US · guidance

CMS Pub. 100-04, ch. 3, § 190.7.2.5

Procedures for Medicare Contractors to Perform and Record

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

Outlier Reconciliation Adjustments

(Rev. 2111, Issued: 12-03-10, Effective: 04-01-11, Implementation: 04-04-11)

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

are to follow if an IPF is eligible for outlier reconciliation:

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

hospital), via the street address and email address provided in §190.7.2.2 (B), 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 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 in writing and via email (through the addresses provided

in §190.7.2.2 (B)) 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:

• Type of Bill (TOB) equals 11X

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

• Cancel date is ‘blank’

7) The Medicare contractor reconciles the claims through the IPF Pricer software and

not through any editing or grouping software.

8) 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).

9) 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.

10) For hospitals paid under the IPF PPS, the Lump Sum Utility will calculate the

difference between the original outlier amount (value code 17) and the revised

outlier amount (value code 17). If the difference between the original and revised

outlier amount (calculated by the Lump Sum Utility) is positive, then a credit

amount (addition) shall be issued to the provider. If the difference between the

original and revised outlier amount (calculated by the Lump Sum Utility) is negative,

then a debit amount (deduction) shall be issued to the provider.

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

by using the calculation methodology in §190.7.2.4. If the difference between the

original and revised outlier amount (calculated by 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 and revised outlier amount (calculated by 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 outlier amount (value code

17) and the revised outlier amount (value code 17).

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

96, the Medicare contractor shall record the original outlier amount from

Worksheet E-3, Part 1 line 1.09, the outlier reconciliation adjustment amount (the

difference between the original outlier amount (value code 17) and the revised

outlier amount (value code 17) calculated by 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 1 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 outlier

amount (value code 17) and the revised outlier amount (value code 17) calculated

by the Lump Sum Utility plus the time value of money) shall be recorded on line

15.99 of Worksheet E-3, Part 1. For complete instructions on how to fill out these

lines please see § 3633.1 of the Provider Reimbursement Manual, Part II.

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

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

Worksheet E-3, Part II line 2, the outlier reconciliation adjustment amount (the

difference between the original outlier amount (value code 17) and the revised

outlier amount (value code 17) calculated by 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 II 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 outlier

amount (value code 17) and the revised outlier amount (value code 17) calculated

by the Lump Sum Utility plus the time value of money) shall be recorded on line

29 of Worksheet E-3, Part II.

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

necessary adjustment from or to the provider.

14) 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

IPF PPS, Medicare contractors shall enter the original CCR in PSF field 25 -

Operating Cost to Charge Ratio.

Medicare contractors shall contact the CMS Central Office via the address and email

address provided in §190.7.2.2 (B) with any questions regarding this process.

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)