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

Healthcare Financial Management, Dec, 1992 by Paul Grimaldi

HSR redetermination

Under the fully prospective capital payment method, a hospital may ask the Medicare intermediary to redetermine its hospital-specific rate (HSR). The revised HSR should reflect net increases in old (and obligated) capital costs occuring after the base period but no later than the hospital's cost-reporting period beginning in FY94 or, if later, the period beginning after obligated capital that is recognized as old capital is put into use. New capital costs are excluded from the revised HSR.

HCFA has clarified when a redetermination request is appropriate, the hospital's responsibility for requesting a redetermination, and whether a hospital is bound by the redetermination.

A redetermination may be made only when the hospital's old capital costs have increased. With its redetermination request, the hospital must submit an estimate of its new, higher HSR. If the intermediary concludes that the new HSR is actually lower, the hospital's request will be denied.

The HSR will not be redetermined for reasons other than an increase in old capital costs. One unacceptable reason is a precipitous decline in Medicare utilization, except in the case of a new hospital with such low Medicare utilization in its original base period that it is not required to file a cost report (Note: The minimum payment level provision provides some financial protection against large utilization declines). Instead, a hospital's HSR will be based on the hospital's old capital costs per discharge in its first 12-month cost-reporting period when a cost report is filed.

The deadline for a hospital to request a redetermination has been extended. Previously, the request was due within 90 days of the close of the affected cost-reporting period. The new deadline is the cost report's due date, including any extension the intermediary grants.

In the case of allocating home office capital costs for a hospital chain, HCFA has indicated that a final HSR should not be issued until the home office audit is completed and the findings are incorporated into the individual hospital's base-period cost report. HCFA also has stated that an individual hospital's final HSR may be determined even though the home office cost report is not settled--but only if the reason is unrelated to capital costs.

Transfer adjustment. For an HSR redetermination (or a new hospital), the transfer adjustment factor applied to the discharge count and the case-mix index will be as consistent as possible with the cost-reporting period used for the new base period. That is, the adjustment will be based on the December or June claims data available at least six months after the close of the base period involved. For base periods beginning on or after Oct. 1, 1991, data from the Provider Statistical and Reimbursement System (PS&R) will be used to derive the adjustments.

Nonreimbursable to reimbursable. A portion of a hospital's capital costs may not have been reimbursable in the base period, but may have become reimbursable after Dec. 31, 1990. An example of such a portion is the cost of space leased to a party that furnishes nonhospital services in a building where acute inpatient hospital care also is provided.