(Medicare Claims Processing Manual)

 The revised hospital wage indexes and geographic adjustment factors are contained in Tables 4a (urban areas), 4b (rural areas) and 4c (redesignated hospitals) of section VI of the addendum to the PPS final rule.    Grouper 20.0 and MCE 19.0 for discharges occurring on or after October 1, 2002 replace earlier versions of the software.   See Addendum : Hospital Reclassifications and Redesignations by Individual Hospital -  FY2003.   20.3.4  Prospective Payment Changes for Fiscal Year (FY) 2004 and Beyond  (Rev. 3431, Issued: 12- 29-15, Effective: 10 -01-15, Implementation: 10- 05-15)  The IPPS changes for FY 2004 were published in the Federal Register on August 1, 2003.  All changes are effective for hospital discharges occurring on or after October 1, 2003.  Additional changes were listed in a Correction Notice to the Federal Register on October 6, 2003, and a One Time Notification (Pub. 100- 20, Transmittal 16, published on October 31, 2003).   Fiscal year changes to the inpatient prospective payment system occur every October.  Specific instructions will be published shortly after the publication of the IPPS Final Rule each year.  In addition, other changes to the inpatient prospective payment system may occur in January, April or July as necessary.   20.4 - Hospital Capital Payments Under PPS  (Rev. 1, 10- 01-03)  A3-3611   The Omnibus Budget Reconciliation Act of 1987 established an effective date of October 1, 1991, for capital PPS.  Capital PPS will pay hospitals a fixed amount for each Medicare admission upon completion of a 10-year transition period.  Hospitals and hospital distinct part units that are excluded from PPS for operating costs are also excluded from PPS for capital costs.  They continue to be paid for capital -related costs on a reasonable cost basis.   Capital payments are based on the same DRG designations and weights, outlier guidelines, geographic classifications, wage indexes, and disproportionate share percentages that apply to PPS for operating costs.  The indirect teaching adjustment is based on the ratio of residents to average daily census.  The hospital split bill, adjustment bill, waiver of liability and remaining guidelines in 40 , also apply to capital PPS payments.  Outlier thresholds and computation methods have been combined effective with FY 1993 for operating and capital costs.   Capital transfer cases are paid on a per diem basis analogous to the manner in which operating PPS payments are made for transfer cases.   Beneficiary deductible and coinsurance obligations do not apply to capital costs.  Ancillary costs paid under Part B do not impact capital PPS payments.  The 10- year transition period was established to protect hospitals that had incurred capital obligations in excess of the standardized national rate from major disruption.  These high capital cost hospitals are known as "hold harmless" hospitals.  The transition period also provides for phase -in of the national rate for those hospitals with capital obligat ions that are less than the national rate.   A combined payment is made for both operating costs and capital costs under PPS, but the value of the payment for each must be separately identified in the remittance advice for accounting purposes.   20.4.1 - Federal Rate  (Rev. 1, 10- 01-03)  A3-3611.1   The standard Federal capital payment for FY 1992 and later years is based on the projected national average Medicare capital costs per discharge for each of the fiscal years.  The Federal rate is adjusted for each hospital's case mix, day and cost outliers  and wage index location.  A hospital qualifies for a capital DSH adjustment if it is located in a large urban or other urban area, has at least 100 beds, and has a disproportionate share (DSH) percentage greater than 0.   The Federal rate is adjusted annually to reflect changes in these factors.   An adjustment is also provided to the Federal rate for indirect costs of medical education of interns and residents.  The A/B MAC (A) calculates the adjustment by dividing the hospital's full -time equivalent total of interns and residents by the hospital's  total patient days (line 8, column 6 of worksheet S3 of the CMS Form 2552- 89, minus the total of the lines 1B, 1C, 1D, and 7, divided by the number of days in the cost reporting period.)  It reviews the hospital's records and makes any needed changes in t he count at the end of the cost reporting period.  It enters the indirect medical education adjustment ratio in positions 184- 188 of the provider -specific file for use by Pricer.   20.4.2 - Hold Harmless Payments (Rev. 1, 10- 01-03)  A3-3611.2   In FY 1992, hospitals with a hospital -specific rate for capital that is above the Federal PPS rate for the cost reporting period that ended in FY 1990 can receive the higher of:    The hold harmless -old capital rate, which is 100 percent of the reasonable costs of old capital for sole community hospitals, or 85 percent of the reasonable costs associated with old capital for all other hospitals, plus a payment for new capital (see 20.4.5 for the definitions of old and new capital); or    The hold harmless -  100 percent Federal rate.   The A/B MAC (A) adjusts the hospital -specific rate in the cost report for the period ending in FY 1990 for case mix.  It updates the rate to FY 1992 levels using the projected increase in national average capital costs per discharge to initially determine whether a hospital should be paid under the hold harmless or the fully prospective methodology.  The type of methodology is entered in the provider -specific file.  (See 20.2.3.)   Hospitals paid under the fully prospective methodology may change to the hold harmless methodology if justified by the addition of obligated capital and other changes in remaining old capital costs subsequent to the base period.  This option is available t hrough the later of a hospital's cost reporting period beginning in FY 94 or after obligated capital has been put in use.  Hospitals must request an extension from the A/B MAC (A) by the later of January 1, 1993, or within 180 days of the event causing the  delay, if they will be unable to put an asset in use for inpatient care by October 1, 1996.  The new hospital -specific rate reflects the disposal of old assets and the addition of obligated capital costs, but not new capital acquisitions.  If the recalcul ated hospital -specific rate exceeds the Federal rate, the hospital will be paid under the hold harmless methodology.  The payment methodology in effect for FY 94 (or after the obligated capital has been put in use, if later) determines the payment methodol ogy applicable for the remainder of the transition period under either transition payment methodology.  The A/B MAC (A) does not hold harmless a hospital for increased costs resulting from a lease arrangement entered into after December 31, 1990.   If a hospital has such low Medicare utilization in its original capital base period that it is not required to file a cost report, its hospital -specific rate will be based on its old capital costs per discharge in the first 12 -month cost reporting period f or which a cost report is filed.  The A/B MAC (A) converts a reasonable cost/hold harmless hospital to the 100 percent Federal payment rate when:    Advantageous due to reductions in depreciation and/or the allowable percentage of old capital;    A hospital elects to be paid at 100 percent of the Federal rate; or    A hospital does not maintain adequate records to identify its old capital related costs.  The A/B MAC (A) enters the payment methodology change in the provider -specific file.   An adjustment is also provided to the Federal rate for indirect costs of medical education of interns and residents.  The A/B MAC (A) calculates the adjustment by dividing the hospital's full -time equivalent total of interns and residents by the hospital's  total patient days (line 8, column 6 of worksheet S3 of the CMS Form 2552- 89, minus the total of the lines 1B, 1C, 1D, and 7, divided by the number of days in the cost reporting period).  It reviews the hospital's records and makes any needed changes in t he count at the end of the cost reporting period.  It enters the indirect medical education adjustment ratio in positions 184- 188 of the provider -specific file for use by Pricer.   20.4.3 - Blended Payments  (Rev. 1, 10- 01-03)  A3-3611.3   Hospitals with a FY 1990 hospital -specific rate for capital below the Federal rate are paid a fully prospective capital rate based on a blend of their hospital -specific rate and the Federal rate.  The payment for discharges occurring during a cost -reporting period that began in FY 1992 is based on a blend of 90 percent of the hospital -specific rate and 10 percent of the Federal rate.  The payment for discharges occurring during a cost -reporting period that began in FY 1993 is  based on a blend of 80 percent of the hospital -specific rate and 20 percent of the Federal rate.  The Federal portion of the payment increases by 10 percent each year and the hospital -specific portions decreases by 10 percent each year, culminating in payment at 100 percent of the Federal rate in the tenth year.   20.4.4 - Capital Payments in Puerto Rico  (Rev. 1, 10- 01-03)  A3-3611.4   A special standard rate applies to Puerto Rico.  It is a combination of 50 percent of the Federal capital amount and 50 percent of the Puerto Rican capital amount.  It is used in lieu of the Federal rate to compute hold harmless and fully prospective payme nts for PPS hospitals in Puerto Rico.   20.4.5 - Old and New Capital  (Rev. 1, 10- 01-03)  A3-3611.5   Old capital is a hospital asset that:   Has been put in use for patient care on or before December 31, 1990; or    Has been legally committed to by an enforceable contract entered into on or before December 31, 1990, and put in patient use before October 1, 1994.  All other assets are considered new for Medicare purposes.   20.4.6 - New Hospitals  (Rev. 1, 10- 01-03)  A3-3611.6   New hospitals that open during the national 10- year transition are exempt from capital PPS payment for their first two years of operation.  A new hospital is one that does not have a 12- month cost reporting period that ended on or before September 30, 1990.  The new hospital exemption does not apply to:    A new acute care hospital that operated as a PPS excluded hospital for 2 or more years before its transition to PPS;    A hospital which has been open more than 2 years, but has participated in Medicare fewer than 2 years;    A hospital that closes and reopens within 2 years under the same or different ownership; or    A hospital that builds a new or replacement facility at the same or a new location, even if a change of ownership or new leasing arrangements are involved.  A new hospital is paid 85 percent of its reasonable costs for capital during the exemption period.  The hospital's second year of operation is the base period for determination of the hospital -specific rate and old capital assets.  Effective with its third  year of operation, the hospital is paid:    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;