US · guidance

CMS Pub. 100-04, ch. 3, § 20.1.2.7

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 hospital 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 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 operating and capital outlier payments in the cost reporting

period, the operating CCR or weighted average operating CCR from the time the

claims were paid during the cost reporting period eligible for reconciliation and the

final settled operating and capital CCR.

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

reconciliation is appropriate, the Medicare contractor follows 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 records in the Inpatient Provider Specific File (IPSF)

by entering the final settled operating and capital CCR from the cost report in the

operating and capital CCR fields. Specifically, for hospitals paid under the IPPS,

Medicare contractors shall enter the revised operating CCR in PSF field 25 -

Operating Cost to Charge Ratio and the revised capital CCR in PSF field 47 -

Capital Cost to Charge Ratio. No other elements in the IPSF (such as elements

related to the DSH and IME adjustments) shall be updated for the applicable

provider records in the IPSF that span the cost reporting period being reconciled

aside from the elements for the operating and capital CCRs.

*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 applicable IPPS 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 IPPS, the Lump Sum Utility will calculate the

difference between the original and revised operating and capital outlier amounts.

If the difference between the original and revised operating and capital outlier

amounts (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 operating and capital amounts (calculated by the Lump Sum Utility) is

negative, then a debit amount (deduction) shall be issued to the provider. NOTE:

The difference between the original and revised operating outlier amounts and the

difference between the original and revised capital outlier amounts are two distinct

amounts calculated by the lump sum utility and are recorded on two separate lines

on the cost report.

11) The operating and capital time value of money amounts are two distinct

calculations that are recorded separately on the cost report. Medicare contractors

shall determine the applicable time value of money amount by using the calculation

methodology in §20.1.2.6. If the difference between the original and revised

operating and capital outlier amounts is a negative amount then the time value of

money is also a negative amount. If the difference between the original and revised

operating and capital outlier amounts 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 and revised operating and capital outlier amounts.

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

96, the Medicare contractor shall record the original operating and capital outlier

amounts, the operating and capital outlier reconciliation adjustment amount (the

difference between the original and revised operating and capital outlier amounts

calculated by the Lump Sum Utility), the operating and capital time value of money

and the rate used to calculate the time value of money on lines 50-56, of Worksheet

E, Part A of the cost report (NOTE: the amounts recorded on lines 50-53 and 55

thru 56 can be positive or negative amounts per the instructions above). The total

outlier reconciliation adjustment amount (the difference between the original and

revised operating and capital outlier amount (calculated by the Lump Sum Utility)

plus the time value of money) shall be recorded on line 24.99 of Worksheet E, Part

A. For complete instructions on how to fill out these lines please see § 3630.1 of

the Provider Reimbursement Manual, Part II. NOTE: Both the operating and

capital amounts are combined and recorded on line 24.99 of Worksheet E, Part A.

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

2552-10, the Medicare contractor shall record the original operating and capital

outlier amounts, the operating and capital outlier reconciliation adjustment amounts

(the difference between the original and revised operating and capital outlier

amounts calculated by the Lump Sum Utility), the operating and capital time value

of money and the rate used to calculate the time value of money on lines 90-96, of

Worksheet E, Part A of the cost report (NOTE: the amounts recorded on lines 90-

93 and 95 thru 96 can be positive or negative amounts per the instructions above).

The total outlier reconciliation adjustment amount (the difference between the

original and revised operating and capital outlier amount (calculated by the Lump

Sum Utility) plus the time value of money) shall be recorded on line 69 of

Worksheet E, Part A. NOTE: Both the operating and capital amounts are

combined and recorded on line 69 of Worksheet E, Part A.

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 operating and capital CCR(s) elements to

their original values (that is, the CCRs used to pay the claims) in the applicable

provider records in the IPSF to ensure an accurate history is maintained.

Specifically, for hospitals paid under the IPPS, Medicare contractors shall enter the

original operating CCR in PSF field 25 -Operating Cost to Charge Ratio and the

original capital CCR in PSF field 47 -Capital Cost to Charge Ratio.

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

CMS Central Office via the address and email address provided in §20.1.2.1 (B).

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)