CMS Pub. 100-06, ch. 1, § 100.6

17000)

(Rev. 26, 12-08-03)

A1-1213.6

The contractor shall include the cost of activities related to the development and

implementation of approved PIs and administrative enhancements as directed by CMS.

A. Activity Codes for Pis

Activity codes for PIs will be assigned to approved projects. A list of approved PIs will

be available in CAFM II. The contractor shall use only approved PI codes. The

miscellaneous PI activity code may be used only on the initial BR and the SBR for

projects that have not been approved and do not have an assigned PI activity code. It shall

not use the miscellaneous PI Activity Code on an IER or FACP.

1. PIs include administrative enhancements and legislative mandates directed by CMS

that are considered essential for maintenance of effective program operations. They do

not necessarily generate program savings.

2. PIs may include activities that affect more than one Medicare function and are

administered as a PI.

3. PIs also include systems conversions and transitions. See D below.

B. PI Funding

The PI funding is generally for first year start up costs only. Funding for subsequent years

is generally treated as an ongoing cost, not a PI, and should be included as an ongoing

operational cost in the contractor's BR. If PI funding after the first year is requested, a

schedule with funding for each FY should be included in the initial request for funding. If

CMS determines that PI funding for subsequent FYs is authorized, the contractor should

include the PI funding authorized in its BR every year it is authorized.

C. PI Costs

The contractor shall report incremental direct costs and incremental overhead and general

and administrative costs. If some of the non-incremental direct costs are incurred due to

reallocation of staff time, document it but do not request funding. Incremental direct

costs and incremental overhead and general and administrative costs may include:

• Incremental personal service costs of staff and management directly involved in

the project (including programmers).

• Materials and supplies used for the project

• Subcontract services, such as feasibility studies done under contract.

• EDP costs including data conversion, computer time and EDP support services

that are incurred only if the project is done. These costs should be spread to the

appropriate cost categories on the Activity Form. See Section 90.9. Include

special charges under a facilities management contract for programming changes.

Depreciation on equipment purchased in conjunction with the project should be

shown in the EDP equipment cost category; and

• Incremental overhead and general and administrative costs caused by any

increase:

■ in the cost incurred for overhead or general and administrative functions

(described in 90.9.H and 90.9.I) as a result of the PI project

implementation , or

■ in the Medicare allocation from the corporate overhead or general and

administrative pool due to an increase in the cost allocation base

D. System Conversions and Transitions

The following costs are included in systems conversions and transitions and may also

apply to other projects:

• Project Management Costs - Costs of essential staff/management project support;

• Software Installation Costs - Costs for installing and testing the software;

• File Conversion Costs - Costs for converting to the new system including the

costs of mapping, software development and testing;

• Interface Development and Implementation Costs - Costs to interface with

external programs e.g., for electronic data interchange, check writing, 1099

preparation, other reports and forms;

• Training Costs - Costs of staff training including train the trainer, technical staff

and user staff training costs; and

• Other Costs - Costs of provider education, outreach, and post- implementation

problem resolution.

E. Cost-Benefit Documentation for PI Projects

1. General

Before funding will be approved for a project that is proposed by a contractor, it must be

demonstrated to be cost-beneficial. A project will generally only be approved if the net

present value (NPV) for the project is equal to or greater than zero. The present value of

the savings is at least equal to the costs of implementation when both are discounted to

the same start date. As a general rule, CMS will consider only projects having a positive

NPV over 2 years. However, the contractor shall provide probable costs and savings

taken over all years of the project.

This documentation does not supplant the existing prior approval process or the threshold

amounts specified in the Medicare contract/agreement for system enhancements and

subcontracts.

2. Applicability

The contractor shall include cost-benefit documentation with all requests for PI funds.

The amount of the documentation required depends on the estimated cost and complexity

of the project. Administrative enhancements and systems transitions directed by CMS are

not subject to this cost-benefit test unless specifically required by CMS.

3. Documentation

The contractor shall document cost-benefit analysis using NPV calculations of costs and

savings discounted to the start date. A narrative explanation of cost-benefit analysis

should identify the assumptions for the analysis such as the start date, discount rate, and

costs and savings in each fiscal year. The contractor shall include the following items in

documentation:

• Estimated Cost - The contractor shall show cost items in categories reported for

activities. See §90.9 for cost categories. It shall provide underlying cost details

and the assumptions on which they are based for each material cost item. It shall

include personnel, machine time, materials and outside services in the estimate of

costs. It shall also include EDP charges and overhead. For capital expenditures in

excess of $500, it shall use standard procedures for establishing the asset's useful

life and for the depreciation schedule. CMS pays expenses when incurred; the

contractor shall include the proper depreciation and return on investment for the

period before implementation in its analysis.

• Administrative Cost Savings - The contractor shall outline any savings in staff

time, postage, and computer time. It shall include only cost reductions, not cost

avoidance. It shall reduce these savings by increases in administrative costs

attributable to the project (e.g., temporary productivity losses due to learning

curve, "downtime" for problem resolution, and depreciation for equipment

purchased).

• Benefit Savings - The contractor shall estimate the amount of benefit savings, if

any, which result from preventing or recovering erroneous payments, based on

policy in effect at the time of the analysis.

• Discount Rate - The contractor shall use the interest rate applicable under the

Prompt Payment Act to discount both the savings and costs to the start date. The

interest rate is published in the "Federal Register."

• Start Date - This is the point in time where the project first incurs costs and is the

date in time used to determine the Net Present Value of the project.

F. PI Workload

The contractor shall report no workload unless directed by CMS.

100.7 - Provider Enrollment - Medicare Program Administration

Function (Summary Level Code 19000) - (Rev. 1, 08-30-02)

A1-1213.7, B1-4213.7

The contractor shall use this summary level code only with the concurrence of CMS.

100.8 - Medical Review (MR) Function (Summary Code 21000) - (Rev.

1, 08-30-02)

A1-1213.8, B1-4213.8

MR is the efforts taken to prevent, identify, and address claim errors made by providers

including manual or automated review of claims to ensure that payments are made for

services that are covered and correctly coded. (For further information see the Program

Integrity Manual)

100.9 - Medicare Secondary Payer (MSP) Function (Summary Level

Code 22000) - (Rev. 1, 08-30-02)

A1-1213.9, B1-4213.9

The MSP function includes the costs and workload(s) for recovery activities related to

working aged; disabled; ESRD; workers' compensation; auto/liability/no fault; and other

activities related to MSP and identified by CMS.