Changes in Medicare capital PPS rates and rules - prospective payment system

Healthcare Financial Management, Dec, 1992 by Paul Grimaldi

Capital outliers. The capital payment per outlier patient will change in FY93 because of revisions in Medicare payment policies (see Exhibit 3). In addition, a growing number of patients and patient days will qualify for capital outlier payments because the day and cost outlier thresholds have been lowered.

IME and DSH adjustments. Qualifying hospitals can expect updated values for the indirect medical education and disproportionate share hospital (IME/DSH) adjustments, which may substantially change their capital payments for inlier and outlier patients. The updated values are interim, based on the latest financial information. At settlement, actual values for the cost-reporting period will be used to determine the final capital payment adjustment, as well as whether the fully prospective or hold harmless payment method applies to the hospital.

Obligated capital

Capital-related costs of assets that have been placed into use after Dec. 31, 1990, and for which the hospital was obligated on that date, are recognized as old capital costs. In general rule, the obligated asset must first be used for patient care before Oct. 1, 1994.

A process has been established for hospitals to qualify for extensions beyond the Oct. 1, 1994, deadline, to no later than Sept. 30, 1996. The hospital must notify its Medicare fiscal intermediary of extraordinary circumstances delaying project completion. A written request must be filed by Jan. 1, 1993, or, if later, within 180 days following the event causing the delay. The request must describe the cause of the delay, explain why it is extraordinary, beyond the hospital's control, and cannot be overcome, and indicate the new expected completion date. The intermediary must forward the request and its findings to HCFA within 60 days of receipt. Unless additional information is needed, HCFA must inform the intermediary of its decision within 90 days.

The amount of time a hospital has to notify the Medicare intermediary about obligated capital has been lengthened. Notification, including documentation, previously was due within 90 days after the beginning of the hospital's first capital PPS reporting period. The deadline was Oct. 1, 1992, or 90 days after the hospital first becomes subject to capital PPS. Furthermore, HCFA has revised the amount of time an intermediary has to notify the hospital of its decision to the later of the end of the hospital's first capital PPS cost-reporting period or nine months from the date of the hospital's submission of complete documentation about obligated capital.

HCFA has indicated that after "approved" obligated capital assets are placed into use for patient care, the Medicare intermediary may begin to make interim payments. Based on final settlement of the applicable cost report, a year-end adjustment will be made to reconcile actual and interim payments.

Conditional CON. In situations where a state awards a certificate of need (CON) that is conditional upon the hospital satisfying certain requirements, the Medicare intermediary will determine, case by case, whether the conditions preclude a hospital from undertaking the project without undue delay. Depending on the circumstances, additional time may be allowed for the asset to qualify as obligated capital.