev. 135; Issued:  01-25-08; Effective:  10-01-07; Implementation:  02-01-08) 
 
The release of title XVIII claims information for complementary health insurance 
purposes is permitted (under specified conditions) by Regulation No. 1 (Disclosure of 
Official Records and Information). This section establishes financial policies concerning 
identification of costs related to the release of this information by the contractor.   
Under the national Coordination of Benefits Agreement (COBA) crossover process, a 
COBA trading partner must pay the required charges for the release of Medicare claims 
information. The Medicare program absorbs charges for supplying duplicate Medicare 
Summary Notice (MSN) or billing forms to beneficiaries, their authorized 
representatives, and to SSOs. (See Medicare Bill Processing, Chapter 21, Medicare 
Summary Notice). 
 
On behalf of CMS, the Coordination of Benefits Contractor now signs national crossover 
agreements, known as COBAs, and also invoices, collects, and reconciles fees arising 
from the claims that it crosses over to trading partners.  The COBC is also tasked with 
distributing collected crossover fees to those Medicare contractors whose claims were 
successfully transmitted and accepted by the COBA trading partner. 
 
Effective with October 1, 2007, the COBC assumes responsibility for the Medigap claim-
based crossover process.  At that time, it also assumes the foregoing responsibilities 
associated with invoicing the affected Medigap insurers, collecting the crossover fees 
from these entities, and distributing these fees to the affected Medicare contractors. 
 
All Part B contractors, including Medicare Administrative Contractors (MACs), and 
Durable Medical Equipment Medicare Administrative Contractors (DMACs) shall 
invoice for the last claims files that they transmit to their associated Medigap insurers.  In 
addition, these affected contractors shall pursue unpaid balances with the Medigap 
insurers following the conclusion of the Medigap claim-based crossover transition, which 
included clearing all residual Medigap claim-based crossover claims from their payment 
floors no later than October 31, 2007. 
 
COBA Financial Management Processes 
 
Contractors were instructed through Transmittal 130 (Change Request [CR] 3614), dated 
December 17, 2004, to populate the 837 flat file with a 21-digit unique identifier in the 
Beginning of Hierarchical Transaction (BHT03) segment.  Transmittal 586 (CR 3906), 
dated June 17, 2005, will add an additional digit to that BHT03 segment identifying the 
file as Test (T) or Production (P).  Contractors shall report only these production claims 
sent to the COBC to their financial staff along with the unique value populated in the 
BHT03 segment, to facilitate reconciliation of reimbursements due to the contractor and 
related workload reporting.  System reports shall include, at a minimum, formatted data 
similar to those developed for the receipt of the COBC Detailed Error Report, created in 
Transmittal 474 (CR 3709), dated February 11, 2005.  It is possible for a claim to be 
crossed over to more than one trading partner.  System reports shall reflect those 
situations when more than one Coordination of Benefits Agreement Identification 
Number (COBA ID) is included in a Common Working File (CWF) response trailer (29). 
 
Contractors shall decrease the number of claims from the reported amount on a particular 
BHT03 segment (when the last digit of the segment is a P) to their financial staff based 
on the receipt of a COBC Detailed Error Report.  Contractor financial staff shall not  expect reimbursement for any claims that appear on the error report and shall adjust 
financial records (accrued credits) accordingly.  If a trading partner receives a paper 
claim from a provider before it processes the electronic claim from the COBC, the 
trading partner will still have payment responsibility for the claim crossed over by the 
COBC.  Therefore, the contractor financial staff shall expect payment for such claims.  
For COBA IDs that fall in the range for Medicaid claims (70000-77999), contractors 
shall not expect payment on these claims, and shall subtract that number of claims from 
the amount reported to their contractor financial staff for a particular BHT03 segment 
that contains a P.  There are certain situations in which contractors will not be 
reimbursed for production claims that did cross over and did not appear on a COBC 
Detailed Error Report.  These non-error report adjustments include (1) claims that may be 
crossed by both the contractor and the COBC within the first thirty (30) days of 
production; (2) write-offs that are approved by CMS; (3) claims that cant be read by the 
trading partner and, therefore, cannot be disputed at the Internal Control Number (ICN) 
level; and (4) other as defined by CMS.  The non-error report adjustments may or may 
not identify the BHT03 number or the ICN, but will include a total count for the 
situations listed above.  The contractors financial contacts will be notified of these 
adjustments monthly, no later than the same business day that reimbursements are 
received.  Contractors shall not expect reimbursement and adjust financial records 
(accrued credits) accordingly. 
 
Each contractors financial staff shall use the remittance advice accompanying a monthly 
deposit, which links a specific BHT03 segment with how many claims were actually 
crossed over on that file (and not rejected due to flat file errors, HIPAA validation errors, 
trading partner accepted disputes, or non-error report adjustments), to reconcile the 
reimbursement received against reimbursement expected for a particular BHT03 value.  
Contractors shall not expect any claims that contain a Julian date in the BHT03 segment 
that is within two (2) business days of the end of the month to be billed on that months 
invoice to the trading partner.  Those claims will be billed on the following months 
invoice. 
 
Contractors shall provide CMS with appropriate banking information to facilitate 
payment via automatic funds transfer.  (NOTE:  The remittance advice for 
reimbursement will be sent electronically to the contractors bank.  If the contractor 
would prefer a hard copy of the advice, they must request one by sending an e-mail to 
COBAProcess@cms.hhs.gov).  Contractors shall be responsible for notifying CMS of 
any updates to their current banking information by sending an e-mail to 
COBAProcess@cms.hhs.gov for the purpose of requesting a telephone call from CMS to 
discuss the changes.  Contractors will receive reimbursement into one bank account 
associated to the contractor number used for Contractor Administrative-Budget and 
Financial System (CAFM II) reporting.  The contractor shall provide CMS with a list of 
all contractor numbers that are combined for reporting purposes to the CAFM II 
contractor number.  A comparison and variance report is available in CAFM II for 
reconciliation purposes.  The contractor shall reconcile total credits received and total 
accrued credits on the comparison and variance reports monthly. 
  Contractors shall send initial notification of financial contact information to 
COBAProcess@cms.hhs.gov as well as updates to that contact information, as they 
occur. 
 
460 - Coordination of Medicare with The Federal Grants-In-Aid 
Program (Medicaid) 
(Rev. 33, 2-6-04) 
 
A1-1602, B1-4602 
 
The CMS furnishes Medicare billing information to State agencies or their fiscal agents 
for Medicaid purposes at no charge to the State or claims submitter. This section 
establishes the policy related to transmitting the Medicare billing information to 
Medicaid. (See The Medicare Claims Processing Manual, Chapter 22, Medicare 
Summary Notices and other Beneficiary Notices for requirements for disclosure.)  Once 
CMS implements the consolidated claims crossover process, it will furnish Medicare 
billing information to State Medicaid agencies (SMAs) through its consolidated claims 
crossover contractor, the COBC. 
 
460.1 - Furnishing Title XVIII Claims Information 
(Rev. 33, 2-6-04) 
A1-1602.1, B1-4602.1 
 
The contractor shall furnish Medicare billing information to Medicaid upon request of the 
State agency or its fiscal agents. It shall provide it at no charge to Medicaid as long as the 
information can be used in the format given by Medicare: 
 
  A copy of the billing/claims form; 
 
  A copy of the Medicare Summary Notice; 
 
  A copy of the billing form and any attachments thereto; or  
 
  Electronic transfer containing the information described in Medicare Claims 
Processing Manual, chapter 28. 
 
Where the State has the systems capacity to process data generated in electronic media, 
the contractor shall provide the information at no charge. Where the State does not have 
the capacity to process electronic data but must use hardcopy, there is no charge for the 
information. If, however, the State or its fiscal agent has the capacity to process 
electronic data, but requests the information on hardcopy, the contractor shall charge the 
State $.30 per claim for the information furnished. The RO has the responsibility of 
determining whether the States have the systems capacity. 
 
Some State agencies may want the contractor to furnish the information in a format other 
than the standard format described in Medicare Claims Processing Manual, chapter 28. If  the contractor is willing to undertake such additional services for the State, it shall 
develop an agreement with the State. It shall include terms by which the State will 
reimburse it on a reasonable cost basis for the additional service provided. The cost 
includes both direct and indirect costs. 
 
For more details regarding how the crossing over of claims to State Medicaid agencies 
will be handled under the COBA process, refer to Pub.100-04, Chapter 28, 70.6 
 
460.2 - Treatment of Administrative Cost of Furnishing Information to 
State Agencies 
(Rev. 33, 2-6-04) 
 
A1-1602.2, 4602.2 
 
Until CMS consolidates the Medicaid claims crossover process under its Coordination of 
Benefits Contractor (COBC), the contractor shall charge the administrative costs incurred 
in furnishing billing information for Federal grants-in-aid program purposes, including 
the cost of transfer, to the title XVIII program in the appropriate departments. 
 
It shall treat amounts collected from State agencies for information furnished on 
hardcopy where the State has the systems capacity to process electronic data as a credit to 
Medicare. It shall report this on Form CMS-1523B/1524B in the credit section. 
 
The contractor shall deposit in its regular bank account amounts collected from State 
agencies for additional services performed. It shall clearly identify those funds as to 
source and purpose to facilitate auditing. The funds must be deposited in the regular bank 
account because the cash outlay for the cost of furnishing billing/claims information 
comes initially from this account. 
 
460.3 - Cost of a Separate Claims Process - (Rev. 1, 08-30-02) 
A1-1602.3, B1-4602.3 
 
Where a State agency selects a Medicare contractor as its agent and a claims process 
separate from the Medicare claims process is developed, the cost of all functions 
performed in this separate process are a direct charge to the State agency. Arrangements 
for billing State agencies for the cost of this claims process are the contractor's 
responsibility. When Medicare billing information is transferred to the separate claims 
process, the provisions of 460.1 apply. 
 
It is possible that some operations for the separate title XVIII and medical assistance 
claims may be performed in the same department, possibly by the same clerk. For 
example, upon completion of the title XVIII claim and transfer of billing information, it 
may be necessary to return the claim to the files maintenance section to determine 
eligibility and status in the medical assistance program. Where common cost centers 
exist, it is the contractor's responsibility to identify the effort expended for each program  and charge costs from these costs centers to the appropriate program. The cost includes 
both direct and indirect costs. 
 
460.4 - Integrated Claims Processing Systems - (Rev. 1, 08-30-02) 
A1-1602.4, B1-4602.4 
 
Where a State agency selects a Medicare contractor as its fiscal agent and the contractor 
has an integrated claims processing system, Medicare pays the full cost of operations 
which are required for processing title XVIII claims even though the operations benefit 
both the title XVIII and State medical assistance programs. Integrated operations 
generally include receiving, screening, determination of amount of payment, and portions 
of the keypunching and data processing functions. The contractor shall analyze integrated 
operations carefully in order to identify any functions that are not required under title 
XVIII but have been superimposed on the normal title XVIII claims process. For 
example, special coding required by the State agency, additional key punching and data 
processing necessary as a result of this coding, preparation of a separate check, and other 
similar activities are extra, identifiable functions not required in the title XVIII claims 
process and are not reimbursable by Medicare. State agencies are responsible for 
administrative costs of all extra, identifiable functions that the contractor performs while 
processing combined claims. 
 
The contractor shall furnish a letter of intent to the State agency. It shall clearly indicate 
any extra, identifiable functions that are part of integrated operations and are performed 
for medical assistance program purposes. It shall indicate any operations separate and 
apart from the integrated claims process that are performed solely for the State agency. 
The contractor and the State agency are responsible for establishing the terms of the 
agreement and the method of reimbursement. When negotiations have been completed, 
the contractor shall forward two copies to the servicing RO. 
 
460.5 - Other Services - (Rev. 1, 08-30-02) 
A1-1602.5, B1-4602.5 
 
Where the contractor performs any other services for State agencies, which are not 
related to the title XVIII claims process, the cost of such services cannot be charged to 
title XVIII. The contractor shall identify these services and charge directly for them 
where possible. It shall charge the full cost, rather than add-on cost, to the State agency. 
The cost includes both direct and indirect costs. It shall have the State agency prepare a 
letter of intent with which it clearly defines the services the contractor is to perform and 
the method of reimbursement. 
 
470 - Principles for Sharing Costs of Physician Profiles - (Rev. 1, 08-30-
02) 
B1-4603 
 
Section 470 applies to carriers only. 
  Carriers are authorized to release physician charge information to other parties under 
certain circumstances. The purpose of this section is to establish the policy for the release 
of this information. 
 
470.1 - Release of Physician Profile Information to Title XIX Agencies 
and to TRICARE Fiscal Intermediaries - (Rev. 1, 08-30-02) 
B1-4603.1 
 
Medicare carriers are authorized to release physician charge information to State agencies 
that need this data to make medical assistance payments under title XIX, and to 
TRICARE fiscal intermediaries for use in administering the Civilian Health and Medical 
Program of the Uniformed Services. (See The Medicare General Information, Eligibility 
and Entitlement Manual, Chapter 6, for disclosure requirements.) 
 
The State agency and/or TRICARE fiscal intermediary should reach an agreement with 
the Medicare carrier on the cost involved prior to furnishing the data. Extra and 
identifiable costs associated with the retrieval and transfer of information include such 
things as programming, assembling the data, handling, correspondence, files search and 
copying. These costs will be charged to the State agency and to TRICARE. (In the Final 
Administrative Cost Proposal, notation should be made if information was furnished to 
title XIX agencies or the TRICARE fiscal intermediaries and the cost of retrieving and 
furnishing the information should be shown.) 
 
A carrier may have an integrated claims process; that is, it may process title XVIII and 
title XIX claims concurrently and mutual benefit may be derived from various operations 
in the claims process. In such cases, cost allocation is required in accordance with 470.2. 
 
In any case in which determination of the actual cost of disclosing information would 
interfere with efficient administration, such cost may be fixed at an amount estimated not 
to exceed actual cost. The information may be released after payment of such amount. If 
collection costs are disproportionately high or would interfere with efficient 
administration, payment of up to $300 per annum may be waived. 
 
470.2 - Principles for Sharing Costs of Physician Profiles When Used for 
Medicare and the Carriers' Regular Business - (Rev. 1, 08-30-02) 
B1-4603.2 
 
Criteria for the determination of reasonable charges for the Part B program required 
carriers to secure and maintain data. These criteria also emphasize that data supporting 
the customary charge of the physician are to be obtained from all sources available to the 
carrier so that the customary charge will reflect the charge made generally to the 
physician's patients for a particular service. 
 
Where several programs or lines of business derive mutual benefits from the use of 
physician profile data, the following principle should be observed to assure equitable 
distribution of costs:   
Where physician profiles established on data derived in whole or in part from the 
Medicare program are used by a carrier in any other program or business, cost sharing is 
required. The cost chargeable to the Medicare program will be determined by the volume 
of Medicare claims processed to the total claims processed for all lines of business using 
the physician profile data. 
 
The Secretary and the Secretary's delegated subordinates have a contractual right to 
information necessary to insure program continuity and to insure maximum efficiency 
and effectiveness. If a change of carriers in an area were to occur, it might be necessary 
to transfer to the succeeding carrier appropriate data to assure that no disruption of 
reasonable charge determinations would result. Such data would be protected from 
unwarranted disclosure under Administration regulations on confidentiality. 
 
480 - Coordination of Medicare and Medicare Supplemental (Medigap) 
Health Insurance Policies 
(Rev. 38, 04-09-04) 
 
B1-4607 
 
The transfer of title XVIII claims information to Medicare supplemental insurers is 
required (under specified conditions) by 1842(h)(3)(B) of the Social Security Act, as 
enacted by 4081 of OBRA 87. 
 
  The physician or supplier involved must be a participating, physician or supplier, 
 
  The beneficiary must assign Medigap benefits to the physician or supplier, and 
 
  The policy named by the beneficiary must be a true Medigap policy to the 
exclusion of employer coverage and plans operated by labor organizations. 
 
Refer to Section 480.1 Exhibit for a list of Medigap insurers. 
 
Carriers and DMERCs shall continue with claim-based Medigap crossovers until they 
receive direction from CMS, via a future instruction, to do otherwise. 
 
480.1  Exhibits, Medigap Insurers - (Rev. 16, 04-11-03) 
 
Refer to Section 480.1, Exhibits for a list of Medigap insurers. 
 
490 - Establishing a Common Provider Audit Program. - (Rev. 1, 08-30-
02) 
A1-1603 
  The following material (sections 490 through 500) applies to providers on prospective 
payment or cost reimbursement. 
 
Title XVIII of the Social Security Act requires that participating health care institutions 
(providers) be reimbursed on a reasonable cost basis and to achieve this a comprehensive 
provider audit program has been established. Some grant-in-aid programs, namely title V 
(the maternal child health services and crippled children's programs) and title XIX 
(Medicaid), also require that hospitals and possibly some other providers be reimbursed 
on a reasonable cost basis. Other third party payers may also have the same requirement. 
The common provider audit program is established to reduce the cost of provider auditing 
to participating third party payers and avoid duplicate auditing effort. The purpose then is 
to have one audit of a participating provider, which will serve the needs of all 
participating programs reimbursing the provider for services rendered. 
 
490.1 - Policies for Implementation of a Common Provider Audit 
Program for Titles V, XVIII and XIX of the Social Security Act - (Rev. 
1, 08-30-02) 
A1-1603.1 
 
Agreement has been reached between the Health Services and Mental Health 
Administration, PHS (title V), the Medical Services Administration, SRS (title XIX), and 
the Centers for Medicare & Medicaid Services, on basic policy governing the common 
audit program. This common audit policy has four basic elements: (a) cost sharing, (b) 
desk review, (c) field audit, and (d) final settlement. 
 
490.2 - Cost Sharing - (Rev. 1, 08-30-02) 
A1-1603.2 
 
The costs incurred in auditing providers performing services for more than one of the 
above programs are to be shared on the basis of the amount of reimbursement (benefits 
paid) to individual providers by the respective programs. 
 
Any proposed modification to this method of sharing costs of audit will be evaluated on 
the basis of its merits. Alternative methods proposed should adhere to the basic principle 
that audit dollars are expended to protect the integrity of benefits paid. 
 
Costs to be shared include all costs incurred from the point of securing the cost report 
from the provider through the publishing and distribution of the audit findings (or cost 
settlement data where no audit is performed). If final settlement is included in the 
common audit program, these costs should also be shared. 
 
There have been some questions concerning the definition of reimbursement (benefits 
paid). Reimbursement by the program means the dollar amounts of payments made from 
program funds at final settlement and should include payments to providers for inpatient 
and outpatient services and, if applicable, combined physician billing. 
  490.3 - Desk Review - (Rev. 1, 08-30-02) 
A1-1603.3 
 
The desk review capability of the intermediary will be used for the principal, intensive 
review of the cost reports submitted by the providers. The purpose of the review will be 
to determine (l) acceptability of the cost report, (2) need for a field audit, and (3) if an 
audit is to be performed, the depth of the audit. 
 
490.4 - Field Audit - (Rev. 1, 08-30-02) 
A1-1603.4 
 
The participants shall evaluate the existing field audit capability of intermediary in-house 
staff, State audit staff, or a subcontracted audit firm, in regard to their past experience 
with the audit capabilities to be used. Every effort should be made to utilize qualified 
field audit capability available from the State agencies. CMS expects intermediaries to 
avoid the more costly audit firm subcontracts wherever possible. 
 
490.5 - Final Settlement - (Rev. 1, 08-30-02) 
A1-1603.5 
 
All participants in the common audit program are to receive copies of the audit findings 
or cost settlement data where no audit is performed. The audit workpapers are also to be 
available if needed to proceed with settlement. The final settlement may or may not be 
undertaken jointly as agreed upon by the parties. Where independent settlements are to be 
made, there should be coordination among the participants to review the findings, insure 
consistent treatment, and discuss the effects of proposed settlements on each program. 
 
490.6 - Implementing a Common Audit Program - (Rev. 1, 08-30-02) 
A1-1603.6 
 
The CMS has contracted with intermediaries to perform certain functions required under 
title XVIII. The title V and XIX programs, which use State funds in conjunction with 
Federal funds, are administered by the States; therefore, an agreement should be executed 
between the intermediaries and the State agencies or their fiscal agents, whoever has the 
responsibility for auditing providers under titles V and XIX, to delineate the procedures 
to be followed, costs to be shared, method of payment for services, coordination 
necessary, and such other items as may be necessary for a complete understanding of 
what is expected of each party. 
 
A model agreement (Exhibit l) is furnished as a guide in the preparation of the agreement. 
 
Where the intermediary is also the fiscal agent for the State and responsible for the audit 
of providers under title V and/or title XIX, a common audit agreement is still necessary 
and should be submitted to CMS for review before being effectuated. 
  In all cases, two copies of the executed agreement should be forwarded to the CMS 
regional office. The regional office will forward one of the copies to the Division of 
Contractor Operations so the common audit program can be monitored on a nationwide 
basis to assure consistent application of policy. 
 
490.7 - Contacting State Agencies or Their Fiscal Agents - (Rev. 1, 08-
30-02) 
A1-1603.7 
 
In those instances where the intermediary is also the State's fiscal agent and responsible 
for audit of the providers, there should be no difficulty working out an agreement which 
would be acceptable to the State and CMS. Where the intermediary has established 
contacts with the State agencies responsible for grants-in-aid programs, the feasibility for 
a common audit program should be explored with them. If the intermediary has not 
established contact with the State agencies, they should request assistance from their 
CMS regional office of their progress toward the establishment of a common audit 
program. Multi-State intermediaries should contact the appropriate fiscal specialist in the 
CMS central office for assistance and reporting progress. 
 
490.8 - Points to Remember in Discussions with Other Parties - (Rev. 1, 
08-30-02) 
A1-1603.8 
 
Initially, we anticipate that State agencies will not be familiar with our comprehensive 
desk review procedures and suggest that the intermediary arrange to meet with the State 
agency to explain the title XVIII procedures. The intermediary should ask the Health 
Insurance Regional Office to coordinate such a meeting with the titles V and XIX 
Regional Offices. 
 
In those instances where the intermediary is also the State's fiscal agent for one of the 
titles other than title XVIII and also has the responsibility for auditing, there will be no 
coordination problem. However, where the State agency does its own auditing or uses a 
different fiscal agent, the State agency may decide to permit the intermediary to use the 
title XVIII guides or they may wish, at least initially, to designate someone to review the 
desk review determinations with the intermediary. In any event, the intermediary should 
cooperate and attempt to resolve any conflict as to either the necessity or scope of audit 
through explanation of the determination made. Note that any audit felt necessary should 
benefit all titles in proportion to their share of the costs. 
 
The agreement with the State agencies should specify that either party may request a 
special audit of a provider or an abnormal exploration of a particular cost in a routine 
audit, so long as the requesting party assumes responsibility for the additional cost. 
  490.9 - Release of Final Settlement Data for Periods Ending Prior to 
January l, 1970 to State Agencies Signing Agreements - (Rev. 1, 08-30-
02) 
A1-1603.9 
 
Final settlement data, whether audited or based on the decision to not audit, pertaining to 
cost reports for periods ending prior to January l, 1970, with the exception of those 
audited cost reports based on combined reporting forms, can be released without charge 
to State agencies signing an agreement for a common audit. 
 
It is expected that any cost reports for periods prior to January l, 1970, not yet audited, 
will have the title XIX or V information added and the cost reports will then be handled 
as a common audit. 
 
490.10 - Release of Final Settlement Data for Periods Ending After 
December 31, 1969 to State Agencies Signing Agreements - (Rev. 1, 08-
30-02) 
A1-1603.10 
 
Final settlement data for periods ending after December 31, 1969,which contain only title 
XVIII information will be released to States signing agreements as follows: 
 
A.  Data for final settlement based on comprehensive desk review information only 
will be furnished with costs of acquiring and developing the information to be 
shared on the basis of reimbursement by the respective programs. 
 
B.  Data for final settlement to be based on audited cost information will be furnished 
with cost of the field audit only to be shared on the basis of reimbursement by the 
respective programs. The desk review data will be included without charge. 
 
490.11 - Treatment of Administrative Costs Accrued in the Operation of 
a Common Audit Program - (Rev. 1, 08-30-02) 
A1-1603.11 
 
Administrative costs accrued in the operation of a common audit program are to be 
shared as indicated in 490.2 above and only that portion of the cost for which Medicare 
is responsible should be shown on the Interim Expenditure Report (Form CMS 1527) and 
the Final Administrative Cost Proposal (Form CMS 1615). 
 
490.12 - Treatment of Receipts for Final Settlement Data Released to 
State Agencies - (Rev. 1, 08-30-02) 
A1-1603.12 
 
Amounts collected for furnishing final settlement data under Section 490.10 above are to 
be deposited in the intermediary's Medicare bank account. Funds so deposited must be  clearly identified as to source and purpose to facilitate auditing. The funds must be 
deposited in the Medicare account because the cash outlay for the cost of obtaining the 
information was charged to Medicare. Funds received for this purpose should be shown 
as a separate credit item on the Interim Expenditure Report (Form CMS-1527) and the 
Final Administrative Cost Proposal (Form CMS 1615). 
 
500 - Coordination of Final Settlement Data Without A Common Audit 
Program - (Rev. 1, 08-30-02) 
A1-1604 
 
There may be instances where a State agency or their fiscal agents may not find it 
feasible to participate in a common audit program, yet desire the title XVIII final 
settlement information. 
 
It is recognized that the title XVIII final settlement data (whether it be audited data or 
comprehensive desk review data) will not contain all the data required by State agencies 
or their fiscal agents to make settlements under their programs. Title XVIII final 
settlement information may be released to State agencies or their agents with charges for 
the information to be determined as follows: 
 
1.  Release of final settlement data based on comprehensive desk review only - The 
cost of acquiring and developing the information is to be shared on the basis of 
reimbursement to the individual provider by the respective programs. Our review 
and appraisal reveals that in the comprehensive desk review process little effort is 
expended in verifying strictly title XVIII information and that most of the effort 
would benefit all programs equally. 
 
2.  Release of final settlement data based on audited cost information - The cost of 
field audit only is to be shared on the basis of reimbursement to the individual 
provider by the respective programs. The desk review data will be included 
without charge. 
 
500.1 - Treatment of Administrative Costs and Receipts for Furnishing 
Settlement Information Where There is No Common Audit Program - 
(Rev. 1, 08-30-02) 
A1-1604.1 
 
Administrative cost incurred in furnishing settlement information should be charged to 
the title XVIII audits of providers' function. Amounts collected for furnishing this 
information must be deposited in the intermediary's Medicare bank account. Funds so 
deposited must be clearly identified as to source and purpose to facilitate auditing. The 
funds must be deposited in the Medicare account because the cash outlay for the cost of 
obtaining the information was charged to Medicare. Funds received for this purpose 
should be shown as a separate credit item on the Interim Expenditure Report (Form 
CMS-1527) and the Final Administrative Cost Proposal (Form CMS-1615). 
  510 - Reporting Costs for Assistance Provided QIOs - (Rev. 1, 08-30-02) 
A3-1610 
Section 249F of Public Law 92-603 provides for the establishment of Quality 
Improvement Organizations. These organizations require varying amounts of assistance 
from intermediaries. 
 
Intermediaries incurring costs in providing assistance to QIOs (including planning, 
conditional, and operating) should use the guidelines provided below in reporting costs 
on their Estimate of Administrative Costs, Cumulative Interim Expenditure Report and 
Budget, and Final Cost Proposals. Funds have not been included in CMS's allocation for 
contractor operations to provide assistance to QIOs. Therefore, requests from QIOs for 
data as described in B below should not be undertaken until agreement for reimbursement 
of costs incurred has been reached with the QIO. It is suggested that this agreement be 
included in the Memorandum of Understanding. 
 
Assistance to QIOs will generally fall into two categories: 
 
A.  Activities Which Are to be Charged to Medicare 
 
Incidental items will be charged to Medicare on regular lines. Such items include general 
discussions on the Memorandum of Understanding, available data, operating procedures, 
meetings to discuss specific agenda items, phone calls, etc. Similar items, but involving 
more than an incidental amount of time, staff, or cost such as an all day meeting, a series 
of meetings to discuss and explain available data, etc., should be identified, reported on 
the PRO line and charged to Medicare. 
 
B.  Activities Which Are to be Charged to QIOs 
 
This category consists of data requested by the QIO for use in carrying out their function 
such as photocopying existing data, special computer runs, and other similar requests for 
information. As indicated above, an agreement regarding requests and reimbursement for 
costs incurred for completing the requests should be reached in advance and with CMS 
RO concurrence, is to be incorporated in a Memorandum of Understanding. The costs for 
this type of data are to be billed directly to the QIO and an informational report of the 
costs incurred is to be attached to the Medicare fiscal reports to CMS. Costs for this type 
of activity are not to be charged to Medicare. 
 
520 - Exhibits - (Rev. 1, 08-30-02) 
A1-1699 
 
Exhibit l - Agreement for Common Audit Under Titles X, XVIII and XIX 
 
EXHIBIT l 
 
Agreement for Common Audit Under Titles V, XVIII and XIX 
  WHEREAS the Secretary of Health, Education and Welfare has the responsibility for the 
administration of titles V, XVIII and XIX of the Social Security Act and has urged 
coordination of these programs to the extent practicable; 
 
WHEREAS it is required that under titles V, XVIII and XIX participating health care 
institutions, hereinafter referred to as providers, are to be reimbursed for inpatient 
services on a reasonable cost basis; 
 
WHEREAS representatives of the Social Security Administration, the Medical Services 
Administration and the Maternal and Child Health Services of the Department of Health, 
Education, and Welfare have agreed that whatever audit of providers is required should 
serve the purpose of the three programs; 
 
WHEREAS the (name of intermediary or intermediaries), hereinafter referred to as the 
intermediary, has entered into an agreement with the Secretary of Health, Education, and 
Welfare to act as the fiscal intermediary under title XVIII, and that the intermediary is 
contractually obligated to make such audit of records of providers of services as is 
necessary to assure that the facilities are being reimbursed in accordance with the 
provisions of the Act and the Regulations promulgated pursuant thereto; 
 
WHEREAS the Secretary has authorized intermediaries and State agencies to enter into 
agreements for use of common audit information under titles V, XVIII and XIX and 
sharing of such audit costs; 
 
THEREFORE, the intermediary and the (name of State agency or agencies), hereinafter 
referred to as the ______________________________________, hereby agree to the 
following: 
 
1.  The intermediary shall have responsibility for performance of desk reviews of 
provider cost reports to determine their acceptability and for deciding the need for 
and scope of field audits. It is expected that the intermediary will arrange for 
appropriate consultation with the (name of State agency or agencies) in arriving at 
its decision regarding need for or scope of any audit. 
 
2.  The intermediary and the (name of State agency or agencies), shall select a 
mutually acceptable audit capability to be used in the conduct of field audits, 
including the consideration of the intermediary's and the State agency's in-house 
audit staff. The intermediary and the (name of State agency or agencies) shall 
enter into any subcontracts which might be necessary to accomplish field audits 
under the common audit program, in accordance with their responsibilities under 
their agreements with the Secretary of Health, Education, and Welfare for 
administration of their respective programs. (Administration of subcontracts will 
be arranged between the intermediary and State agency.) 
 
3.  Cost sharing 
  a.  The cost of common audits, including desk review, field audit activities, 
and, if applicable, final settlement activities, will be shared by the 
intermediary and the (State agency or agencies); 
 
b.  The cost to each party to this agreement will be based upon the ratio of 
benefits paid to individual providers by titles V, XVIII, and XIX for the 
period covered by the cost report; 
 
c.  (This provision will set forth the mutually satisfactory arrangements to be 
reached whereby each party contributes its share of the audit costs on a 
timely basis.) 
 
4.  This agreement shall begin on (date) and end on (date). It will automatically be 
renewed for successive periods of one year unless the intermediary or the State 
agency(s) gives written notice of intention not to renew the agreement at least 90 
days before the end of the current period. 
 
5.  Any costs incurred as a result of termination of this agreement will be shared on 
an equal basis. 
 
6.  Final settlement with the providers will be made (by the intermediary for all 
parties/or separately). (If separate settlements are to be made, the following 
should be added, "Coordination of settlements by the intermediary and the (State 
agency or agencies) will be necessary to insure consistent treatment of questioned 
items.") 
 
7.  The provisions of the Agreement shall be applicable only in connection with the 
audit of those providers receiving reimbursement under title XVIII and at least 
one of the other titles referred to in this agreement. 
 
(Intermediary) 
 
BY: __________________________ 
 
(name and title of Intermediary's authorized representative) 
 
(State Agency) 
 
BY :__________________________ 
 
(name and title of the authorized State representative)  Transmittals Issued for this Chapter 
 
Rev #  Issue Date  Subject  Impl Date  CR# 
R149FM  03/27/2009  Instruction for Credits for Medicare  04/27/2009  6348 
Administrative /Cntractors on 
Complementary Credit Reporting 
R135FM  01/25/2008  Clarification Regarding the  02/01/2008  5837 
Coordination of Benefits Agreement 
(COBA) Medigap Claim-Based 
Crossover Process 
R128FM  07/13/2007  Revisions to Instructions on Chapter  08/13/2007  5682 
1-Budget Preparation-Intermediaries 
and Carriers and Chapter 2-Budget 
Execution of the Medicare Financial 
Management (Pub. 100-06) 
R114FM  01/26/2007  Reporting Requirements for  02/26/2007  5444 
Crossover Claims Transmitted to the 
Coordination of Benefits Contractor 
(COBC) Under the Coordination of 
Benefits Agreement (COBA) Process 
R78FM  09/30/2005  Coordination of Benefits Agreement  10/31/2005  4016 
(COBA) Process for Contractor 
Financial Staff Notification 
R62FM  01/21/2005  Timeframe for Continued Execution  02/22/2005  3658 
of Crossover Agreements and 
Updated on the Transition to the 
National Coordination of Benefits 
Agreement (COBA) Program 
R38FM  04/09/2004  Coordination of Medicare and  07/06/2004  3218 
Complementary Insurance Programs 
R33FM  02/06/2004  Coordination of Medicare and  07/06/2004  3109 
Complementary Insurance Programs 
R26FM  12/08/2003  Allocation of Overhead and General  01/05/2004  2885 
and Administrative Costs 
R23FM  10/24/2003  Completing the Budget Distribution  11/07/2003  2876 
(BD) 
R01FM  08/30/2002  Initial Publication of Chapter  N/A  N/A 
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