Medicare DSH formula

TYPE OF DAY  - General Assistance Patient Days

DESCRIPTION - Days for patients covered under a State-only (or countryonly) general assistance program (whether or not any payment is available for health care services under the program). These patients are not Medicaid-eligible under the State plan.

TYPE OF DAY  - Other State-Only Health Program Patient Days

DESCRIPTION - Days for patients covered under a State-only health program. These patients are not Medicaid-eligible under the State plan.

TYPE OF DAY  - Charity Care Patient Days

DESCRIPTION -Days for patients not eligible for Medicaid or any other third-party payer, and claimed as uncompensated care by a hospital. These patients are not Medicaid-eligible under the State plan. 

TYPE OF DAY  - Actual 1902(r)(2) and 1931(b) Days

DESCRIPTION -Days for patients eligible under a State plan based on a 1902(r)(2) or 1931(b) election. These patients are Medicaid-eligible under the Title XIX State plan under the authority of these provisions, which is exercised by the State in the context of the approved State plan

TYPE OF DAY  - Medicaid Optional Targeted Low-Income Children (CHIP-related) Days

DESCRIPTION -Days for patients who are Title XIX-eligible and who meet the definition of "optional targeted low-income children" under §1905(u)(2). The difference between these children and other Title XIX children is the enhanced FMAP rate available to the State. These children are fully Medicaid-eligible under the State plan.

TYPE OF DAY  - Separate CHIP Days

DESCRIPTION -Days for patients who are eligible for benefits under a non-Medicaid State program furnishing child health assistance to targeted low-income children. These children are, by definition, not Medicaid-eligible under a State plan.

TYPE OF DAY  - §1915(c) Eligible Patient (the "217" group) Days

DESCRIPTION -Days for patients in the eligibility group under the State plan for individuals under a Home and Community Based Services waiver. This group includes individuals who would be Medicaid-eligible if they were in a medical institution. Under this special eligibility group, they are Medicaid-eligible under the State plan.

TYPE OF DAY  - Retroactive Eligible Days

DESCRIPTION -Days for patients not enrolled in the Medicaid program at the time of service, but found retroactively eligible for Medicaid benefits for the days at issue. These patients are Medicaid-eligible under the State plan

TYPE OF DAY  - Medicaid Managed Care Organization Days

DESCRIPTION -Days for patients who are eligible for Medicaid under a State plan when the payment to the hospital is made by an MCO for the service. An MCO is the financing mechanism for Medicaid benefits, and payment for the service through the MCO does not affect eligibility

TYPE OF DAY  - Medicaid DSH Days

DESCRIPTION -Days for patients who are not eligible for Medicaid benefits, but are considered in the calculation of Medicaid DSH payments by the State. These patients are not Medicaid-eligible

Sometimes Medicaid State plans specify that Medicaid DSH payments are based upon a hospital's amount of charity care or general assistance days. This, however, is not "payment" for those days, and does not mean that the patient is eligible for Medicaid benefits or can be counted as such in the Medicare formula

Medicare & Medicaid Services

If, for cost reporting periods beginning before January 1, 2000, a hospital that did not receive payments reflecting the erroneous inclusion of otherwise ineligible days filed a jurisdictionally proper appeal to the PRRB on the issue of the exclusion of these types of days from the Medicare DSH formula before October 15, 1999, the A/B MAC (A) will reopen the cost report at issue and revise the Medicare DSH payment to reflect the inclusion of these types of days as Medicaid days. If there are any questions or concerns regarding the qualifications for a "jurisdictionally proper appeal," the A/B MAC (A) submits them in writing before rendering a decision in a specific case to:

Centers for Medicare & Medicaid Services 

7500 Security Boulevard 

Office of Financial Management 

Financial Services Group 

Location C3-14-16 

Baltimore, Maryland 21244-1850.

Where, for cost reporting periods beginning before January 1, 2000, a hospital filed a jurisdictionally proper appeal to the PRRB on the issue of the exclusion of these types of days from the Medicare DSH formula on or after October 15, 1999, reopen the settled cost report at issue and revise the Medicare DSH payment to reflect the inclusion of these types of days as Medicaid days, but only if the hospital appealed, before October 15, 1999, the denial of payment for the days in question in previous cost reporting periods. The actual number of these types of days that are used in this revision must be properly supported by adequate documentation provided by the hospital. Do not reopen a cost report and revise the Medicare DSH payment to reflect the inclusion of these types of days as Medicaid days if, on or after October 15, 1999, a hospital added the issue of the exclusion of these types of days to a jurisdictionally proper appeal already pending before PRRB on other Medicare DSH issues or other unrelated issues.

Continue to pay the Medicare DSH adjustment reflecting the inclusion of general assistance or other State-only health program, charity care, Medicaid DSH, and/or waiver or demonstration population days for all open cost reports for cost reporting periods beginning before January 1, 2000, to any hospital that, before October 15, 1999, filed a jurisdictionally proper appeal to the PRRB specifically for this issue on previously settled cost reports.

Finally, if a hospital has filed a jurisdictionally proper appeal with respect to the CMS 97-2 ruling and the hospital has otherwise received payment for the portion of Medicare DSH adjustment attributable to the inclusion of general assistance or other State-only health programs, charity care, Medicaid DSH, and/or ineligible waiver or demonstration population days based on its paid Medicaid days, include these types of unpaid days in the Medicare DSH formula when revising the cost reports affected by the CMS 97-2 appeal.

Hospitals That Received Payments Reflecting the Erroneous Inclusion of Days at Issue

In practical terms this means that the A/B MAC (A) is not to reopen any cost reports for cost reporting periods beginning before January 1, 2000, to disallow the portions of Medicare DSH payments attributable to the erroneous inclusion of general assistance or other State-only health program charity care, Medicaid DSH, and/or ineligible waiver or demonstration population days if the hospital received payments for those days based on those cost reports. If, prior to the issuance of this Program Memorandum, a hospital reopened a settled cost report to disallow the portion of Medicare DSH payment attributable to the inclusion of these types of days, reopen that cost report again and refund the amounts (including interest) collected. Do not, however, pay the hospitals interest on the amounts previously recouped as result of the disallowance. Furthermore, on or after October 15, 1999, the A/B MAC (A) is not to accept reopening requests for previously settled cost reports or amendments to previously submitted cost reports pertaining to the inclusion of these types of days in the Medicare DSH formula.

For cost reporting periods beginning before January 1, 2000, hospitals are to continue to allow these types of days in the Medicare DSH calculation for all open cost reports only in accordance with the practice followed for the hospital at issue before October 15, 1999, (i.e., for open cost reports, the A/B MAC (A) allows only those types of otherwise ineligible days that the hospital received payment for in previous cost reporting periods settled before October 15, 1999). For example, if, for a given hospital, a portion of Medicare DSH payment was attributable to the erroneous inclusion of general assistance days for only the out-of-State or HMO population in cost reports settled before October 15, 1999, the A/B MAC (A) is to include the ineligible waiver days for only that population when settling open cost reports for cost reporting periods beginning before January 1, 2000. However, the actual number of general assistance and other State-only health program, charity care, Medicaid DSH, and/or ineligible waiver or demonstration days, as well as Medicaid Title XIX days that the A/B MAC (A) allows for the open cost reports must be supported by auditable documentation provided by the hospital.

Hospitals That Did Not Receive Payments Reflecting the Erroneous Inclusion of Days at Issue

If a hospital did not receive any payment based on the erroneous inclusion of general assistance or other State-only health program, charity care, Medicaid DSH, and/or waiver or demonstration population days for cost reports that were settled before October 15, 1999, and the hospital never filed a jurisdictionally proper appeal to the Provider Reimbursement Review Board (PRRB) on this issue, the A/B MAC (A) is not to pay the hospital based on the inclusion of these types of days for any open cost reports for cost reporting periods beginning before January 1, 2000. Furthermore, on or after October 15, 1999, the A/B MAC (A) is not to accept reopening requests for previously settled cost reports or amendments to previously submitted cost reports pertaining to the inclusion of these types of days in the Medicare DSH formula 

Excluded Days

Many States operate programs that include both State-only and Federal-State eligibility groups in an integrated program. For example, some States provide medical assistance to beneficiaries of State-funded income support programs. These beneficiaries, however, are not eligible for Medicaid under a State plan approved under Title XIX, and, therefore, days utilized by these beneficiaries do not count in the Medicare disproportionate share adjustment calculation. If a hospital is unable to distinguish between Medicaid beneficiaries and other medical assistance beneficiaries, then it must contact the State for assistance in doing so

In addition, if a given patient day affects the level of Medicaid DSH payments to the hospital but the patient is not eligible for Medicaid under a State plan approved under Title XIX on that day, the day is not included in the Medicare DSH calculation

It should be noted that the types of days discussed above are not necessarily the only types of excluded days. Please see the chart in 140.2.4.1, which summarizes some, but not necessarily all, of the types of days to be excluded from (or included in) the Medicare DSH adjustment calculation

To provide consistency in both components of the calculation, any days that are added to the Medicaid day count must also be added to the total day count, to the extent that they have not been previously so added.

Regardless of the type of allowable Medicaid day, the hospital bears the burden of proof and must verify with the State that the patient was eligible under one of the allowable categories during each day of the patient's stay. The hospital is responsible for and must provide adequate documentation to substantiate the number of Medicaid days claimed. Days for patients that cannot be verified by State records to have fallen within a period wherein the patient was eligible for Medicaid as described in this memorandum cannot be counted

Hold Harmless for Cost Reporting Periods Beginning Before January 1, 2000 (Rev. 1, 10-01-03)

In accordance with the hold harmless position communicated by CMS on October 15, 1999, for cost reporting periods beginning before January 1, 2000, hospitals are not to disallow, within the parameters discussed below, the portion of Medicare DSH adjustment payments previously made to hospitals attributable to the erroneous inclusion of general assistance or other State-only health program, charity care, Medicaid DSH, and/or ineligible waiver or demonstration population days in the Medicaid days factor used in the Medicare DSH formula. This is consistent with CMS' determination that hospitals and A/B MACs (A) relied, for the most part, on Medicaid days data obtained from State Medicaid agencies to compute Medicare DSH payments and that some of those agencies commingled the types of otherwise ineligible days listed above with Medicaid Title XIX days in the data transmitted to hospitals and/or A/B MACs (A). Although CMS has decided to allow the hospitals to be held harmless for receiving additional payments resulting from the erroneous inclusion of these types of otherwise ineligible days, this decision is not intended to hold hospitals harmless for any other aspect of the calculation of Medicare DSH payments or any other Medicare payments. 

Medicare Claims Processing Manual

Included Days

In calculating the number of Medicaid days, the hospital must determine whether the patient was eligible for Medicaid under a State plan approved under Title XIX on the day of service. If the patient was so eligible, the day counts in the Medicare disproportionate share adjustment calculation. The statutory formula for "Medicaid days" reflects several key concepts. First, the focus is on the patient's eligibility for Medicaid benefits as determined by the State, not the hospital's "eligibility" for some form of Medicaid payment. Second, the focus is on the patient's eligibility for medical assistance under an approved Title XIX State plan, not the patient's eligibility for general assistance under a State-only program. Third, the focus is on eligibility for medical assistance under an approved Title XIX State plan, not medical assistance under a State-only program or other program. Thus, for a day to be counted, the patient must be eligible on that day for medical assistance benefits under the Federal-State cooperative program known as Medicaid (under an approved Title XIX State plan). In other words, for purposes of the Medicare disproportionate share adjustment calculation, the term "Medicaid days" refers to days on which the patient is eligible for medical assistance benefits under an approved Title XIX State plan. The term "Medicaid days" does not refer to all days that have some relation to the Medicaid program, through a matching payment or otherwise; if a patient is not eligible for medical assistance benefits under an approved Title XIX State plan, the patient day cannot become a "Medicaid day" simply by virtue of some other association with the Medicaid program.

Medicaid days, for purposes of the Medicare disproportionate share adjustment calculation, include all days during which a patient is eligible, under a State plan approved under Title XIX, for Medicaid benefits, even if Medicaid did not make payment for any services. Thus, Medicaid days include, but are not limited to, days that are determined to be medically necessary but for which payment is denied by Medicaid because the provider did not bill timely, days that are beyond the number of days for which a State will pay, days that are utilized by a Medicaid beneficiary prior to an admission approval but for which a valid enrollment is determined within the prescribed period, and days for which payment is made by a third party. In addition, we recognize in the calculation days that are utilized by a Medicaid beneficiary who is eligible for Medicaid under a State plan approved under Title XIX through a managed care organization (MCO) or health maintenance organization (HMO). However, in accordance with 42 CFR 412.106(b)(4), a day does not count in the Medicare disproportionate share adjustment calculation if the patient was entitled to both Medicare Part A and Medicaid on that day. Therefore, once the eligibility of the patient for Medicaid under a State plan approved under Title XIX has been verified, the A/B MAC (A) must determine whether any of the days are dual  entitlement days and, to the extent that they are, subtract them from the other days in the calculation.

DSH Exception

The A/B MAC (A) shall review the documentation submitted in support of the provider's request for a disproportionate share adjustment under 42 CFR 412.106(c)(2) of the regulations. Beginning with Federal Fiscal Year (FY) 2011 A/B MACs (A) shall submit to CMS annually by February 28 documentation for the hospitals they determine meet the qualifying standards for receiving disproportionate share hospital (DSH) payments under section 42 CFR 412.106(c)(2). This review can be accomplished in conjunction with the audit/settlement of the cost report for the period subject to the adjustment. At a minimum, the A/B MAC (A) shall:

• Verify total inpatient revenues;

• Verify that State and local government appropriations on the financial statements are consistent with amounts contained in governmental appropriations bills; 

• Review, on the basis of a sample of cases, the provider's implementation of procedures for identifying indigent patients. Ensure that amounts for "indigent" patients do not include charges associated with:

° Titles XIX and XVIII patient care;

° Hill-Burton care; 

° Free care to employees; and 

° Bad debts for patients who are not indigent

Reporting for PS&R and CWF

The A/B MAC (A) 's PPS Pricer identifies the amount of the DSH adjustment on each bill. The A/B MAC (A) reports this amount with value code 18 to its PS&R, and to CWF.

Clarification of Allowable Medicaid Days in the Medicare Disproportionate Share Hospital (DSH) Adjustment Calculation (Rev. 1, 10-01-03)

20.3.1.1 - Clarification for Cost Reporting Periods Beginning On or After January 1, 2000 (Rev. 1, 10-01-03)

PM A-01-03

Under §1886(d)(5)(F) of the Social Security Act (the Act), the Medicare disproportionate share patient percentage is made up of two computations. The first computation includes patient days that were furnished to patients who, during a given month, were entitled to both Medicare Part A and Supplemental Security Income (SSI) (excluding State  supplementation). This number is divided by the number of covered patient days utilized by patients under Medicare Part A for that same period. The second computation includes patient days associated with beneficiaries who were eligible for medical assistance (Medicaid) under a State plan approved under Title XIX but who were not entitled to Medicare Part A. This number is divided by the total number of patient days for that same period.

EXAMPLES

Hospital A is an urban hospital with 200 beds and has a DSH percentage of 21 percent. Its December 1990 DSH payment factor is computed:

(21 - 20.2) (.65) + 5.62 = 6.14% 

DSH adjustment factor = 6.14% (.0614)

Hospital B is an urban hospital with 250 beds and has a DSH percentage of 45 percent. Its December 1990 DSH payment adjustment factor is computed:

(45 - 20.2) (.65) + 5.62% = 21.74% 

DSH adjustment factor = 21.74% (.2174)

Urban hospitals with 100 or more beds and rural hospitals with 500 or more beds whose DSH percentage is equal to or less than 20.2 - the following formula is used:

(DSH % - 15) (.6) + 2.5

• Urban hospitals with fewer than 100 beds - 5 percent. 

• Rural hospitals that are RRCs and sole community hospitals - the greater of 10 percent or the percentage determined using the following formula:

(DSH % - 30) (.6) + 4.0

Hospital C is a rural hospital that is an RRC and a sole community hospital, and has a DSH percentage of 35 percent. Its DSH payment factor is computed:

(35 - 30) (.6) + 4.0 = 7%

DSH adjustment factor = 10% (.1000)

Hospital D is a rural hospital which is a RRC and a sole community hospital. It has a DSH percentage of 45 percent. Its DSH payment factor is computed:

(45 - 30) (.6) + 4.0 = 13%

DSH adjustment factor is 13% (.1300)

• Rural hospitals that are RRCs, but are not sole community hospitals-the following formula is used:

(DSH % - 30) (.6) + 4.0

• Rural hospitals that are sole community hospitals, but are not RRCs - 10 percent.

• Rural hospitals not described above with 100 beds or less - 4 percent if DSH percentage is 45 percent or more.

• Rural hospitals not described above with more than 100 beds but fewer than 500 beds - 4 percent if DSH percentage is 30 percent or more.

• Urban hospitals with 100 or more beds whose DSH percentage is less than or equal to 20.2 - the following formula is used:

(DSH % - 15) (.6) + 2.5

For the period October 1, 1993, through September 30, 1994:

• Urban hospitals with 100 or more beds whose DSH percentage is greater than 20.2-the following formula is used:

(DSH % - 20.2) (.8) + 5.88

• Urban hospitals with 100 or more beds whose DSH percentage is less than or equal to 20.2 - the following formula is used:

(DSH % - 15) (.6) + 2.5

• Rural hospitals that are RRCs and sole community hospitals - the greater of 10 percent or the percentage determined using the following formula: 

(DSH % - 30) (.6) + 4.0

EXAMPLES

Hospital A is an urban hospital with 200 beds and has a DSH percentage of 21. Its DSH payment factor is computed:

(21 - 15)(.5) + 2.5 = 5.5%

DSH adjustment factor = 5.5% (.0550)

Hospital B is an urban hospital with 250 beds and has a DSH percentage of 45. Its DSH payment adjustment factor is computed:

(45 - 15)(.5) + 2.5 = 17.5%

DSH adjustment factor = 15% (.1500) (the maximum adjustment under the law)

• Urban hospitals with fewer than 100 beds - 5 percent. 

• Rural hospitals with fewer than 500 beds - 4 percent.

For the period October 1, 1988 - March 31, 1990:

Urban hospitals with 100 or more beds and rural hospitals with 500 or more beds - the following formula is used:

(DSH % - 15) (.5) + 2.5

Hospital A is an urban hospital with 200 beds and has a DSH percentage of 21 percent. Its DSH payment factor is computed:

(21-15)(.5) + 2.5 = 5.5%

DSH adjustment factor = 5.5% (.0550)

Hospital B is an urban hospital with 250 beds and has a DSH percentage of 45 percent. Its DSH payment adjustment factor is computed:

(45-15) (.5) + 2.5 = 17.5%

DSH adjustment factor = 17.5% (.1750, the limit was removed effective 10/1/88)

• Urban hospitals with fewer than 100 beds - 5 percent. 

• Rural hospitals with fewer than 500 beds - 4 percent.

For the period April 1, 1990 - December 31, 1995:

Urban hospitals with 100 or more beds and rural hospitals with 500 or more beds whose DSH percentage is greater than 20.2 - the following formula is used:

Through December 31, 1990 - (DSH % - 20.2) (.65) + 5.62

January 1, 1991, and later - (DSH % - 20.2) (.7) + 5.62

DSH payments

For operating DSH payments:

For discharges between May 1, 1986, and March 31, 1990, a hospital qualifies for an operating cost DSH adjustment if it has a DSH percentage of:

• At least 15 percent for an urban hospital with 100 or more beds;

• At least 40 percent for an urban hospital with less than 100 beds; or 

• At least 45 percent for a rural hospital, with fewer than 500 beds

For discharges on and after October 1, 1986, the hospital qualifies for an operating cost DSH adjustment if it has a DSH percentage of at least 15 percent, is located in a rural area, and has 500 or more beds.

For discharges between April 1, 1990 and December 31, 1995, a hospital qualifies for an operating DSH adjustment if it has a DSH percentage of:

• At least 15 percent for an urban hospital with 100 or more beds, or a rural hospital with 500 or more beds; 

• At least 40 percent for an urban hospital with fewer than 100 beds; 

• At least 45 percent for a rural hospital with 100 beds or fewer, if it is not also classified as a sole community hospital; or 

• At least 30 percent for a rural hospital with more than 100 beds which is classified as a sole community hospital.

A hospital qualifies for a capital DSH adjustment if it is located in a large urban or other urban area, has at least 100 beds, and has a DSH percentage greater than 0.

For the DSH determination, the number of beds in a hospital is determined by counting the number of inpatient care bed days available during the cost reporting period, excluding beds assigned to newborns, custodial care, and PPS excluded distinct part hospital units, and dividing that number by the number of days in the cost reporting period. Inpatient care bed days available should be the same as Indirect Medical Education (IME) bed days. Available beds may not match the number of licensed beds.

B. - Determination of Operating DSH Adjustment Percentage

Hospitals that meet the DSH percentage criteria are entitled to adjustments to the Federal portion of their operating cost DRG payments (including the Federal portion of outlier payments) as follows. For hospitals that qualify for DSH payment, Pricer calculates the DSH adjustment percentage

Urban hospitals with 100 or more beds and rural hospitals with 500 or more beds - 

The lesser of 15 percent or the percentage determined by using the following formula:

(DSH % - 15)(.5) + 2.5

Additional Payment Amounts for Hospitals with Disproportionate Share of Low-Income Patients

(Rev. 2393, Issued: 01-25-12, Effective: 10-01-11, Implementation: 07-02-12)

The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985, (Public Law: 99-272), provides for an additional payment to an urban hospital of 100 or more beds that serves a disproportionate share of low-income patients.

Adjustments are made in the Federal portion of the operating cost DRG payment to increase payments to hospitals serving a disproportionate share of low-income patients. The additional payment equals the Federal portion of the operating cost DRG payment and outlier payments, but excludes any additional payments for the costs of indirect medical education multiplied by an adjustment percentage.

If a hospital meets the disproportionate share hospital (DSH) definition, an additional operating cost payment will be made for discharges occurring on or after May 1, 1986. The DSH adjustment is applied only to the Federal portion of the operating cost DRG payment (including outlier payments). It is basically a year-end lump sum adjustment. However, the A/B MAC (A) will identify hospitals that are eligible to receive the DSH adjustment and make interim payments subject to a year-end settlement based upon the hospital's DSH percentage for the cost reporting period. The DRG payment a hospital receives includes the interim operating cost DSH payment and an interim operating indirect medical education adjustment.

For services on or after October 1, 1997, the DSH percentage is not applied to outlier payments.

The data is used for settlement purposes for hospitals.

Note that CMS issues a Recurring Update Notification prior to the Federal Fiscal Year beginning date to provide contractors with the updated SSI file information.

A. - Regular Calculation of DSH Percentage 

The operating DSH percentage is the sum of:

• The percentage of the hospital's total Medicare Part A patient days attributable to Medicare patients who are also SSI recipients (this percentage will be supplied to the A/B MAC (A) by CMS). Since the SSI/Medicare percentages are determined by CMS on a fiscal year basis, hospitals will be afforded the option (for settlement purposes) of determining their SSI/Medicare percentage based upon data from their own cost reporting period. If a hospital avails itself of this option, it must furnish its FI, in a manner and format prescribed by CMS, data on its Medicare patients for the cost reporting period. CMS will match these data to data supplied by SSA to determine the patients dually entitled to Medicare Part A and SSI for the hospital's cost reporting period. The hospital bears the full cost of this process, including the cost of verification by SSA.

Consistent with the regulations at 42 CFR 412.106(b)(2)(i) and 412.106(b)(2)(iii), patients who are enrolled in Medicare Advantage (administered through Medicare Part C) should also be included in the Medicare fraction. These days will be included in the Medicare/SSI fraction, but in order for them to be counted, the hospital must submit an informational only bill (TOB 111) which includes Condition Code 04 to their Medicare contractor. This will ensure that these days are included in the hospital’s SSI ratio for Fiscal Year 2007 and beyond.

Acute Care hospitals that received DSH during FY 2006 are also required to submit informational only bills for their Medicare Advantage patients.

For MA patients, Long Term Care Hospitals are also required to submit informational only bills (TOB 111) with Condition Code 04.

For MA patients, Inpatient Rehabilitation Facilities are also required to submit informational only bills (TOB 111) with both Condition Code 04 and the Case Mix Group (CMG) from the IRF PAI. Refer to section 140.2.4.3 for the requirements for Inpatient Rehabilitation Facilities.

The percentage of total patient days attributable to patients entitled to Medicaid, but not to Medicare Part A. 

Provider-Specific File

F. Inpatient Rehabilitation Facilities (IRFs) 

The A/B MACs (A) create a provider specific history file using the following data elements for each IRF beginning with their first cost reporting period that starts on or after January 1, 2002. A/B MACs (A) submit the current and the preceding fiscal years every three months. For PPS-exempt providers, code Y in position 49 (waiver code) to maintain the record in the PRICER PROV file. Data elements 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 13, 18, 19, 21, 25, 27, 28, and 42 are required. All other data elements are optional for this provider type. 

Effective October 1, 2005, data element 13 is no longer applicable to payment applications but is still required. Data element 35 is required for all IRFs. Data elements 17, 33, 38, and 49 are required if applicable to the IRF. 

Effective October 1, 2013, data element 34 (Hospital Quality Indicator) is required.

G. Long Term Care Hospital (LTCH) 

The A/B MACs (A) create a provider specific history file using the following data elements for each LTCH beginning with their first cost reporting period that starts on or after October 1, 2002. A/B MACs (A) submit the current and the preceding fiscal years every three months. For PPS-exempt providers, code Y in position 49 (waiver code) to maintain the record in the PRICER PROV file. Data elements 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 12, 13, 14, 18, 19, 21, 22, and 25 are the minimum required fields for entering a provider under LTCH PPS. 

Effective July 1, 2005, data element 35 is required. Data elements 33 and 38 are optional and may be populated if needed. Data elements 12, 13, and 14 are no longer applicable. 

Effective July 1, 2006, data elements 23, 24, 27, 28, and 49 are required. 

Effective October 1, 2013, data element 34 (Hospital Quality Indicator) is required.

H. Inpatient Psychiatric Facilities (IPF)

The A/B MACs (A) create a provider specific history file using the following data elements for each IPF beginning with their first cost reporting period that starts on or after January 1, 2005.

The A/B MACs (A) submit the current and the preceding fiscal years every three months. For PPS-exempt providers, code Y in position 49 (waiver code) to maintain the record in the PRICER PROV file. Data elements 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 13, 17, 18, 19, 21, 22, 23, 25, 33, 35, 38, and 48 are required. All other data elements are optional for this provider type. Although data element 25 refers to the operating cost to charge ratio, ensure that both operating and capital cost-to-charge ratio are entered in data element 25 for IPFs. Ensure that data element 21 (Facility Specific Rate) will be determined using the same methodology to determine the interim payment per discharge under the TEFRA system.

 Effective July 1, 2006, data element 13 is no longer required. Data elements 33 and 38 are optional and may be populated if needed. 

Effective October 1, 2013, data element 34 (Hospital Quality Indicator) is required.

Medicare Claims

A. PPS 

Hospitals The A/B MACs (A) submit all records (past and current) for all PPS providers every three months. Duplicate the provider file used in the "PRICER" module of the claims processing system.

 B. Non-PPS Hospitals and Exempt Units 

The A/B MACs (A) create a provider specific history file using the listed data elements for each non-PPS hospital and exempt hospital unit. Submit the current and the preceding fiscal years every three months. Code Y in position 49 (waiver code) to maintain the record in the PRICER PROV file. 

C. Hospice 

The A/B MACs (A) create a provider specific history file using the following data elements for each hospice. Submit the current and the preceding fiscal years every three months. Data elements 3, 4, 5, 6, 9, 10, 13, and 17 are required. All other data elements are optional for this provider type. 

Effective October 1, 2005, data element 13 is no longer applicable to payment applications but is still required. Data element 35 is required for all hospices. Data elements 33 and 38 are optional and may be populated if needed. 

Effective October 1, 2013, data element 34 (Hospital Quality Indicator) is required.

D. Skilled Nursing Facility (SNF) 

The A/B MACs (A) create a provider specific history file using the following data elements for each SNF beginning with their first cost reporting period that starts on or after July 1, 1998. 

The A/B MACs (A) submit the current and the preceding fiscal years every three months. For PPS-exempt providers, code Y in position 49 (waiver code) to maintain the record in the PRICER PROV file. Data elements 3, 4, 5, 6, 9, 10, 13, 19, and 21 are required. All other data elements are optional for this provider type. 

Effective October 1, 2005, data element 13 is no longer applicable to payment applications but is still required. Data element 35 is required for all SNFs. Data elements 33 and 38 are required if there is a special wage index. Effective October 1, 2005, through September 30, 2006, data elements 33 and 38 are required since there is a special wage index.

E. Home Health Agency (HHA) 

The A/B MACs (HHH) create a provider specific history file using the following data elements for each HHA. Regional home health A/B MACs (HHH) submit the current and the preceding fiscal years every three months. Data elements 3, 4, 5, 6, 7, 8, 9, 10, 11, 13, and 19 are required. All other data elements are optional for this provider type. All fields must be zero filled if not completed. Update the effective date in data element 4 annually. Ensure that the current census division in data element 11 is not zero. Ensure that the waiver indicator in data element 8 is N. Ensure that the MSA code reported in data element 13 is a valid MSA code.

Provider-Specific File

(Rev. 3431, Issued: 12-29-15, Effective: 10-01-15, Implementation: 10-05-15)

The PROV file contains needed information about each provider to enable the pricing software to calculate the payment amount. Updates are published annually or quarterly, as needed, to notify A/B MACs of any changes to payment systems requiring updates to the PSF. 

The A/B MACs maintain the accuracy of the data in accordance with the following criteria. 

Whenever the status of any element changes, the A/B MAC prepares an additional record showing the effective date. For example, when a hospital's FY beginning date changes as a result of a change in ownership or other "good cause," the A/B MAC makes an additional record showing the effective date of the change. 

The format and data required by the PRICER program and by the provider-specific file is found in Addendum A.

The A/B MACs submit a file of provider-specific payment data to CMS CO every three months for PPS and non-PPS hospitals, inpatient rehabilitation hospitals or units (referred to as IRFs), long term care hospitals (LTCHs), inpatient psychiatric facilities (IPFs), SNFs, and hospices, including those in Maryland. Regional home health A/B MACs (HH) submit a file of provider specific data for all home health agencies. A/B MACs serving as the audit A/B MAC for hospital based HHAs do not submit a file of provider specific data for HHAs. 

The A/B MACs create a new record any time a change occurs for a provider. Data must be reported for the following periods: October 2 - January 1, January 2 - April 1, April 2 - July 1, and July 2 - October 1. This file must be received in CO within seven business days after the end of the period being reported. 

NOTE: A/B MACs submit the latest available provider-specific data for the entire reporting period to CO by the seven-business day deadline. If CO fails to issue applicable instructions concerning changes or additions to the file fields by 10 calendar days before the end of the reporting period, the A/B MAC may delay reporting of data related to the CO instructions until the next file due date. For example, if CO instructions changing a file field are issued on or after September 21 with an effective date of October 1, the A/B MAC may exclude the October 1 CO-required changes from the file submitted by October 9. The A/B MAC includes the October 1 CO-required changes, and all subsequent changes through January 1 in the file submitted in January.

PPS Pricer Program

(Rev. 1, 10-01-03) A3-3615.3, A3-3656.3

The CMS provides a Pricer program to determine the price upon which to base payment under prospective payment. A separate Pricer installation guide is provided. The A/B MAC (A) uses the Pricer appropriate for the date of discharge. 

After GROUPER determines the DRG, the A/B MAC (A) 's system calls the Pricer program. Pricer determines the price to pay and prepares a report. 

Four data files are included. CMS maintains three: 

• DRGX file - contains DRG weights, average length of stay and outlier cutoff points. 

• MSAX file - contains urban and rural wage indexes used in calculating payment. CMS may request that the A/B MAC (A) make interim changes to this file when index changes are issued for individual hospitals after issuance of Pricer for the period. 

• RATE file - contains census division values and updating amounts used in calculating payment.

The A/B MAC (A) maintains the provider-specific file, (PROV file). This contains information about the facts specific to the provider that affect computations, e.g., effective dates for PPS, type of provider (for application of special computation rules), census division, MSA, adjusted cost per discharge, disproportionate share adjustment percentage, and capital data. 

Pricer also calculates the disproportionate share adjustment and adds it to the DRG payment. Correct calculation depends upon the accuracy of related information the A/B MAC (A) includes in the PRICER PROV file. 

The Pricer program applies the DRG relative weights, hospital urban or rural and census division location, provider-specific data, and beneficiary hospital data from the bill to determine the amount payable for each PPS discharge bill. 

Pricer uses the Intern-to-Bed ratio in calculating the indirect teaching adjustment for operating costs for the A/B MAC (A) to accumulate and use in related payments. Pricer uses the intern-to-average daily census ratio to calculate the indirect teaching adjustment for capital costs. The A/B MAC (A) ensures that these ratios are available for Pricer to compute payment for teaching hospitals. It includes the ratios in its PROV file to ensure that cost outliers are not overpaid to its teaching hospitals. 

Pricer does not calculate utilization days required for the PS&R, CWF, or cost report. It does not determine the amount to pay after deduction for deductible, coinsurance, or the primary payment where Medicare is secondary. The A/B MAC (A) must calculate the price and make adjustments to the price furnished before making payment 

The A/B MACs (A) use the Pricer implementation guide for information concerning Pricer processing reports, input parameters and data requirements.

DRG GROUPER Program

(Rev. 3030, Issued: 08-22-14, Effective: ASC X12: January 1, 2012, ICD-10: Upon Implementation of ICD-10, Implementation: ICD-10: Upon Implementation of ICD- 10, ASC X12: September, 23 2014)

The A/B MAC (A) pays for inpatient hospital services on the basis of a rate per discharge that varies according to the MS-DRG to which a beneficiary's stay is assigned. Each MSDRG represents the average resources required to care for a case in that particular MSDRG relative to the national average of resources consumed per case. The MS-DRG weights used to calculate payment are in the Pricer DRGX file. 

The A/B MAC (A) uses the GROUPER program to assign the MS-DRG number. GROUPER determines the MS-DRG from data elements reported by the hospital. This applies to all inpatient discharge/transfer bills received from both PPS and non-PPS facilities, including those from waiver States, long-term care hospitals, and excluded units. T

he Pricer (PPSMAIN) driver program calls the correct fiscal year GROUPER based upon the discharge date. If the A/B MAC (A) or shared system writes its own driver program, it must access the GROUPER for the correct FY based on discharge date. GROUPER does not determine the MS-DRG price. GROUPER input/output are specified below. The A/B MAC (A) determines the best place in its total system to place the GROUPER program.

Grouper requires the following items:

1. Principal and up to 24 other diagnoses 

2. Principal and up to 24 additional procedures 

3. Age at last birthday at admission 

4. Sex (1=male and 2=female) 

5. Discharge destination (patient status code from the claim)

The claim sex coding is M for male and F for female while GROUPER is l for male and 2 for female. Discharge destination codes are similar to claim definitions for patient status except codes 20-29 are summarized as 20. The A/B MAC (A) calculates age at admission. GROUPER needs age rather than date of birth.

Grouper responds with the following information: 

1. Major diagnostic category 

2. MS-DRG number 

3. Grouper return code (a one position code indicating the action taken by the program) 

4. Procedure code used in determining the MS-DRG 

5. Diagnosis code used in determining the MS-DRG 

6. Secondary diagnosis code used in determining the MS-DRG, if applicable

Paying Claims Outside of the MCE

All institutional inpatient claims are routed through the MCE before they are processed to payment. There may be special circumstances, however, when it is necessary to pay claims bypassing MCE edits. The CMS will notify the contractor of these instances. They include:

• New coverage policies are enacted by Congress with effective dates that preclude making the necessary changes timely; and 

• Errors are discovered that cannot be corrected timely. 

A/B MACs (A) are responsible for reporting problems timely. 

Requesting to Pay Claims Without MCE Approval

The contractor may also request approval from the RO in specific situations to pay claims without first sending them through the MCE. 

Examples of such situations are: 

• A systems error cannot be corrected timely, and the provider's cash flow will be substantially impacted; and/or 

• Administrative Law Judge (ALJ) decisions, court decisions, and CMS instructions in particular cases may necessitate that payment be made outside the normal process.

Procedures for Paying Claims Without Passing through the MCE (Rev. 2117, Issued: 12-10-10, Effective: 01-12-11, Implementation: 01-12-11)

Before an inpatient claim may be paid without first going through the MCE, the contractor shall obtain approval from CMS Central Office or the RO. 

Note: In certain situations, contractors bypass the MCE through an established, CMSinstructed claim processing procedure (e.g., to verify a facility is certified to perform a specified service after a MCE limited coverage edit is applied). Such scenarios do not require approval from the RO as the approval for such a bypass was inherently implied when the established procedure was first implemented.

 In all instances involving payment outside the normal inpatient editing process, the contractor applies the following procedures: 

• Contractors shall submit the claim overriding the MCE using the appropriate field in FISS. 

• Pay interest accrued through the date payment is made on clean claims. Do not pay any additional interest. 

• Maintain a record of payment and implement controls to be sure that incorrect payment is not made, i.e., when the claim is paid without being subject to normal editing. 

• Monitor MCE software to determine when the impediment to processing is removed. 

• Consider the claim processed for workload and expenditure reports when it is paid.

• Submit to the RO Consortium Contractor Manager (CCM) by the 20th of each month a report of all inpatient claims paid without processing through the MCE with the exception of override situations explained in the Note above (e.g., for limited coverage edits). The list of claims paid outside of the MCE is to include the following information:

o HIC 

o DCN 

o TOB

o DOS (From/Through) 

o Provider Number 

o MCE/OCE OVR (Claim/Line)

o Reimbursement Amount 

o Receipt Date 

o Process Date 

o Paid Date

Also, include summary data for each edit code showing claim volume and payment. Any override approvals received and/or relevant JSM references should be annotated on the reports.

Processing Requirements

13. Bilateral Procedure 

There are codes that do not accurately reflect performed procedures in one admission on two or more different bilateral joints of the lower extremities. A combination of these codes show a bilateral procedure when, in fact, they could be single joint procedures (i.e., duplicate procedures). 

If two more of these procedures are coded, and the principal diagnosis is in MDC 8, the claim is flagged for post-pay development. The A/B MAC (A) processes the bill as coded but requests an O.R. report. If the report substantiates bilateral surgery, no further action is necessary. If the O.R. report does not substantiate bilateral surgery, an adjustment bill is processed. 

If the error rate for any provider is sufficiently high, the A/B MAC (A) may develop claims prior to payment on a provider-specific basis. 

Effective with the implementation of ICD-10, ICD-10-PCS codes will be implemented which clearly identify the exact joint (left or right). Reporting these two more precise ICD-10-PCS codes will clearly indicate if a bilateral procedure is performed.

14. Invalid Age 

If the hospital reports an age over l24, the A/B MAC (A) requests the hospital to determine if it made a bill preparation error. If the beneficiary's age is established at over l24, the hospital enters 123. 

15. Invalid Sex 

A patient's sex is sometimes necessary for appropriate MS-DRG determination. Usually the A/B MAC (A) can resolve the issue without hospital assistance. The sex code reported must be either 1 (male) or 2 (female). 

16. Invalid Discharge Status 

A patient's discharge status is sometimes necessary for appropriate MS-DRG determination. Discharge status must be coded according to the Form CMS-1450 conventions.

 17. Invalid Discharge Date 

An invalid discharge date is a discharge date that does not fall into the acceptable range of numbers to represent, either the month, day or year (e.g., 13/03/01, 12/32/01). If no discharge date is entered, it is also invalid. MCE reports when an invalid discharge date is entered. 

18. Limited Coverage 

Effective October 1, 2003, for certain procedures whose medical complexity and serious nature incur extraordinary associated costs, Medicare limits coverage. The edit message indicates the type of limited coverage (e.g., LVRS, heart transplant, etc). The procedures receiving limited coverage edits previously were listed as non-covered procedures, but were covered under Medicare in certain circumstances. The A/B MACs (A) will handle these procedures as they had previously. 

19. Procedure inconsistent with length of stay 

The following procedure code should only be coded on claims when the respiratory ventilation is provided for greater than four consecutive days during the length of stay. Effective October 1, 2012, ICD-9-CM procedure code, 96.72, Continuous invasive mechanical ventilation for 96 consecutive hours or more Effective October 1, 2015, ICD-10-PCS code, 5A1955Z - Respiratory Ventilation, Greater than 96 Consecutive Hours