Blended Payments

A3-3611.3 

Hospitals with a FY 1990 hospital-specific rate for capital below the Federal rate are paid a fully prospective capital rate based on a blend of their hospital-specific rate and the Federal rate. The payment for discharges occurring during a cost-reporting period that began in FY 1992 is based on a blend of 90 percent of the hospital-specific rate and 10 percent of the Federal rate. The payment for discharges occurring during a cost-reporting period that began in FY 1993 is based on a blend of 80 percent of the hospital-specific rate and 20 percent of the Federal rate. The Federal portion of the payment increases by 10 percent each year and the hospital-specific portions decreases by 10 percent each year, culminating in payment at 100 percent of the Federal rate in the tenth year.

Capital Payments in Puerto Rico

A3-3611.4 

A special standard rate applies to Puerto Rico. It is a combination of 50 percent of the Federal capital amount and 50 percent of the Puerto Rican capital amount. It is used in lieu of the Federal rate to compute hold harmless and fully prospective payments for PPS hospitals in Puerto Rico.

Old and New Capital

A3-3611.5 

Old capital is a hospital asset that: 

• Has been put in use for patient care on or before December 31, 1990; or 

• Has been legally committed to by an enforceable contract entered into on or before December 31, 1990, and put in patient use before October 1, 1994

All other assets are considered new for Medicare purposes.

New Hospitals

A3-3611.6 

New hospitals that open during the national 10-year transition are exempt from capital PPS payment for their first two years of operation. A new hospital is one that does not have a 12-month cost reporting period that ended on or before September 30, 1990. The new hospital exemption does not apply to:

• A new acute care hospital that operated as a PPS excluded hospital for 2 or more years before its transition to PPS; 

• A hospital which has been open more than 2 years, but has participated in Medicare fewer than 2 years;

• A hospital that closes and reopens within 2 years under the same or different ownership; or 

• A hospital that builds a new or replacement facility at the same or a new location, even if a change of ownership or new leasing arrangements are involved

A new hospital is paid 85 percent of its reasonable costs for capital during the exemption period. The hospital's second year of operation is the base period for determination of the hospital-specific rate and old capital assets. Effective with its third year of operation, the hospital is paid:

• The fully prospective methodology if the hospital-specific rate is less than the Federal rate. The A/B MAC (A) uses the blend rate applicable to the Federal FY in which the base period begins. For example, a new hospital with a hospitalspecific rate less than the Federal rate and a base year beginning in FY 1995 is paid 70 percent of its hospital-specific rate and 30 percent of the Federal rate; or 

• The hold harmless methodology if the hospital-specific rate is greater than the Federal rate. Hold harmless payments may continue for up to 8 years. They may continue beyond the first cost reporting period that begins on or after October 1, 2000.