CMS Pub. 100-16, ch. mc86c18a, § 40.1

Medicare's payment to HCPPs is based on the reasonable cost of providing Medicare-covered services to Medicare enrollees.

All necessary and proper expenses of the HCPP in providing Medicare-covered services

are recognized. The share of the total HCPP cost that is borne by CMS is related to the

Medicare-covered care furnished to Medicare beneficiaries so that no part of their cost

would need to be borne by other enrollees or nonenrolled patients. Conversely, costs

attributable to other HCPP enrollees and nonenrolled patients are not to be borne by

Medicare.

The HCPP payment principles take into account the special nature of HCPPs by

recognizing costs of marketing, enrollment, and certain other costs unique to the HCPP

form of health delivery.

Under these principles, there may be more than one method of handling a particular cost

item (including apportionment and allocation methods). The method elected by the

HCPP must be consistently followed in subsequent periods. A change of method must

have advance approval from CMS. Also, any request for a change in the method of

handling a particular cost item, including the apportionment or allocation of such items,

must be made 90 days prior to the beginning of the reporting year in which the new

method is proposed for use.