(Medicare Claims Processing Manual)

 The fully prospective methodology if the hospital -specific rate is less than the Federal rate.  The A/B MAC (A) uses the blend rate applicable to the Federal FY in which the base period begins.  For example, a new hospital with a hospital -specific rate les s than the Federal rate and a base year beginning in FY 1995 is paid 70 percent of its hospital -specific rate and 30 percent of the Federal rate; or   The hold harmless methodology if the hospital -specific rate is greater than the Federal rate.  Hold harmless payments may continue for up to 8 years.  They may continue beyond the first cost reporting period that begins on or after October 1, 2000.   20.4.7 - Capital PPS Exception Payments (Rev. 1, 10- 01-03)  A3-3611.7, 42 CFR 412.348  Exception payments are provided for hospitals with inordinately high levels of capital obligations.  Payment is made to a hospital paid under either the fully prospective payment methodology, or the hold- harmless payment methodology.  Exception payments will expire at the end of the 10- year transition peri od.  Exception payments ensure that:    Sole community hospitals receive 90 percent of their Medicare inpatient capital costs;   Urban hospitals with 100 or more beds and a disproportionate share patient percentage of at least 20.2 percent receive 80 percent of their Medicare inpatient capital costs; and    All other hospitals receive 70 percent of their Medicare inpatient capital costs.   Pricer adds interim exception payments to the basic capital payment, using the rate entered in positions 189-194 of the provider -specific file.  The A/B MAC (A) adjusts these interim payments, as needed, at cost report settlement.   A hospital is entitled to an additional payment if its capital payments for the cost reporting period would otherwise be less than the applicable minimum payment level.  The additional payment equals the difference between the applicable minimum payment le vel and the capital payments that the hospital would otherwise receive minus any offset amount.  A limited exception is also provided during the 10- year transition period for hospitals that experience unanticipated extraordinary circumstances that require an unanticipated major capital expenditure.  Events such as a tornado, earthquake, catastrophic f ire, or a hurricane are examples of extraordinary circumstances.  The capital project must cost at least $5 million (net of proceeds from other payment sources such as insurance, litigation decisions and other State, local or Federal government funding programs) to qualify for this exception.  An eligible hospital's minimum payment level under this exception is 85 percent of costs associated with the unanticipated capital expenditure and the applicable minimum payment level for its other Medicare inpatient capital costs.   Total estimated payments under the exception process may not exceed 10 percent of the total estimated capital prospective payments (exclusive of hold- harmless payments for old capital) for the same fiscal year.   These limited exceptions must be approved by CMS prior to payment.  If approved, the A/B MAC (A) includes the limited exception payment amount per discharge in the exception field of the provider specific file.  20.4.8 - Capital Outliers  (Rev. 1, 10- 01-03)  A3-3611.8   Total Federal PPS payments are reduced by an amount equal to anticipated outlier payments for the year to fund capital and operating outlier payments.  Outlier payments apply only to the Federal portions of capital payments.  Pricer calculates outlier payments.   Pricer used a combined methodology to determine the day outlier payment rate for capital and operating day outliers ( Day outliers were eliminated after FY 1997 ).  A second combined methodology is used to determine the cost outlier payment rate for capital and operating costs.  A capital or operating cost outlier is paid only if both capital and operating costs related to an admission exceed the combined outlier threshold.  Pricer pays the higher of the combined total cost outlier payment or the total day outlier payment.  An exception applies to a transferring hospital.  A transferring hospital may be paid a cost outlier, but may not be paid a day outlier unless DRG 385 or 456 applies.  The outlier computation methodology is contained in the A/B MAC (A) Pric er installation guide.  (See 20.7 for the common thresholds that apply to both operating and capital outliers.)   20.4.9 - Admission Prior to and Discharge After Capital PPS Implementation Date  (Rev. 1, 10- 01-03)  A3-3611.9   The capital payment issued for an inpatient hospital stay that begins prior to and ends after the onset of capital PPS is the amount determined by Pricer for that DRG.  No reasonable cost capital pass through payment is payable for the portion of the stay that pre -dates capital PPS.  The A/B MAC (A) may not split a bill for the periods before and after the onset of capital PPS that fall into the same billing period.  It bases any outlier payment due on the entire stay, not only that portion of the stay that began after the start of capital PPS.   20.4.10 - Market Basket Update  (Rev. 1, 10- 01-03)  A3-3611.10   For FY 1992 through FY 1995, the update to the Federal and the hospital -specific rates is based on actual increases in capital -related costs per discharge adjusted for case mix change.  For example, FY 1993 rate updates are based on a comparison of inpatie nt capital costs per case in Medicare cost reports beginning in FY 1990 and the costs per case in the cost reports beginning in FY 1988.  The update computation will be modified after FY 1995 to reflect the capital market basket index, changes in capital r equirements and new technology.  Annual updates for periods after FY 1992 will be effective October 1 for all PPS hospitals, rather than the start of cost report periods that begin during that FY.   20.5 - Rural Referral Centers (RRCs)  (Rev. 1, 10- 01-03)  A3-3610.16, HO -415.17  Section 1886(d)(5)(C) of the Act provides for exceptions and adjustments to the standardized prospective payment amounts to take into account the special needs of RRCs.  The adjustment allowed for approved RRCs is that they are paid based upon the urban, rather than rural, prospective payment rates as adjusted by the applicable DRG weighting factor and the rural area index.  In addition, OBRA 89 (P.L. 101- 239) extended RRC status through cost reporting periods beginning before October 1992 to any hospital classified as an RRC as of September 30, 1989.  To retain status as an RRC effective with the cost reporting period beginning on or after October 1, 1992, a hospital must have met the criteria for classification as an RRC in at least two of the prior three years, or qualify on the basis of the requireme nts for initial RRC certification for the current year.  The A/B MAC (A) will not review the RRC status of a hospital before the end of its third full cost reporting year as an RRC.  It will limit review of RRCs in operation more than three years at the be ginning of FY 1993 to a hospital's most recent three years.  RRCs that pass review as meeting RRC status for at least two of the last three years receive a 3 -year extension of their RRC status.   The rates in Pricer include a reduction in the adjusted standardized amounts for all hospitals to ensure that total PPS payment neither increase nor decrease as a result of the increase in payments to RRCs.   To qualify for initial RRC status for cost reporting periods beginning on or after October 1, 1992, a rural hospital must have had at least 275 beds, or the hospital must have met one of three criteria in 42 CFR 412.96(c) (3), (4) and (5) , and both of the following requirements:    The hospital's case -mix index value for FY 91 must have been at least 1.2760, or equal to the median case- mix index value for urban hospitals (excluding hospitals with approved teaching programs) calculated by CMS for the census region in which the hospita l is located, if fewer.    For its cost reporting period that began during FY 1991, the hospital must have had at least 5000 discharges, or equal to the median number of discharges for urban hospitals in that census region, if fewer, or if an osteopathic hospital, must have had at l east 3000 discharges.   The CMS publishes the median case -mix index value and the median number of discharges annually in the PPS update in the "Federal Register."   20.6 - Criteria and Payment for Sole Community Hospitals and for Medicare Dependent Hospitals  (Rev. 1816; Issued:  09- 17-09; Effective Date:  Discharges on or after October 1, 2009; Implementation Date:  10 -05-09)  A. - Criteria for Sole Community Hospitals (SCHs)   A sole community hospital (SCH) is a hospital that is paid under the Medicare hospital inpatient prospective payment system (IPPS) and is either located more than 35 miles from other like hospitals or is located in a rural area, and meets the criteria for SCH status as specified at 42 CFR 412.92 (Title 42 of the Code of Federal Regulations, Section 412.92, Special treatment:  Sole community hospitals).  A hospital may be designated as an SCH effective with cost reporting periods beginning on or after Octobe r 1, 1990.  B. - Criteria for Medicare Dependent Hospitals (MDHs)   A Medicare- dependent, small rural hospital (MDH) is a hospital that is paid under the Medicare hospital inpatient prospective payment system (IPPS) and meets the criteria for MDH status as specified at 42 CFR 412.108 (Title 42 of the Code of Federal Regula tions, Section 412.108  Special treatment:  Medicare -dependent, small rural hospitals).  A hospital may be designated as an MDH effective with cost reporting periods beginning on or after April 1, 1990, and ending on or before March 31, 1993, and for disch arges occurring on or after October 1, 1997, and before October 1, 2011.   C. - Payment to SCHs and MDHs   SCHs and MDHs are paid based on either the Federal rate or their hospital -specific (HSP) rate, whichever will result in the greatest payment.  The HSP rate is the hospitals rate based on their updated costs per discharge for a particular fiscal year (FY) as specified in statute.  Like all IPPS hospitals paid, SCHs and MDHs are paid for their discharges based on the diagnosis -related DRG classification and weights regardless of whether payment based on the Federal rate or the hospitals HSP rate results in the greatest payment.   SCHs will be paid based on their HSP rate for either FY 1982, 1987, 1996 (for cost reporting periods beginning on or after October 1, 2000) or 2006 (for cost reporting periods beginning on or after January 1, 2009) if this results in a greater payment than the Federal rate.  For more detail, see 42 CFR 412.92(d) and 42 CFR 412.73, 412.75, 412.77, and 412.78, respectively, for determining the HSP rates for FYs 1982, 1987, 1996 and 2006.  MDHs will be paid based on their HSP rate for either FY 1982, 1987, or 2002 (for cost reporting periods beginning on or after October 1, 2006) if this results in a greater payment than the Federal rate.  For more detail, see 42 CFR 412.108(c) and 42 CFR 412.73, 412.75, and 412.79, respectively, for determining the HSP rates for FYs 1982, 1987, and 2002.  In addition, qualifying SCHs and MDHs that experience a significant decrease in its number of discharges may receive an additional payment as specified at 42 CFR 412.92(e) and 42 CFR 412.108(d), respectively.  In general, the HSP rates for both SCHs and MDHs are updated annually.  The HSP rates are updated for inflation by the applicable market basket increase for each FY after the base period year, and are also adjusted by a budget neutrality factor to account for the annual DRG reclassification and recalibration for each year from FY 1993 forward, regardless of the year of the base period.  (For reference purposes, the budget neutrality adjustment factors are listed below at the end of this section.)  For the i nflation update, beginning FY 2005, if the hospital did not submit quality data, the market basket update is reduced by a percentage specified in statute for the applicable FY consistent with section 1886(b)(3)(B)(viii) of the Act.