CMS Pub. 100-16, ch. mc86c18b, § 130

Arrangements

(Rev. 30, 09-05-03)

The reasonable cost of physical, occupational, speech, and other therapeutic services, or

services of other health-related specialists (except physicians) performed by outside

suppliers for providers of services, clinics, rehabilitation agencies, public health agencies,

or Medicare HCPPs may not exceed the sum of:

• Amounts equivalent to the salary and other costs that would have been incurred

by the provider or other entity if the services had been performed in an

employment relationship; and

• An allowance to compensate for other costs an individual not working as an

employee might incur in furnishing services under arrangements.

However, this reasonable cost may be determined on the basis of a reasonable rate per

unit of service:

• When the services of a therapist or other health-related specialist are required only

on a limited part-time basis or only intermittently; and

• When aggregate reimbursement on this per unit of service basis is less than what

the provider would have paid a salaried employee therapist or other health-related

specialist on a full-time or regular part-time basis. (See 42 CFR 413.106.)

In no case, though, may reasonable cost exceed the amount actually paid the outside

supplier for services rendered.

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For a detailed discussion of reasonable cost, see Chapter 14 of the Provider

Reimbursement Manual (Pub. 15), Part I.