(Medicare Claims Processing Manual)

1) Identify total Medicare costs from Worksheet D -1, Part II, line 49 minus (Worksheet D, Part III, col. 8, line 31 plus Worksheet D, Part IV, col. 7, line 101).   2) Identify total Medicare charges (the sum of routine and ancillary charges) from Worksheet D -4, Column 2, line 31 plus line 103 from the cost report; where possible, these charges should be confirmed with the PS&R data.   3) Divide the Medicare costs by the Medicare charges to compute the CCR.   All references to Worksheets and specific line numbers shall correspond with the sub-provider identified as the IRF unit that has the letter "T" or R in the third position of the Medicare provider number.   C. - Calculating Medicare CCRs for New IRFs   In the case of a New IRF unit (defined in 42 C.F.R. 412.30) or a New Inpatient Rehabilitation Hospital (defined as a hospital that has never entered into a provider agreement with the Secretary), the Medicare contractor shall use a national average CCR based on the facility location of either urban or rural. The national average CCRs applicable to IRFs shall be found in each years annual notice of prospective payment rates published in the Federal Register.   The national average CCR will be used until the IRFs actual CCR can be computed using the first tentative settled or final settled cost report data, which will then be used for the subsequent cost report periods.   We NOTE, the policies in  E and F below can be applied as an alternative to the national average CCR.   For those IRFs assigned the national average CCR, the CCR must be updated every October 1 based on the latest national average CCRs published in each years IRF PPS annual notice of prospective payment rates until the IRF is assigned a CCR based on the latest tentative or final settled cost report or a CCR based on the policies of part E and F of this section.   D. - Mergers, Conversion and Errors with CCRs   Effective April 1, 2011, in the case of a merger, the Medicare contractor shall use the CCR from the IRF with the surviving provider number. If a new provider number is issued (i.e., a new provider agreement is signed because the new owner refused assignme nt of the existing provider agreement), the Medicare contractor shall use the national CCR based on the facility location of either urban or rural.   When errors related to CCRs and/or outlier payments are discovered, Medicare contractors shall contact the CMS Central Office to seek guidance. Likewise, when a cost report is reopened after final settlement and as a result of this reopening there is a change to the CCR; Medicare contractors should contact the CMS Central Office for further instructions.   E. - Alternative CCRs   The CMS may direct the Medicare contractor to use an alternative CCR to the CCR from the later of the latest settled cost report or latest tentative settled cost report, if it believes this will result in a more accurate CCR. In addition, if the Medicare c ontractor finds evidence that using data from the latest settled or tentatively settled cost report would not result in the most accurate CCR, the Medicare contractor should contact the CMS Regional Office and CMS Central Office to seek approval to use a C CR based on alternative data. For example, CCRs may be revised more often if a change in an IRFs operations occurs which materially affects the IRFs costs and/or charges. Notification to the CMS Central Office shall be sent to the mailing address or emai l address provided in Part (f) below. The CMS Regional Office, in conjunction with CMS Central Office, will approve or deny any request by the Medicare contractor for use of an alternative CCR. Revised CCRs will be applied prospectively to all IRF PPS claims processed after the update.  F. - Request for Use of a Different CCR by the IRF   Also, an IRF will have the opportunity to request that a different CCR be applied in the event it believes the CCR being applied is inaccurate. The IRF is required to present substantial evidence supporting its request. Such evidence should include documentation regarding its costs and charges that demonstrate its claim that an alternative ratio is more accurate. After the Medicare contractor has evaluated the evidence presented by the IRF, the Medicare contractor notifies the CMS Regional Office and CMS Central Office of such a request. The CMS Regional Office, in conjunction with CMS Central Office, will approve or deny any request by the IRF for use of a different CCR. Medicare contractors shall send requests to the CMS Central Office at the following address or email address:   CMS  C/O Division of Institutional Post Acute Care  7500 Security Blvd  Mail Stop C5 -06-27  Baltimore, MD 21244   irf_outlier_reconciliation@cms.hhs.gov   Revised CCRs will be applied prospectively to all IRF PPS claims processed after the update.   G. - Notification to Facilities Under the IRF PPS   The Medicare contractor shall notify an IRF whenever they make a change to its CCR. When a CCR is changed as a result of a tentative settlement or a final settlement, the change to the CCR should be included in the notice that is issued to each provider after a tentative or final settlement is completed.   H. - Maintaining a History of CCRs and Other Fields in the Provider Specific File   When recalculating claims due to outlier reconciliation, Medicare contractors shall maintain an accurate history of certain fields in the PSF. This history is necessary to ensure that claims already processed (from prior cost reporting periods that have al ready been settled) will not be subject to a duplicate systems adjustment in the event that claims need to be reprocessed. As a result, the following fields in the PSF can only be altered on a prospective basis: 21 - Case Mix Adjusted Cost Per Discharge, 24 - Bed Size, 25 -Operating Cost to Charge Ratio, 27 - SSI Ratio, - 28 -Medicaid Ratio and 49 - Capital IME. A separate history outside of the PSF is not necessary. The only instances a Medicare contractor retroactively changes a field in the PSF is to update t he CCR when using the FISS Lump Sum Utility for outlier reconciliation or otherwise specified by the CMS Regional Office or Central Office.   140.2.7 - Use of a National Average Cost -to-Charge Ratio  (Rev.  2111, Issued: 12- 03-10, Effective: 04 -01-11, Implementation: 04- 04-11)  A national average CCR based on the facility location of either rural or urban is applied in the following situations:    New IRFs that have not yet submitted their first Medicare cost report.    IRFs whose overall CCR is in excess of the national CCR ceiling, as set forth annually in the IRF PPS notices published in the Federal Register.    Other IRFs for which accurate data to calculate an overall CCR are not available.   However, the policies of 140.2.6 part E and F can be applied as an alternative to the national average CCR.   The national urban and rural CCRs for IRFs are set forth annually in the Federal Register.   140.2.8 - Reconciling Outlier Payments for IRFs  (Rev. 2111, Issued: 12- 03-10, Effective: 04 -01-11, Implementation: 04- 04-11)  A. - General   For discharges occurring in cost reporting periods beginning on or after October 1, 2003, Medicare contractors are to reconcile IRF PPS outlier payments at the time of cost report final settlement if:   1) Actual CCR is found to be plus or minus 10 percentage points from the CCR used during that time period to make outlier payments, and   2) Outlier payments exceed $500,000 in that cost reporting period.   The return codes from the PRICER software may be used to identify the cases for which outlier payments were made in a cost reporting period.   In the event that these criteria do not identify facilities that are being overpaid (or underpaid) significantly for outliers, then, based on an analysis of the facilitys most recent cost and charge data that indicates that the CCR for those facilities ar e significantly inaccurate, Medicare contractors and the CMS Central Office also have the administrative discretion to reconcile cost reports of those IRFs. However, Medicare contractors must seek approval from the CMS Regional Office and CMS Central Office in the event they intend to reconcile outlier payments for an IRF that does not meet the above -specified criteria.   To determine if an IRF meets the criteria for outlier reconciliation, the Medicare contractor shall perform the following steps: (1) incorporate all the adjustments from the cost report, (2) run the cost report, (3) calculate the revised CCR and (4) comput e the actual CCR prior to issuing a Notice of Program Reimbursement (NPR). If the criteria are not met, the cost report can be finalized. If the criteria are met, Medicare contractors shall follow the instructions in 140.2.10. The NPR cannot be issued nor  can the cost report be finalized until outlier reconciliation is complete.   If a cost report is reopened after final settlement and as a result of this reopening there is a change to the CCR (which could trigger or affect IRF PPS outlier reconciliation and outlier payments), Medicare contractors shall notify the CMS Central and Re gional Offices for further instructions. Notification to the CMS Central Office shall be sent to the mailing address or email address provided in 140.2.6(F) above.   The following examples demonstrate how to apply the criteria for reconciliation:   EXAMPLE A:   Cost Reporting Period: 01/01/2010- 12/31/2010  CCR used to pay original claims submitted during cost reporting period: 0.40  (In this example, this CCR is from the tentatively or final settled 2007 cost report)   Final settled CCR from 01/01/2010- 12/31/2010 cost report: 0.50  Total IRF PPS outlier payout in 01/01/2010- 12/31/2010 cost reporting period: $600,000  Because the CCR of 0.40 used at the time the claim was originally paid changed to 0.50 at the time of final settlement, and the provider received greater than $500,000 in IRF PPS outlier payments during that cost reporting period, the criteria are met for reconciliation, and therefore, the Medicare contractor notifies the CMS Central Office and the Regional Office. The providers IRF PPS outlier payments for this cost reporting period are reconciled using the correct CCR of 0.50.  In the event that multiple CCRs are used in a given cost reporting period to calculate outlier payments, Medicare contractors should calculate a weighted average of the CCRs in that cost reporting period. Example B below shows how to weight the CCRs. The Medicare contractor shall then compare the weighted CCR to the CCR determined at the time of final settlement of the cost reporting period to determine if IRF PPS outlier reconciliation is required. Total IRF PPS outlier payments for the entire cost reporting period must exceed $500,000 in order to trigger reconciliation.  EXAMPLE B:   Cost reporting period: 01/01/2010- 12/31/2010   CCR used to pay original claims submitted during cost reporting period:   0.40 from 01/01/2010 to 03/31/2010 (This CCR could be from the tentatively settled 2006 cost report.)   0.50 from 04/01/2010 to 12/31/2010 (This CCR could be from the tentatively settled 2007 cost report.)   Final settled CCR from 01/01/2010 -  12/31/2010 cost report: 0.35   Total IRF outlier payout in 01/01/2010 - 12/31/2010 cost reporting period: $600,000  Weighted average CCR: 0.476   CCR  DAYS  Weight  Weighted CCR  0.40 90 0.247 (90 Days / 365 Days)  (a) 0.099 = (0.40 * 0.247)  0.50 275 0.753 (275 Days / 365 Days)  (b) 0.377 = (0.50 * 0.753)  TOTAL  365 365 (a)+(b) = 0.476   The IRF meets the criteria for IRF PPS outlier reconciliation in this cost reporting period because the variance from the weighted average CCR at the time the claim was originally paid compared to the CCR from the cost report at the time of settlement is g reater than 10 percentage points (from 0.476 to 0.35) and the provider received total IRF outlier payments greater than $500,000 for the entire cost reporting period.   B. - Providers Already Flagged for Outlier Reconciliation   Medicare contractors shall have until April 25, 2011 to submit via email to irf_outlier_reconciliation@cms.hhs.gov