CMS Pub. 100-04, ch. 3, § 20.1.2.6

Effective for discharges occurring on or after August 8, 2003, at the time of any

reconciliation under §20.1.2.5, outlier payment may be adjusted to account for the time value

of money of any adjustments to outlier payments as a result of reconciliation. The time value

of money is applied from the midpoint of the hospital’s cost reporting period being settled to

the date on which the CMS Central Office receives notification from the Medicare contractor

that reconciliation should be performed.

If a hospital’s outlier payments have met the criteria for reconciliation, CMS will calculate

the aggregate adjustment using the instructions below concerning reprocessing claims and

determine the additional amount attributable to the time value of money of that adjustment.

The index that will be used to calculate the time value of money is the monthly rate of return

that the Medicare trust fund earns. This index can be found at

http://www.ssa.gov/OACT/ProgData/newIssueRates.html.

The following formula will be used to calculate the rate of the time value of money.

(Rate from Web site as of the midpoint of the cost report being settled / 365) * # of days

from that midpoint until date of reconciliation. NOTE: The time value of money can be a

positive or negative amount depending if the provider is owed money by CMS or if the

provider owes money to CMS.

For purposes of calculating the time value of money, the “date of reconciliation” is the day

on which the CMS Central Office receives notification via email from the Medicare

contractor.

The following is an example of the computation of the adjustment to account for the time

value of money:

EXAMPLE

Cost Reporting Period: 01/01/2004-12/31/2004

Midpoint of Cost Reporting Period: 07/01/2004

Date of Reconciliation: 12/31/2005

Number of days from Midpoint until date of Reconciliation: 549

Rate from Social Security Web site: 4.625%

Operating CCR used to pay actual original claims in cost reporting period: 0.40 (This CCR

could be from the tentatively settled 2002 or 2003 cost report)

Final settled operating CCR from 01/01/2004-12/31/2004 cost report: 0.50

Total outlier payout in 01/01/2004-12/31/2004 cost reporting period: $600,000.

Because the CCR fluctuated from .40 at the time the claims were originally paid to 0.50 at

the time of final settlement and the provider has total outlier payments greater than $500,000,

the criteria have been met to trigger reconciliation. The Medicare contractor notifies the

CMS Regional and Central Office.

The Medicare contractor reprocesses and reconciles the claims. The reprocessing indicates the

revised outlier payments are $700,000.

Using the values above, determine the rate that will be used for the time value of money:

(4.625 / 365) * 549 = 6.9565%

Based on the claims reconciled, the provider is owed $100,000 ($700,000-$600,000) for the

reconciled amount and $6,956.50 ($100,000 * 6.9565 %) for the time value of money.