US · guidance

CMS Pub. 100-04, ch. 3, § 150.28

Procedure for Medicare Contractors to Perform and Record

activein force · 2026-08-25 – presentas-observed

Outlier Reconciliation Adjustments

(Rev. 4390, Issued: 09-06-19, Effective: 10-01-19, Implementation: 10-07-19)

The following is a step-by-step explanation of the procedures that Medicare contractors

are to follow if a LTCH is eligible for outlier reconciliation:

1) The Medicare contractor shall send notification to the CMS Central Office (not the

hospital), via email to outliersIPPS@cms.hhs.gov and CMS Regional Office that a

hospital has met the criteria for reconciliation. Medicare contractors shall include

in their notification the provider number, provider name, cost reporting begin date,

cost reporting end date, total short stay and high cost outlier payments in the cost

reporting period, the CCR or weighted average CCR from the time the claims were

paid during the cost reporting period eligible for reconciliation and the final settled

CCR.

2) If the Medicare contractor receives approval from the CMS Central Office that

reconciliation is appropriate, the Medicare contractor shall follow steps 3-14

below. NOTE: Hospital cost reports will remain open until their claims have been

processed for outlier reconciliation.

3) The Medicare contractor shall notify the hospital and copy the CMS Regional

Office and Central Office via email at outliersIPPS@cms.hhs.gov that the

hospital’s outlier claims are to be reconciled.

4) Prior to running claims in the *Lump Sum Utility, Medicare contractors shall

update the applicable provider record in the Provider Specific File (PSF) by

entering the final settled CCR from the cost report in the -25 -Operating Cost to

Charge Ratio field. No other elements in the PSF shall be updated for the

applicable provider records in the PSF that span the cost reporting period being

reconciled aside from the CCR.

*NOTE: The FISS Lump Sum Utility is a Medicare contractor tool that,

depending on the elements that are input, will produce an extract that will

calculate the difference between the original PPS payment amounts and

revised PPS payment amounts into a Microsoft Access generated report. The

Lump Sum Utility calculates the original and revised payments offline and

will not affect the original claim payment amounts as displayed in various

CMS systems (such as NCH).

5) Medicare contractors shall ensure that, prior to running claims through the FISS

Lump Sum Utility, all pending claims (e.g., appeal adjustments) are finalized for

the applicable provider.

6) Medicare contractors shall only run claims in the Lump Sum Utility that meet the

following criteria:

7) Type of Bill (TOB) equals 11X

8) Previous claim is in a paid status (P location) within FISS

9) Cancel date is ‘blank’

10) The Medicare contractor reconciles the claims through the applicable LTCH Pricer

software and not through any editing or grouping software.

11) Upon completing steps 3 through 7 above, the Medicare contractor shall run the

claims through the Lump Sum Utility. The Lump Sum Utility will produce an

extract, according to the elements in Table 1 below. NOTE: The extract must be

importable by Microsoft Access or a similar software program (Microsoft Excel).

12) Medicare contractors shall upload the extract into Microsoft Access or a similar

software program to generate a report that contains elements in Table 1. Medicare

contractors shall ensure this report is retained with the cost report settlement work

papers.

13) For hospitals paid under the LTCH PPS, the difference between the Original PPS

Payment Amount and Revised PPS Payment Amount from the Lump Sum Utility

will reflect the difference between the total original short-stay and high cost outlier

payment amount and the revised short-stay and high cost outlier payment amount.

If the difference between the original and revised PPS Payment Amount is

positive, then a credit amount (addition) shall be issued to the provider. If the

difference between the original and revised PPS Payment is negative, then a debit

amount (deduction) shall be issued to the provider.

14) Medicare contractors shall determine the applicable time value of money amount

by using the calculation methodology in §150.27. If the difference between the

Original PPS Payment Amount and Revised PPS Payment Amount from the Lump

Sum Utility is a negative amount then the time value of money is also a negative

amount. If the difference between the Original PPS Payment Amount and Revised

PPS Payment Amount from the Lump Sum Utility is a positive amount then the

time value of money is also a positive amount. Similar to step 10, if the time value

of money is positive, then a credit amount (addition) shall be issued to the

provider. If the time value of money is negative, then a debit amount (deduction)

shall be issued to the provider. NOTE: The time value of money is applied to the

difference between the original PPS Payment Amount and Revised PPS Payment

Amount.

15) For cost reporting periods beginning before May 1, 2010, under cost report 2552-

96, the Medicare contractor shall record the original PPS amount by summing

lines 1.02 and 1.05 from Worksheet E-3, Part I, the outlier reconciliation

adjustment amount (the difference between the Original PPS Payment Amount and

Revised PPS Payment Amount from the Lump Sum Utility), the total time value of

money and the rate used to calculate the time value of money on lines 50-53, of

Worksheet E-3, Part I of the cost report (NOTE: the amounts recorded on lines 50,

51 and 53 can be positive or negative amounts per the instructions above). The

total outlier reconciliation amount (the difference between the original PPS

Payment Amount and Revised PPS Payment Amount (from the Lump Sum Utility)

plus the time value of money) shall be recorded on line 15.99 of Worksheet E-3,

Part I. For complete instructions on how to fill out these lines please see §3633.1

of the Provider Reimbursement Manual, Part II.

16) For cost reporting periods beginning on or after May 1, 2010, under cost report

2552-10, the Medicare contractor shall record the original PPS amount from

Worksheet E-3, Part IV line 3, the outlier reconciliation adjustment amount (the

difference between the Original PPS Payment Amount and Revised PPS Payment

Amount from the Lump Sum Utility), the total time value of money and the rate

used to calculate the time value of money on lines 50-53, of Worksheet E-3, Part

IV of the cost report (NOTE: the amounts recorded on lines 50, 51 and 53 can be

positive or negative amounts per the instructions above). The total outlier

reconciliation amount (the difference between the original PPS Payment Amount

and Revised PPS Payment Amount (from the Lump Sum Utility) plus the time

value of money) shall be recorded on line 20 of Worksheet E-3, Part IV.

17) The Medicare contractor shall finalize the cost report, issue a NPR and make the

necessary adjustment from or to the provider.

18) After determining the total outlier reconciliation amount and issuing a NPR,

Medicare contractors shall restore the CCR(s) to their original values (that is, the

CCRs used to pay the claims) in the applicable provider records in the PSF to

ensure an accurate history is maintained. Specifically, for hospitals paid under the

LTCH PPS, Medicare contractors shall enter the original CCR(s) in PSF field 25 -

Operating Cost to Charge Ratio.

If the Medicare contractor has any questions regarding this process it should contact the

Central Office, via email at outliersIPPS@cms.hhs.gov.

Table 1: Data Elements for FISS Extract

List of Data Elements for FISS Extract

Provider #

Health Insurance Claim (HIC) Number

Document Control Number (DCN)

Type of Bill

Original Paid Date

Statement From Date

Statement To Date

Original Reimbursement Amount (claims page 10)

Revised Reimbursement Amount (claim page 10)