CMS Pub. 100-04, ch. 4, § 10.6.3

Section 3138 of the Affordable Care Act requires CMS to conduct a study to determine

if, under the OPPS, outpatient costs incurred by 11 specified cancer hospitals exceed the

costs incurred by other hospitals furnishing services under the OPPS. In addition,

Section 3138 of the Affordable Care Act provides that if the specified cancer hospitals’

costs are determined to be greater than the costs of other hospitals furnishing services

under the OPPS, CMS shall provide a payment adjustment to the 11 specified cancer

hospitals that will appropriately reflect these higher outpatient costs. We determined that

outpatient costs incurred by the 11 specified cancer hospitals were greater than the costs

incurred by other OPPS hospitals. Therefore, consistent with Section 3138 of the

Affordable Care Act, we adopted a policy to provide additional payments to each of the

11 cancer hospitals so that each cancer hospital’s final payment to cost ratio (PCR) for

services provided in a given calendar year is equal to the weighted average PCR (which

we refer to as the “target PCR”) for other hospitals paid under the OPPS. The target PCR

is set in advance of the calendar year and is calculated using the most recent submitted or

settled cost report data that are available at the time of final rulemaking for the calendar

year.

The cancer hospital payment adjustment will be made through interim monthly payments

with the final payment adjustment amount calculated based on the provider’s settled cost

report. The calculation for the monthly cancer hospital payment adjustment amount is

described as follows:

Step 1 - Compute the cancer hospital target payment amount for each month by first

multiplying the total charges for covered services for all OPPS services on claims paid

during the month and adjust the total charges to cost by multiplying them by the

outpatient cost-to-charge ratio and then multiplying this amount by the target PCR for the

calendar year.

Step 2 - Add together the total Medicare program payments, unreduced coinsurance and

deductible applied for all APCs, as well as all outlier payments (including reconciled

outlier payments and the time value of money) and transitional pass-through payments

for drugs, biological and/or devices for those same claims paid during the month as those

used in Step 1. If the result is greater than the result of Step 1, go to Step 4. No

additional payment is due this month.

Step 3 - Subtract the result of Step 2 from the result of Step 1 and pay .85 times this

amount.

Step 4 - When the result of step 2 is greater than the result of Step 1 for the final month of

a provider’s cost report period, do nothing more. When the result of Step 2 is greater

than the result of Step 1 for any other month, store all Step 1 and Step 2 totals and include

these totals with the totals for the next month’s additional payment calculation.