By George Basharis, J.D.
Provider’s outlier claims were subject to a reconciliation adjustment because they met the criteria required under Medicare law and regulations at the time of final cost report settlement.
Medicare contractor WPS Government Health Administrators made a proper adjustment to reconcile the outlier payments of Physicians Alliance Hospital for fiscal year ending (FYE) January 31, 2011, the Provider Reimbursement Review Board (Board) has decided. The Medicare contractor met all criteria outlined in Medicare laws and regulations when reducing Provider’s operating outlier payments. The Medicare contractor was not obligated to review the cost items that the provider presented to the Medicare contractor subsequent to receiving its final adjustments after alleging that there were errors in its as-filed cost report. The Medicare contractor also correctly followed CMS’ instructions in making its reconciliation determination (Physicians Alliance Hospital v. WPS Government Health Administrators, PRRB Hearing, Dec. No. 2020-D24, Case No. 13-0394, September 24, 2020).
The provider is a 40-bed long term care hospital (LTCH) in Louisiana. The provider disputed the Medicare contractor’s adjustment in the final settled cost report for FYE January 31, 2011, which reduced the operating outlier payments by $957,549 and assessed interest in the amount of $43,910 to the operating outliers. Under the inpatient prospective payment system for long term care hospitals (LTCH PPS) for operating costs under Medicare Part A, each case is categorized into a long-term care diagnostic-related group (LTC DRG) with a payment weight assigned to it based on the average resources used to treat Medicare patients in that LTC DRG. LTCHs also can receive additional payments for cases that are unusually costly (42 C.F.R. § 412.525(a)). To receive an outlier payment, an LTCH’s estimated costs for a patient must exceed the applicable LTC PPS payment plus a fixed-loss amount, which is established by CMS annually.
The Medicare Claims Processing Manual provides instructions for reconciliation. To determine if a LTCH meets the criteria, the Medicare contractor must incorporate all the adjustments from the cost report, run the cost report, calculate the revised costs to its charges (CCR) and compute the actual CCR prior to issuing a Notice of Program Reimbursement (NPR). If the criteria for reconciliation are not met, the cost report shall be finalized. The NPR cannot be issued nor can the cost report be finalized until outlier reconciliation is complete.
Even if a LTCH does not meet the criteria for reconciliation, the Medicare contractor has the discretion to request that a LTCH’s outlier payments in a cost reporting period be reconciled if the LTCH’s most recent cost and charge data indicate that the outlier payments to the hospital were significantly inaccurate. In this case, the Medicare contractor determined that the provider’s outlier claims were subject to a reconciliation adjustment since, at the time of final cost report settlement, they met the criteria.
The provider contended that the Medicare contractor was inherently obligated to review the cost items that the provider presented to the Medicare contractor subsequent to receiving its final adjustments and which the provider alleged were errors in its as-filed cost report, an argument rejected by the Board. When the provider discovered errors in its as-filed cost report, it had the option to file an amended cost report but did not do so, the Board noted. The Medicare contractor allowed the provider sufficient time to review the adjustments resulting from its review. Instead, in its response, the provider submitted new cost items that were notpart of the as-filed cost report and therefore were not within the Medicare contractor’s scope of review.
The Board considered CMS’s response in its June 9, 2003 final rule and found that the Medicare contractor, in making its reconciliation decision, correctly followed the outlined instructions. Because the annual weighted average CCR used to calculate the provider’s outlier payments was more than plus or minus 10 percentage points from the actual CCR calculated by Medicare Contractor in 2011, and the total outlier payments exceeded $500,000, the Medicare contractor properly determined that reconciliation was appropriate. In addition, the Board found that the Medicare contractor had the discretion to request that the provider’s outlier payments be reconciled if its most recent cost and charge data indicated that the outlier payments to the hospital were significantly inaccurate. The Board also determined that Medicare contractor paid the provider correctly and that there was no evidence in the record that CMS granted approval for the Medicare contractor to perform an outlier reconciliation, which would have negated the Medicare contractor’s outlier reconciliation and provided justification for the Board to rule for the provider.
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