Outlier Reconciliation

Notice of Outlier Reconciliation—Information for Providers

Background

Section 1886(j)(4) of the Social Security Act provides the Secretary with the authority to make payments, in addition to the basic inpatient rehabilitation facility (IRF) prospective payments, for cases incurring extraordinarily high costs. To qualify for outlier payments, a case must have costs above a fixed-loss threshold amount (a dollar amount by which the costs of a case must exceed payments in order to qualify for outliers). IRF-specific cost-to-charge ratios (CCRs) are applied to the covered charges for a case to determine whether the costs of the case exceed the fixed-loss threshold. Eligible outlier payments are then made based on a marginal cost factor equal to 80 percent of the costs in excess of the fixed-loss threshold. For Federal fiscal year (FY) 2012, the fixed-loss outlier threshold is $10,713. CMS publishes the outlier threshold in the annual Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS) Final Rule. Please visit the IRF PPS List of IRF Federal Regulations link to view and download the annual IRF PPS Final Rule (located in the left navigational section). The specific regulations governing payments for outlier cases are located at 42 CFR 412.624(e)(5).

Cost-to-Charge Ratios

As explained above, IRF-specific CCRs are applied to the covered charges for a case to determine whether the costs of the case exceed the fixed-loss outlier threshold. National average CCRs are applied in certain circumstances. For a more detailed discussion on CCRs and when to apply the national average CCRs, see the annual IRF PPS Final Rule. Please visit the IRF PPS List of IRF Federal Regulations link to view and download the annual IRF PPS Final Rule (located in the left navigational section).

For a detailed list of cost-to-charge ratios by provider and by FY please download the rate setting files from our Data Files list (located in the left navigational section).

Reconciliation

Under 42 CFR § 412.624(e)(5), for discharges occurring on or after October 1, 2003:

• High cost outlier payments may be reconciled upon cost report settlement to account for differences between the CCR used to pay the claim at its original submission by the provider and the CCR determined at final settlement of the cost reporting period during which the discharge occurred.
• IRF outlier payments may be adjusted to account for the time value of any underpayments or overpayments based on the regulations in 42 CFR § 412.84(i), except that CMS calculates a single overall (combined operating and capital) CCR for IRFs and national average IRF CCRs are used instead of statewide average CCRs.

On April 1, 2011 the Medicare Administrative Contractors (MAC) and Fiscal Intermediaries (FI) will begin reconciling IRF outlier payments in cases where:

• The IRF-specific CCR is found to be plus or minus  10 percentage points from the CCR used during that time period to make outlier payments; and
• Total outlier payments in that cost reporting period exceed $500,000.

An IRF may contact its FI or MAC to request that its CCR, otherwise applicable, be changed if the IRF presents substantial evidence that the CCRs are inaccurate. Any such requests must be approved by the CMS Regional Office with jurisdiction over that Medicare contractor.