Market Basket Update

A3-3611.10 

For FY 1992 through FY 1995, the update to the Federal and the hospital-specific rates is based on actual increases in capital-related costs per discharge adjusted for case mix change. For example, FY 1993 rate updates are based on a comparison of inpatient capital costs per case in Medicare cost reports beginning in FY 1990 and the costs per case in the cost reports beginning in FY 1988. The update computation will be modified after FY 1995 to reflect the capital market basket index, changes in capital requirements and new technology. Annual updates for periods after FY 1992 will be effective October 1 for all PPS hospitals, rather than the start of cost report periods that begin during that FY.

Rural Referral Centers (RRCs)

A3-3610.16, HO-415.17

Section 1886(d)(5)(C) of the Act provides for exceptions and adjustments to the standardized prospective payment amounts to take into account the special needs of RRCs. The adjustment allowed for approved RRCs is that they are paid based upon the urban, rather than rural, prospective payment rates as adjusted by the applicable DRG weighting factor and the rural area index. In addition, OBRA 89 (P.L. 101-239) extended RRC status through cost reporting periods beginning before October 1992 to any hospital classified as an RRC as of September 30, 1989. 

To retain status as an RRC effective with the cost reporting period beginning on or after October 1, 1992, a hospital must have met the criteria for classification as an RRC in at least two of the prior three years, or qualify on the basis of the requirements for initial RRC certification for the current year. The A/B MAC (A) will not review the RRC status of a hospital before the end of its third full cost reporting year as an RRC. It will limit review of RRCs in operation more than three years at the beginning of FY 1993 to a hospital's most recent three years. RRCs that pass review as meeting RRC status for at least two of the last three years receive a 3-year extension of their RRC status.

The rates in Pricer include a reduction in the adjusted standardized amounts for all hospitals to ensure that total PPS payment neither increase nor decrease as a result of the increase in payments to RRCs.

To qualify for initial RRC status for cost reporting periods beginning on or after October 1, 1992, a rural hospital must have had at least 275 beds, or the hospital must have met one of three criteria in 42 CFR 412.96(c) (3), (4) and (5), and both of the following requirements:

• The hospital's case-mix index value for FY 91 must have been at least 1.2760, or equal to the median case-mix index value for urban hospitals (excluding hospitals with approved teaching programs) calculated by CMS for the census region in which the hospital is located, if fewer. 

• For its cost reporting period that began during FY 1991, the hospital must have had at least 5000 discharges, or equal to the median number of discharges for urban hospitals in that census region, if fewer, or if an osteopathic hospital, must have had at least 3000 discharges.

The CMS publishes the median case-mix index value and the median number of discharges annually in the PPS update in the "Federal Register."