CMS Pub. 100-04, ch. 3, § 140.2.8

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 facility’s most

recent cost and charge data that indicates that the CCR for those facilities are 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) compute 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 Regional

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 provider’s 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 greater 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 a list of providers that were flagged for outlier

reconciliation prior to April 1, 2011 (NOTE: Do not send this list prior to April 1, 2011

as this list shall include all providers flagged for outlier reconciliation prior to April 1,

2011). In this list, Medicare contractors shall include the provider number, provider name,

cost reporting begin date, cost reporting end date, status of cost report (was the Notice of

Program Reimbursement (NPR) issued), date of NPR, total outlier payments in the cost

reporting period, the CCR or weighted CCR from the time the claims were paid during the

cost reporting period being reconciled and the final settled CCR. The CMS Central Office

will then review this list and grant formal approval via email for Medicare contractors to

reprice and reconcile the claims of those hospitals that have been flagged for outlier

reconciliation. Upon approval from the CMS Central Office, Medicare contractors shall

follow the procedures in §140.2.10 and complete the reconciliation process by October 1,

2011. If a Medicare contractor cannot complete the reconciliation process by October 1,

2011, the Medicare contractor shall contact the CMS Central Office for further guidance.

NOTE: Those Medicare contractors that do not have any providers flagged for outlier

reconciliation prior to April 1, 2011, shall also send an email to the address above

indicating that they have no providers flagged for outlier reconciliation prior to April 1,

2011.