CMS Pub. 100-04, ch. 4, § 10.9

Section 1833(t) of the Social Security Act (the Act) as amended by §4533 of the

Balanced Budget Act (BBA) of 1997, authorizes CMS to implement a Medicare

prospective payment system for hospital outpatient services, including partial

hospitalization and intensive outpatient services; Certain Part B services furnished to

hospital inpatients who have no Part A coverage; Partial hospitalization and intensive

outpatient services furnished by CMHCs; Hepatitis B vaccines and their

administration, splints, cast, and antigens provided by HHAs that provide medical and

other health services; Hepatitis B vaccines and their administration provided by

CORFs; and Splints, casts, and antigens provided to hospice patients for treatment of

non-terminal illness.

By statute, CMS is required to review and revise the APC groups, relative payment

rates, wage adjustments, outlier payments and other adjustments required under the

OPPS on an annual basis. These annual updates are made final through the

publication of proposed and final rules in the Federal Register. The annual update

Federal Register rules can be accessed on the OPPS Web site at:

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-

Payment/HospitalOutpatientPPS/

In addition to the annual update at the beginning of each calendar year, we also update

the OPPS on a quarterly basis to account for mid-year changes such as adding new

passthrough drugs and/or devices, adding new treatments and procedures to the new

technology APCs, removing procedures from the inpatient list, and recognizing new

HCPCS codes that may be added during the year. The quarterly updates are issued as

Recurring Update Notifications. The quarterly Recurring Update Notifications can be

found in Pub. 100-21, Recurring Update Notification, which can be accessed at the

following Web site: http://www.cms.gov/Regulations-

andGuidance/Guidance/Manuals/Internet-Only-Manuals-IOMs.html

10.10 - Biweekly Interim Payments for Certain Hospital Outpatient

Items and Services That Are Paid on a Cost Basis, and Direct Medical

Education Payments, Not Included in the Hospital Outpatient

Prospective Payment System (OPPS)

(Rev. 1, 10-03-03)

A-01-32

For hospitals subject to the OPPS, payment for certain items that are not paid under the

OPPS, but which are reimbursable in addition to OPPS, are made through biweekly

interim payments subject to retrospective adjustment based on a settled cost report.

These payments include:

• Direct medical education payments;

• Costs of nursing and allied health programs;

• Costs associated with interns and residents not in an approved teaching program

as described in 42 CFR 415.202;

• Teaching physicians costs attributable to Part B services for hospitals that elect

cost-based reimbursement for teaching physicians under 42 CFR 415.160;

• CRNA services;

• For hospitals that meet the requirements under 42 CFR 412.113(c), the reasonable

costs of anesthesia services furnished to hospital outpatients by qualified

nonphysician anesthetists (i.e., certified registered nurse anesthetists and

anesthesiologists’ assistants) employed by the hospital or obtained under

arrangements;

• Bad debts for uncollectible deductibles and coinsurance;

• Organ acquisition costs paid under Part B.

For hospitals that are paid under the OPPS, interim payments for these items attributable

to both hospital outpatients, as well as inpatients whose services are paid under Part B of

the Medicare program are made on a biweekly basis. The A/B MAC (A) determines the

amount of the biweekly payment by estimating a hospital’s reimbursement amount for

these items for the cost reporting period by using:

• Medicare principles of cost reimbursement for cost-based items; and

• Medicare rules for determining payment for graduate medical education for direct

medical education, and dividing the total annual estimated amount for these items

into 26 equal biweekly payments.

The estimated annual amount is based on the most current data available. Biweekly

interim payments are reviewed and, if necessary, adjusted at least twice during the

reporting period, with final settlement based on a submitted cost report.

Because hospitals subject to the OPPS have not received payment for these items

attributable to services furnished on or after August 1, 2000, the date the OPPS was

implemented, the first payment to each hospital included all the payments due to the

hospital retroactive to August 1, 2000. Thereafter, A/B MACs (A) continue to make

payment on a biweekly basis. Each payment is made two weeks after the end of a

biweekly period of services. The A/B MAC (A) was required to make retroactive

payments and begin making biweekly interim payments to all hospitals that are due these

payments no later than 60 days after March 8, 2001.

These biweekly payments may be combined with the inpatient biweekly payments that

the A/B MAC (A) makes under §2405.2 of the Medicare Provider Reimbursement

Manual (CMS Pub.15-I). However, if a single payment is made, for purposes of final

cost report settlement, they must maintain records to separately identify the amount of the

hospital’s combined payment that is paid out of the Part A or Part B trust fund.

10.11 - Calculation of Overall Cost-to-Charge Ratios (CCRs) for

Hospitals Paid Under the Outpatient Prospective Payment System

(OPPS) and Community Mental Health Centers (CMHCs) Paid Under

the Hospital OPPS

(Rev. 1445, Issued: 02-08-08; Effective: 01-01-08; Implementation: 03-10-08)