CMS Pub. 100-05, ch. 3, § 40.2.2

The provider indicates the primary payer's allocation of its payment between covered and non-covered Medicare services, by entering the amount the primary payer paid toward Medicare

covered services in value codes (FLs 39 - 41) and value amount fields on the Form CMS-1450.

Where the provider cannot determine those services covered by the primary payment, it applies a

ratio of Medicare covered charges to total charges for the services to the primary payment

amount to determine the portion attributable to Medicare covered services and enters this amount

in value codes/amounts (FLs 39-41). It treats all services (other than those for which the

beneficiary may be charged, such as a private room that is not medically necessary) furnished on

any day for which benefits are payable as covered. It must be able to validate its ratio of covered

and non-covered charges if requested.

If a benefit exhausted case is also a day outlier, Medicare covered charges cannot be determined

until the impact of the primary payment on utilization is determined.

EXAMPLE 1

Total charges were $110. Medicare covered charges were $90. The primary payer's

payment was $88. Since the provider cannot determine the actual allocation of the

primary payer's payment, it uses the following calculation to determine the allocation

shown below:

($90 divided by $110) x $88 = $72

The provider enters $72 in value code/amounts (FLs 39-41).

EXAMPLE 2

Total charges were $5,000. Medicare covered charges were $4,000. The primary payer's

payment was $3,000. Since the non-PPS provider cannot determine the allocation of the

primary payer's payment, it determines the allocation as follows:

($4,000 divided by $5,000) x $3,000 = $2,400

The non-PPS provider enters $2,400 in the value code amount.

EXAMPLE 3

Total charges were $550. Medicare covered charges were $500. The primary payer's payment

was $330. Since the HHA cannot determine the allocation of the primary payer's payment, it

determines the allocation as follows:

($500 divided by $550) x $330 = $300

The HHA enters $300 in the value code amount.