Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-13-56264/USCOURTS-ca9-13-56264-0/pdf.json

Nature of Suit Code: 861
Nature of Suit: Social Security - HIA (1395 ff)
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MISSION HOSPITAL REGIONAL

MEDICAL CENTER,

Petitioner-Appellant,

v.

SYLVIA MATHEWS BURWELL, in her

official capacity as Secretary of

Health and Human Services,

Respondent-Appellee.

No. 13-56264

D.C. No.

8:12-cv-01171-

AG-JPR

OPINION

Appeal from the United States District Court

for the Central District of California

Andrew J. Guilford, District Judge, Presiding

Argued and Submitted

October 21, 2015—Pasadena, California

Filed April 11, 2016

Before: Stephen S. Trott, Andrew J. Kleinfeld,

and Consuelo M. Callahan, Circuit Judges.

Opinion by Judge Trott

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2 MISSION HOSP. REG’L MED. CTR. V. BURWELL

SUMMARY*

Medicare 

The panel affirmed the district court’s judgment in favor

of the Secretary of Health and Human Services in an action

challenging the Secretary’s determination that Mission

Hospital Regional Medical Center was not entitled to bill

Medicare for patient services at its new facility in Laguna

Beach, California – formerly South Coast Medical Center – 

until that facility had a provider agreement of its own.

On June 30, 2009, Mission Hospital, a Medicareapproved acute care hospital, purchased the assets of South

Coast, also a Medicare-approved facility. Mission Hospital

attempted by an assets-only purchase to avoid South Coast’s

potential liabilities under South Coast’s Medicare provider

agreement. Mission Hospital alleged that former 42 C.F.R.

§ 489.13(d)(1)(i) permitted it to avoid South Coast’s

Medicare liabilities by submitting Centers for Medicare and

Medicaid Services form 855A requesting that Mission

Hospital’s provider agreement encompass South Coast

effective July 1, 2009; or, alternatively, Mission Hospital

was entitled to the benefit of the retroactivity provision in 42

C.F.R § 489.13(d)(2).

The Secretary rejected Mission Hospital’s contentions.

The Secretary’s decision blocked Mission Hospital from

collecting $1.4 million for services rendered between July 1,

2009 and September 29, 2009 at South Coast, and roughly $7

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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MISSION HOSP. REG’L MED. CTR. V. BURWELL 3

million for normally Medicare eligible services between July

1, 2009 and March 18, 2010, when the South Coast campus

was finally accredited and properly enrolled as a provider in

Medicare. The Departmental Appeals Board adopted the

Secretary’s decision.

The panel concluded that the Secretary’s interpretations,

and decisions rendered by the Departmental Appeals Board,

were reasonable. The panel held that private parties have no

power to alter their legal obligations with Medicare under

their provider agreements. The panel also held that the

retroactivity provisions in 42 C.F.R. § 489.13(d)(2) were

inapplicable.

COUNSEL

William E. Quirk (argued), Polsinelli PC, Kansas City,

California; Wesley D. Hurst, Polsinelli LLP, Los Angeles,

California; and Jason T. Lundy, Polsinelli PC, Chicago,

Illinois, for Petitioner-Appellant.

Kathleen Unger (argued), and Deborah Yim, Assistant United

States Attorneys, Los Angeles, California, for RespondentAppellee.

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OPINION

TROTT, Circuit Judge:

On June 30, 2009, Mission Hospital Medical Center

(“Mission”), a Medicare-approved acute care hospital in

Mission Viejo, California, purchased from Adventist Health

Systems West (“Adventist”) the assets of South Coast

Medical Center (“South Coast”), in Laguna Beach,

California, also a Medicare-approved facility. However,

Mission attempted by an assets-only purchase to avoid South

Coast’s potential liabilities under South Coast’s Medicare

provider agreement. These liabilities encompassed potential

mandated reimbursement to Medicare for any previous

overpayments made to South Coast. Parenthetically, this

labyrinthine system is not a one-way street. Should Medicare

determine it has underpaid a hospital, for example with

respect to “outlier” costs for a beneficiary requiring higher

treatment costs than anticipated in the Prospective Payment

System (“PPS”) system, Medicare will subsequently

compensate the provider accordingly. How complicated is

this process, and how long does it take? We attach 42 C.F.R.

§ 412.84, Payment for extraordinarily high-cost cases (cost

outliers) as an Appendix. This daunting regulation

demonstrates whycontinuityis contemplated bythe Medicare

system.

As a consequence of Mission’s decision to purchase only

South Coast’s assets, the Secretary of the U.S. Department of

Health and Human Services (the “Secretary”) duly

determined that Mission was not entitled to bill Medicare for

patient services at its new facility until that facility had a

provider agreement of its own. This decision blocked

Mission from collecting $1.4 million for services rendered

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MISSION HOSP. REG’L MED. CTR. V. BURWELL 5

between July 1, 2009, and September 29, 2009, at South

Coast, which was now known as Mission’s Laguna Beach

campus, and roughly $7 million for normally Medicare

eligible services between July 1, 2009, and March 18, 2010,

when the Laguna Beach campus was finally accredited and

properly enrolled as a provider in Medicare.

Seeking remuneration for services provided, Mission

appealed the Secretary’s decision, first to the Department of

Heath and Human Services (the “Department”) Civil

Remedies Division. An Administrative Law Judge (“ALJ”)

ruled in favor of the Department. Mission appealed the

ALJ’s decision to the Departmental Appeals Board (“DAB”),

losing once again. The next stop was the district court, where

it suffered the same fate. Mission now appeals the

Secretary’s decision to us.

We have jurisdiction over this timely appeal pursuant to

28 U.S.C. § 1291, and we affirm.

I

A.

First, we explain what this controversy is not about. It is

not about general unknown liabilities that might have arisen

after the purchase date, for example from malpractice

lawsuits, wrongful denial of privileges lawsuits, or

construction and real estate disputes. This case deals only

with the continuityof provider agreement contractual liability

for Medicare overpayments, which are not ascertainable until

Medicare accounting, calculating, and reconciliation, and

which might not occur until years after initial billing. See

42 U.S.C. § 1395g(a). Nothing in this opinion should be

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taken to limit or restrict assets-only purchases of medical

providers, or Medicare reimbursements to assets-only

purchases, so long as the assets-only purchase makes an

exception for Medicare reimbursement of overpayments. We

note that, “[b]y encompassing a system of interim payments

on an estimated cost basis, subject to year-end accounting, the

program ensures Medicare providers a steady flow of income

sufficient to provide service.” United States v. Vernon Home

Health, Inc., 21 F.3d 693, 696 (5th Cir. 1994). This complex

but routine PPS adjustment, reconciliation, and

reimbursement accounting process, to which all providers are

subject, undoubtedly eliminates serious cash flow problems

they would otherwise encounter.

Second, this controversy does not involve an attempt by

Medicare to recover overpayments made to South Coast, or

for that matter, whether Medicare has recovered any such

payments from Adventist, South Coast’s previous owner. At

issue is only whether Mission can recover from Medicare for

services rendered as of the date of its operation of South

Coast as its Laguna Beach campus.

In addition, both parties agree that South Coast’s provider

agreement terminated as of June 30, 2009, after South Coast

submitted a standard form CMS 855A Enrollment

Application notifying the Centers for Medicare and Medicaid

Services (“CMS”) of the impending acquisition and

requesting a change in its enrollment. Mission admits that

[b]ecause Mission Hospital did not acquire

South Coast’s liabilities, including those

related to its provider agreement, South

Coast’s provider agreement terminated upon

South Coast’s acquisition. This is the very

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reason that the hospitals filed their forms

855A to bring the South Coast / Laguna

Beach campus under Mission Hospital’s

provider agreement upon South Coast’s

acquisition.

A.O.B. 29–30.

B.

Nevertheless, Mission asserts that former 42 C.F.R.

§ 489.13(d)(1)(i) permitted it to avoid South Coast’s

Medicare liabilities simply by submitting, along with South

Coast, CMS form 855A to CMS “requesting that Mission’s

Medicare provider agreement encompass the Laguna Beach

campus effective July 1, 2009.” Mission argues that its

submission of this form complied with § 489.13(d) (effective

until September 30, 2010) and should have made July 1,

2009, the effective date of Medicare enrollment for the

Laguna Beach campus under Mission’s existing provider

agreement and without a new accreditation survey. Mission

admits that it “deliberately did not take on the liabilities of

South Coast which was owned by Adventist Health. We left

those liabilities there. Those are between Medicare and

Adventist.” Mission also admits it did not rely on CMS when

it made the decision to attempt this gambit to circumvent

§ 489.18(d), but instead on “statements made to us by

Medicare contractors.”

In the alternative, Mission maintains it is entitled to the

benefit of the retroactivity provision in § 489.13(d)(2). This

section says that the effective date of a provider like Mission

may be retroactive for up to one year from unpaid covered

services provided to a Medicare beneficiary.

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II

Not so fast, says the Secretary. Mission’s argument is too

clever by half. Granted, 42 U.S.C. § 489.18(c) says that

“[w]hen there is a change of ownership . . . , the existing

provider agreement will automatically be assigned to the new

owner,” here, Mission. However, § 489.18(d) as it read in

2009, provided that “[a]n assigned agreement is subject to all

applicable statutes and regulations and to the terms and

conditions under which it was originally issued.” (Emphasis

added). We note that this language talks about the terms and

conditions under which the existing provider agreement was

originally issued. The regulation does not say that the

provider agreement shall contain new identical terms and

conditions that are forward-looking only. The regulation,

which Mission tried to circumvent, provides continuity of

obligations, continuitywhich is essential to the functioning of

Medicare’s Prospective Payment System. The regulation

talks about an assignment, not a new beginning with a clean

slate on new terms. We note there is a three-year statute of

limitation on this adjustment arrangement.

One of the substantive and significant “conditions” in

South Coast’s Medicare provider agreement was an

obligation to reimburse Medicare for any overpayments it

might have received. See 42 U.S.C. § 1395g; 42 C.F.R.

§§ 405.1803(c), 413.64(f); In re TLC Hosps., Inc., 224 F.3d

1008, 1012 (9th Cir. 2000). However, Mission extinguished

South Coast’s provider agreement and voluntarily refused to

assume South Coast’s contractual liability to return

overpayments to Medicare. Consequently, Mission did not

and could not take assignment of South Coast’s provider

agreement. Accordingly, the Laguna Beach campus on July

1, 2009 became for Medicare purposes a “new hospital,”

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without a provider agreement. 42 C.F.R. § 412.84(i)(3)(i)

defines a “new hospital” as “an entity that has not accepted

assignment of an existing hospital’s provider agreement in

accordance with § 489.18 of this chapter.” See also 42 C.F.R.

§§ 412.230, 412.525(a)(4)(iv)(C)(1), 412.529(f)(4)(iii)(A),

419.43(d)(5)(iii)(A). It follows that the Laguna Beach

campus was not enrolled in Medicare after Mission acquired

it as a “new hospital” on June 30, 2009. Thus, the effective

date of the enrollment of the Laguna Beach campus could not

be fixed until it was separately accredited with its own

provider agreement.

As it turned out, The Joint Commission, an independent

non-profit organization that accredits and certifies more than

20,500 health care organizations and programs in the United

States, conducted an unannounced accreditation survey of the

Laguna Beach campus on March 2, 2009. The Joint

Commission reported finding two material deficiencies under

the medical records condition of participation. See 42 C.F.R.

§ 482.24. Mission complains that these deficiencies were not

material, but theywere material to The Joint Commission and

CMS – and that’s what counts. The Joint Commission did

not clear the Laguna Beach campus for accreditation byCMS

until after the deficiencies were remedied. Only then was the

Laguna Beach Campus enrolled, accredited, and authorized

to bill services provided to Medicare beneficiaries.

The DAB adopted and validated the Secretary’s

interpretation and application of the regulations for which she

is responsible.

Mission’s Laguna Beach campus did not meet

this threshold requirement [of current

accreditation] by virtue of Mission’s July 1,

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2009 asset purchase because, as already

discussed, Mission did not assume all of

South Coast’s outstanding liabilities and

therefore Mission could not continue to

operate the Laguna Beach campus under

South Coast’s provider agreement or South

Coast’s accreditation. Moreover, as discussed

below, The Joint Commission extended

Mission’s accreditation to the Laguna Beach

campus only as of March 18, 2010. As a

consequence, until that date, the Laguna

Beach campus did not meet “all requirements”

within the meaning of section 489.13(d)(1)(i),

i.e., the hospital conditions of participation it

could be deemed to meet on the basis of

accreditation. Accordingly, the effective date

of billing privileges for services provided at

Mission’s Laguna Beach campus could not be

earlier than March 18, 2010, notwithstanding

the fact that the sole additional requirement

under section 489.13(d)(1)(i) – submission of

an enrollment application – was met even

before July 1, 2009.

III

Federal law fixes the relationships and responsibilities of

Medicare with beneficiaries and providers. These

relationships and responsibilities are beyond the reach of

private parties such as Mission and South Coast to alter. The

liabilities of a Medicare provider are as different from the

liabilities in a typical assets-only purchase, as chalk is from

cheese. Mission as a provider was aware of all of these rules

and obligations when it attempted to short-circuit the system

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MISSION HOSP. REG’L MED. CTR. V. BURWELL 11

in its favor. “As a participant in the Medicare program,

[Mission] had a duty to familiarize itself with the legal

requirements for cost reimbursement.” Heckler v. Cmty.

Health Servs. of Crawford Cty., Inc., 467 U.S. 51, 64 (1984).

Our sister circuit’s opinion in United States v. Vernon

Home Health, Inc., 21 F.3d 693 (5th Cir. 1994), informs and

is consistent with our opinion. In Vernon, the purchaser of

the corporate assets of a Medicare provider tried to escape the

provider’s responsibilityto repayMedicare for overpayments. 

To do so, the purchaser invoked Texas state law on its behalf

regarding the assumption of liabilities. The Fifth Circuit said,

“federal law governs cases involving the rights of the United

States arising under a nationwide federal program such as the

Social Security Act. The authority of the United States in

relation to funds disbursed and the rights acquired by it in

relation to those funds are not dependent upon state law.” 

21 F.3d at 695 (citations omitted). It is equally true that

private parties have no power to alter their legal obligations

with Medicare under their provider agreements.

IV

Mission’s attempt to shoehorn its predicament into the

retroactivity provisions of the special rule in 42 C.F.R

§ 489.13(d)(2) fares no better. By its use of the word “may,”

the regulation gives CMS discretion about when to grant

retroactive coverage. The Secretary’s long-standing policy as

restated by the DAB was to exercise her discretion under this

rule only to providers that were accredited, as that is how

CMS knows a provider is in compliance with Medicare’s

requirements. See Puget Sound Behavioral Health, DAB No.

1944 at 14 (2004).

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Applying this sound policy to this controversy, the DAB

said,

As in Puget Sound, we conclude that section

489.13(d)(2) is inapplicable because the

conditions under which it was intended to

apply are not present here. Specifically, there

was no assurance that Mission’s Laguna

Beach campus was in compliance with the

Medicare participation requirements at the

time the services were provided both because

Mission was not assigned South Coast’s

provider agreement due to Mission’s failure to

assume South Coast’s liabilities and because

The Joint Commission determined that the

Laguna Beach campus was accredited only as

of March 18, 2010.

West Norman Endoscopy Center, DAB No. 2331 (2010)

upon which Mission relies is distinguishable because, as the

DAB noted, West Norman “was accredited . . . when it began

providing these services,” whereas Mission’s Laguna Beach

campus was not. Id. at *8.

V

In Heckler v. Community Health, the Supreme Court said,

Under the Medicare program, Title XVIII of

the Social Security Act, 79 Stat. 291, as

amended, 42 U.S.C. §§ 1395–1395vv,

providers of health care services are

reimbursed for the reasonable cost of

services rendered to Medicare beneficiaries

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MISSION HOSP. REG’L MED. CTR. V. BURWELL 13

as determined by the Secretary of Health

and Human Services (Secretary).

§ 1395x(v)(1)(A). Providers receive interim

payments at least monthly covering the cost of

services they have rendered. 1395g(a).

Congress recognized, however, that these

interim payments would not always correctly

reflect the amount of reimbursable costs, and

accordingly instructed the Secretary to

develop mechanisms for making appropriate

retroactive adjustments when reimbursement

is found to be inadequate or excessive.

§ 1395x(v)(1)(A)(ii). Pursuant to this

statutory mandate, the Secretary requires

providers to submit annual cost reports which

are then audited to determine actual costs.

42 CFR §§ 405.454, 405.1803 (1982). The

Secretary may reopen any reimbursement

determination within a 3-year period and

make appropriate adjustments. § 405.1885.

467 U.S. at 53–54 (footnote omitted).

This controversy could have been avoided had Mission

simply availed itself of the path open to it pursuant to

§ 489.18(c). As the DAB correctly said, “the results of the

case would be different had Mission assumed South Coast’s

liabilities when it acquired its assets.” We read this language

to have meant, in context, that this case would be different

“had Mission accepted South Coast’s liabilities to Medicare

when it acquired its assets,” and not to have referred to

liabilities South Coast might have had to patients, physicians,

vendors, or other third parties. Mission gambled on an

argument based on a contractor’s advice, not CMS’s. On

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September 29, 2009, CMS warned Mission of its sure-to-fail

situation, advising Mission that it could not bill for services

“until either (1) The Joint Commission conducts a survey at

Laguna Beach or (2) Mission Hospital agrees to take

assignment of [South Coast’s] provider number, including all

potential liabilities[.]” When Mission received this

notification, it ceased billing but did not alter its position.

Under the Administrative Procedure Act, an agency

decision may be reversed only if it is arbitrary, capricious, an

abuse of discretion, or otherwise not in accordance with the

law. 5 U.S.C. § 706(2)(A).

We must give substantial deference to an

agency’s interpretation of its own regulations. 

Our task is not to decide which among several

competing interpretations best serves the

regulatory purpose. Rather, the agency’s

interpretation must be given controlling

weight unless it is plainly erroneous or

inconsistent with the regulation. In other

words, we must defer to the Secretary’s

interpretation unless an alternative reading is

compelled by the regulation’s plain language

or by other indications of the Secretary’s

intent at the time of the regulation’s

promulgation.

Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994)

(citations and internal quotation marks omitted). “This broad

deference is all the more warranted when, as here, the

regulation concerns ‘a complex and highly technical

regulatory program,’ in which the identification and

classification of relevant ‘criteria necessarily require

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MISSION HOSP. REG’L MED. CTR. V. BURWELL 15

significant expertise and entail the exercise of judgment

grounded in policy concerns.’” Id. (emphasis added)

(quotingPauley v. BethEnergy Mines, Inc., 501 U.S. 680, 697

(1991)); see also PAMC, Ltd. v. Sebelius, 747 F.3d 1214,

1217 (9th Cir. 2014); Cmty. Hosp. of Monterey Peninsula v.

Thompson, 323 F.3d 782, 789–90 (9th Cir. 2003). Moreover,

“[t]here is simply no requirement that the Government

anticipate every problem that may arise in the administration

of a complex program such as Medicare.” Heckler, 467 U.S.

at 64. Accordingly “that [CMS] had not anticipated this

problem and made a clear resolution available to [either

Mission or South Coast] is of no consequence.” Id. CMS

cannot be expected to foresee every situation that might arise. 

We repeat what the Court said in Thomas Jefferson: The

Secretary is expected to “exercise . . . judgment grounded in

policy concerns in selecting between permissible

interpretations of the regulations.” 512 U.S. at 512.

Because we conclude that the Secretary’s interpretations

and decisions rendered by the DAB in this case were

reasonable and satisfied this standard, we AFFIRM. 

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APPENDIX

42 C.F.R. § 412.84 - Payment for extraordinarily highcost cases (cost outliers).

(a) A hospital may request its intermediary to make an

additional payment for inpatient hospital services that meet

the criteria established in accordance with § 412.80(a).

(b) The hospital must request additional payment—

(1) With initial submission of the bill; or

(2) Within 60 days of receipt of the intermediary’s initial

determination.

(c) Except as specified in paragraph (e) of this section, an

additional payment for a cost outlier case is made prior to

medical review.

(d) As described in paragraph (f) of this section, the QIO

[QualityImprovement Organization] reviews a sample of cost

outlier cases after payment. The charges for any services

identified as noncovered through this review are denied and

any outlier payment made for these services are recovered, as

appropriate, after a determination as to the provider’s liability

has been made.

(e) If the QIO finds a pattern of inappropriate utilization by

a hospital, all cost outlier cases from that hospital are subject

to medical review, and this review may be conducted prior to

payment until the QIO determines that appropriate corrective

actions have been taken.

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(f) The QIO reviews the cost outlier cases, using the medical

records and itemized charges, to verify the following:

(1) The admission was medically necessary and

appropriate.

(2) Services were medically necessary and delivered in

the most appropriate setting.

(3) Services were ordered by the physician, actually

furnished, and not duplicatively billed.

(4) The diagnostic and procedural codings are correct.

(g) The intermediary bases the operating and capital costs of

the discharge on the billed charges for covered inpatient

services adjusted by the cost to charge ratios applicable to

operating and capital costs, respectively, as described in

paragraph (h) of this section.

(h) For discharges occurring before October 1, 2003, the

operating and capital cost-to-charge ratios used to adjust

covered charges are computed annually by the intermediary

for each hospital based on the latest available settled cost

report for that hospital and charge data for the same time

period as that covered by the cost report. For discharges

occurring before August 8, 2003, statewide cost-to-charge

ratios are used in those instances in which a hospital’s

operating or capital cost-to-charge ratios fall outside

reasonable parameters. CMS sets forth the reasonable

parameters and the statewide cost-to-charge ratios in each

year's annual notice of prospective payment rates published

in the Federal Register in accordance with § 412.8(b).

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(i)

(1) For discharges occurring on or after August 8, 2003,

CMS may specify an alternative to the ratios otherwise

applicable under paragraphs (h) or (i)(2) of this section.

A hospital may also request that its fiscal intermediary

use a different (higher or lower) cost-to-charge ratio

based on substantial evidence presented by the hospital.

Such a request must be approved by the CMS Regional

Office.

(2) For discharges occurring on or after October 1, 2003,

the operating and capital cost-to-charge ratios applied at

the time a claim is processed are based on either the most

recent settled cost report or the most recent tentative

settled cost report, whichever is from the latest cost

reporting period.

(3) For discharges occurring on or after August 8, 2003,

the fiscal intermediary may use a statewide average costto-charge ratio if it is unable to determine an accurate

operating or capital cost-to-charge ratio for a hospital in

one of the following circumstances:

(i) New hospitals that have not yet submitted their

first Medicare cost report. (For this purpose, a new

hospital is defined as an entity that has not accepted

assignment of an existing hospital’s provider

agreement in accordance with § 489.18 of this

chapter.)

(ii) Hospitals whose operating or capital cost-tocharge ratio is in excess of 3 standard deviations

above the corresponding national geometric mean.

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This mean is recalculated annually by CMS and

published in the annual notice of prospective payment

rates issued in accordance with § 412.8(b).

(iii) Other hospitals for whom the fiscal intermediary

obtains accurate data with which to calculate either an

operating or capital cost-to-charge ratio (or both) are

not available.

(4) For discharges occurring on or after August 8, 2003,

any reconciliation of outlier payments will be based on

operating and capital cost-to-charge ratios calculated

based on a ratio of costs to charges computed from the

relevant cost report and charge data determined at the

time the cost report coinciding with the discharge is

settled.

(j) If any of the services are determined to be noncovered, the

charges for these services will be deducted from the requested

amount of reimbursement but not to exceed the amount

claimed above the cost outlier threshold.

(k) Except as provided in paragraph (l) of this section, the

additional amount is derived by first taking 80 percent of the

difference between the hospital’s adjusted operating cost for

the discharge (as determined under paragraph (g) of this

section) and the operating threshold criteria established under

§ 412.80(a)(1)(ii); 80 percent is also taken of the difference

between the hospital’s adjusted capital cost for the discharge

(as determined under paragraph (g) of this section) and the

capital threshold criteria established under § 412.80(a)(1)(ii).

The resulting capital amount is then multiplied by the

applicable Federal portion of the payment as determined in

§ 412.340(a) or § 412.344(a).

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(l) For discharges occurring on or after April 1, 1988, the

additional payment amount for the DRGs related to burn

cases, which are identified in the most recent annual notice of

prospective payment rates published in accordance with

§ 412.8(b), is computed under the provisions of paragraph (k)

of this section except that the payment is made using 90

percent of the difference between the hospital’s adjusted cost

for the discharge and the threshold criteria.

(m) Effective for discharges occurring on or after August 8,

2003, at the time of any reconciliation under paragraph (i)(4)

of this section, outlier payments may be adjusted to account

for the time value of any underpayments or overpayments.

Any adjustment will be based upon a widely available index

to be established in advance by the Secretary, and will be

applied from the midpoint of the cost reporting period to the

date of reconciliation.

 Case: 13-56264, 04/11/2016, ID: 9933954, DktEntry: 51-1, Page 20 of 20