Medicare Outlier Final Rule
Published
June 13, 2003 - The Centers for Medicare & Medicaid
Services (CMS) June 9 published the highly anticipated final
rule that makes changes as to how Medicare provides additional
payments to hospitals for high-cost Medicare cases, known
as outlier payments [68 Federal Register 34494]. CMS
had published a proposed rule in March to modify the outlier
payment methodology to address what CMS believes has been
a "gaming" of the outlier system which has led to
larger than expected outlier payments over the last several
years. Changes in the proposed rule would have significantly
reduced outlier payments for a number of hospitals. In the
final rule, CMS rejected comments asking for a transition
period so that hospitals could financially adjust to the outlier
changes.
The final rule made only a few modifications to what had been
proposed, although the effective date was changed for several
provisions. The final rule requires the use of most recently
submitted or settled cost reports to determine the cost-to-charge
ratio (CCR) that is used to determine a case's costs. For
most hospitals this change will not occur until Federal fiscal
year (FFY) 2004, which begins Oct.1. However, beginning Aug.
9, CMS stated it may change the CCRs for selected hospitals
the Agency believes are receiving excessive outlier payments.
In addition, effective Aug. 8, CMS will discontinue the practice
of substituting statewide average CCRs for hospitals that
have extremely low CCRs.
Because the use of more recent CCRs will not begin until
October, CMS decided not to change the outlier cost threshold
of $33,560 for the rest of this fiscal year. However, the
final rule changes will be incorporated into the calculation
of the FFY 2004 cost outlier threshold, which will be published
in the beginning of August as part of the Medicare inpatient
prospective payment system final rule.
The final rule also clarified that it will not reconcile
outlier payments based upon the RCC in effect at the time
a Medicare discharge occurred unless, again, it believes the
hospital is receiving excess payments.
CMS stated that it will soon be publishing instructions to
its fiscal intermediaries to help implement various provisions
of the final rule.
Information:
Karen Fisher, Senior Associate Vice President
AAMC Health Care Affairs
kfisher@aamc.org
(202) 862-6140
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