CMS Pub. 100-04, ch. 3, § 40.2

The CMS must record a day or charge as either covered or noncovered because of the

following:

Beneficiary utilization is recorded based upon days during which the patient received

hospital or SNF accommodations, including days paid by Medicare and days for which the

provider was held liable for reasons other than medical necessity or custodial care. Days

denied as not medically necessary or as custodial care are not charged against a beneficiary's

utilization record when the provider is determined to be liable.

The provider may claim credit on its cost report only for covered accommodations, days and

charges for which actual payment is made, i.e., provider liable days and charges are not

included. Data from the bill payment process are used in preparing the cost report.

The number of days and charges provided to the Pricer program affects the day and cost

outlier determinations and the DRG payment amount. Non-PPS provider days are excluded

from Pricer consideration.

It is possible to use a different number of days on a single bill for each of the above

purposes, although the same number of days will generally apply in actual practice. For

example, if the beneficiary had at least 1 day of eligibility remaining at admission, days that

occur after benefits are exhausted up through the day outlier threshold for the applicable

DRG are counted for cost reporting purposes under IPPS (see section190.12.1 for IPF and

section 150.17 for LTCH benefits exhaust claims processing).

A. - General Rule on Counting of Days

These following are general rules for counting days. However, these rules are also subject to

special rules for determining day of admission, discharge, death, beginning a leave of

absence, same day transfer, guarantee of payment days, provider liability issues and outlier

days for PPS outliers. See §40.1 and §40.1.G for an explanation of these special rules.

The provider calculates and enters on the bill the number of claimable Medicare patient days

on the cost report. (Medicare patient days always refer to cost report days.) For PPS

facilities the A/B MAC (A) counts, for the cost report, utilization and Pricer purposes, all

days for which Part A payment may be made to the hospital. This includes days for which

the provider is not liable under the limitation of liability provision. It does not count days for

which no Part A payment may be made for cost report, utilization or Pricer purposes.

For non-PPS providers, the A/B MAC (A) does not count the days for Pricer purposes,

because DRG payment or outlier calculations are not made.

B. - Medically Unnecessary Days for Which the Provider May Charge the Beneficiary

Days on which the hospital furnished no covered Part A services are not charged to

utilization and are not counted as Medicare patient days.

If the hospital or SNF stay includes any medically unnecessary days for which the provider

has met the requirements of §§40.2.2 C or D for charging the beneficiary, the A/B MAC (A)

counts those days as noncovered under Part A for cost report, utilization and Pricer purposes.

Since the provider may not be aware of the date benefits are exhausted or when the outlier

threshold is reached, the A/B MAC (A) verifies the provider's counts. If, for any reason, the

A/B MAC (A) or the QIO determines fewer days are claimable (e.g., if the A/B MAC (A) or

the QIO indicates that benefits are exhausted), the A/B MAC (A) will adjust cost report days

for its PS&R system. If the A/B MAC (A) or the QIO determines fewer days are claimable

for the cost report, it determines the proper number of days of utilization to charge the

beneficiary and the proper number of days for the length of stay used by Pricer. It uses the

factors in §40.1 and §40.1G to make these calculations.

C. - Medically Unnecessary Outlier Costs for Which the Hospital May Not Charge

If the hospital requests payment for cost outlier, and the Medicare covered charges converted

to cost exceed the cost outlier threshold, the services which are not reasonable and necessary

(or constitute custodial care) which are noncovered, but for which the hospital may not

charge the beneficiary are determined as follows:

• The hospital determines the lesser of the following:

° The cost of the medically unnecessary services (converting the charges for the

medically unnecessary services to cost); or

° The amount by which the adjusted cost of the stay exceeds the cost outlier

threshold.

Ancillary services, which are not required to be furnished on an inpatient basis, are treated as

medically unnecessary, but nevertheless may be covered under Part B.

• If the costs in excess of the outlier threshold exceed the cost of the medically

unnecessary services, the cost of all of the medically unnecessary services are treated

as noncovered costs. If these costs exceed the costs in excess of the cost outlier

threshold, beginning with the cost of the last medically unnecessary service in the

stay, the hospital must identify, and add on, in reverse order, the cost of other

medically unnecessary services until the total cost of medically unnecessary services

reaches the costs in excess of the cost outlier threshold. If the cost of the last service

to be added on in this manner brings the cost of medically unnecessary services over

the amount of costs in excess of the cost outlier threshold, only the portion of the cost

of that last medically unnecessary service (in the order of the addition) needed to

bring the total of the medically unnecessary costs up to the costs in excess of the cost

outlier threshold is added on. In this case, the costs in excess of the cost outlier

threshold are treated as the noncovered costs.

• Once the costs of medically unnecessary services to be treated as noncovered are

determined, convert them to charges for each applicable service/revenue category,

e.g., accommodations, radiology, pharmacy, by dividing the costs treated as not

medically necessary in each category by 72 percent. The medically unnecessary

charges determined are treated as noncovered charges. Days for which all costs are

found to be noncovered are treated as noncovered days.

• The hospital determines which medically unnecessary services and days treated as

noncovered are services and days for which the beneficiary can be charged under

§40.2.2C or E. The remainder of the services and days are the medically unnecessary

services and days treated as noncovered even though the hospital may not charge the

beneficiary. However, the distinction between medically unnecessary services and

days for which the hospital may charge, and those for which it may not, will not be

reflected in the charges shown on the inpatient hospital billing. Both are combined

and shown as noncovered services and days.

The determination of medically unnecessary cost outliers is not affected by non-entitlement

days or days after benefits are exhausted. If the stay is covered or treated as covered, the

beneficiary is treated as entitled to Part A, and as having benefits available throughout the

stay.