[Code of Federal Regulations] [Title 42, Volume 2] [Revised as of October 1, 2004] From the U.S. Government Printing Office via GPO Access [CITE: 42CFR412.1] [Page 390-395] TITLE 42--PUBLIC HEALTH CHAPTER IV--CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES PART 412_PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES --Table of Contents Subpart A_General Provisions Sec. 412.1 Scope of part. Subpart A_General Provisions Sec. 412.1 Scope of part. 412.2 Basis of payment. 412.4 Discharges and transfers. 412.6 Cost reporting periods subject to the prospective payment systems. 412.8 Publication of schedules for determining prospective payment rates. [[Page 391]] 412.10 Changes in the DRG classification system. Subpart B_Hospital Services Subject to and Excluded From the Prospective Payment Systems for Inpatient Operating Costs and Inpatient Capital- Related Costs 412.20 Hospital services subject to the prospective payment systems. 412.22 Excluded hospitals and hospital units: General rules. 412.23 Excluded hospitals: Classifications. 412.25 Excluded hospital units: Common requirements. 412.27 Excluded psychiatric units: Additional requirements. 412.29 Excluded rehabilitation units: Additional requirements. 412.30 Exclusion of new rehabilitation units and expansion of units already excluded. Subpart C_Conditions for Payment Under the Prospective Payment Systems for Inpatient Operating Costs and Inpatient Capital-Related Costs 412.40 General requirements. 412.42 Limitations on charges to beneficiaries. 412.44 Medical review requirements: Admissions and quality review. 412.46 Medical review requirements: Physician acknowledgement. 412.48 Denial of payment as a result of admissions and quality review. 412.50 Furnishing of inpatient hospital services directly or under arrangements. 412.52 Reporting and recordkeeping requirements. Subpart D_Basic Methodology for Determining Prospective Payment Federal Rates for Inpatient Operating Costs 412.60 DRG classification and weighting factors. 412.62 Federal rates for inpatient operating costs for fiscal year 1984. 412.63 Federal rates for inpatient operating costs for Federal fiscal years 1984 through 2004. 412.64 Federal rates for inpatient operating costs for Federal fiscal year 2005 and subsequent fiscal years. Subpart E_Determination of Transition Period Payment Rates for the Prospective Payment System for Inpatient Operating Costs 412.70 General description. 412.71 Determination of base-year inpatient operating costs. 412.72 Modification of base-year costs. 412.73 Determination of the hospital-specific rate based on a Federal fiscal year 1982 base period. 412.75 Determination of the hospital-specific rate for inpatient operating costs based on a Federal fiscal year 1987 base period. 412.77 Determination of the hospital-specific rate for inpatient operating costs for sole community hospitals based on a Federal fiscal year 1996 base period. 412.78 Recovery of excess transition period payment amounts resulting from unlawful claims. Subpart F_Payment for Outlier Cases and Special Treatment Payment for New Technology Payment for Outlier Cases 412.80 Outlier cases: General provisions. 412.82 Payment for extended length-of-stay cases (day outliers). 412.84 Payment for extraordinarily high-cost cases (cost outliers). 412.86 Payment for extraordinarily high-cost day outliers. Additional Special Payment for Certain New Technology 412.87 Additional payment for new medical services and technologies: General provisions. 412.88 Additional payment for new medical service or technology. Subpart G_Special Treatment of Certain Facilities Under the Prospective Payment System for Inpatient Operating Costs 412.90 General rules. 412.92 Special treatment: Sole community hospitals. 412.96 Special treatment: Referral centers. 412.98 [Reserved] 412.100 Special treatment: Renal transplantation centers. 412.101 Special treatment: Inpatient hospital payment adjustment for low-volume hospitals. 412.102 Special treatment: Hospitals located in areas that are reclassified from urban to rural as a result of a geographic redesignation. 412.103 Special treatment: Hospitals located in urban areas and that apply for reclassification as rural. 412.104 Special treatment: Hospitals with high percentage of ESRD discharges. 412.105 Special treatment: Hospitals that incur indirect costs for graduate medical education programs. 412.106 Special treatment: Hospitals that serve a disproportionate share of low-income patients. [[Page 392]] 412.107 Special treatment: Hospitals that receive an additional update for FYs 1998 and 1999. 412.108 Special treatment: Medicare-dependent, small rural hospitals. 412.109 Special treatment: Essential access community hospitals (EACHs). Subpart H_Payments to Hospitals Under the Prospective Payment Systems 412.110 Total Medicare payment. 412.112 Payments determined on a per case basis. 412.113 Other payments. 412.115 Additional payments. 412.116 Method of payment. 412.120 Reductions to total payments. 412.125 Effect of change of ownership on payments under the prospective payment systems. 412.130 Retroactive adjustments for incorrectly excluded hospitals and units. Subparts I-J [Reserved] Subpart K_Prospective Payment System for Inpatient Operating Costs for Hospitals Located in Puerto Rico 412.200 General provisions. 412.204 Payments to hospitals located in Puerto Rico. 412.208 Puerto Rico rates for Federal fiscal year 1988. 412.210 Puerto Rico rates for Federal fiscal years 1989 through 2003. 412.211 Puerto Rico rates for Federal fiscal year 2004 and subsequent fiscal years. 412.212 National rate. 412.220 Special treatment of certain hospitals located in Puerto Rico. Subpart L_The Medicare Geographic Classification Review Board Criteria and Conditions for Redesignation 412.230 Criteria for an individual hospital seeking redesignation to another rural area or an urban area. 412.232 Criteria for all hospitals in a rural county seeking urban redesignation. 412.234 Criteria for all hospitals in an urban county seeking redesignation to another urban area. Composition and Procedures 412.246 MGCRB members. 412.248 Number of members needed for a decision or a hearing. 412.250 Sources of MGCRB's authority. 412.252 Applications. 412.254 Proceedings before MGCRB. 412.256 Application requirements. 412.258 Parties to MGCRB proceeding. 412.260 Time and place of the oral hearing. 412.262 Disqualification of an MGCRB member. 412.264 Evidence and comments in MGCRB proceeding. 412.266 Availability of wage data. 412.268 Subpoenas. 412.270 Witnesses. 412.272 Record of proceedings before the MGCRB. 412.273 Withdrawing an application, terminating an approved 3-year reclassification, or canceling a previous withdrawal or termination. 412.274 Scope and effect of an MGCRB decision. 412.276 Timing of MGCRB decision and its appeal. 412.278 Administrator's review. 412.280 Representation. Subpart M_Prospective Payment System for Inpatient Hospital Capital Costs General Provisions 412.300 Scope of subpart and definition. 412.302 Introduction to capital costs. 412.304 Implementation of the capital prospective payment system. Basic Methodology for Determining the Federal Rate for Capital-Related Costs 412.308 Determining and updating the Federal rate. 412.312 Payment based on the Federal rate. 412.316 Geographic adjustment factors. 412.320 Disproportionate share adjustment factor. 412.322 Indirect medical education adjustment factor. Determination of Transition Period Payment Rates for Capital-Related Costs 412.324 General description. 412.328 Determining and updating the hospital-specific rate. 412.331 Determining hospital-specific rates in cases of hospital merger, consolidation, or dissolution. 412.332 Payment based on the hospital-specific rate. 412.336 Transition period payment methodologies. 412.340 Fully prospective payment methodology. 412.344 Hold-harmless payment methodology. 412.348 Exception payments. 412.352 Budget neutrality adjustment. Special Rules for Puerto Rico Hospitals 412.370 General provisions for hospitals located in Puerto Rico. 412.374 Payments to hospitals located in Puerto Rico. Subpart N [Reserved] [[Page 393]] Subpart O_Prospective Payment System for Long-Term Care Hospitals 412.500 Basis and scope of subpart. 412.503 Definitions. 412.505 Conditions for payment under the prospective payment system for long-term care hospitals. 412.507 Limitation on charges to beneficiaries. 412.508 Medical review requirements. 412.509 Furnishing of inpatient hospital services directly or under arrangement. 412.511 Reporting and recordkeeping requirements. 412.513 Patient classification system. 412.515 LTC-DRG weighting factors. 412.517 Revision of LTC-DRG group classifications and weighting factors. 412.521 Basis of payment. 412.523 Methodology for calculating the Federal prospective payment rates. 412.525 Adjustments to the Federal prospective payment. 412.529 Special payment provisions for short-stay outliers. 412.531 Special payment provisions when an interruption of a stay occurs in a long-term care hospital. 412.532 Special payment provisions for patients who are transferred to onsite providers and readmitted to a long-term care hospital. 412.533 Transition payments. 412.534 Special payment provisions for long-term care hospitals within hospitals and satellites of long-term care hospitals. 412.535 Publication of the Federal prospective payment rates. 412.541 Method of payment under the long-term care hospital prospective payment system. Subpart P_Prospective Payment for Inpatient Rehabilitation Hospitals and Rehabilitation Units 412.600 Basis and scope of subpart. 412.602 Definitions. 412.604 Conditions for payment under the prospective payment system for inpatient rehabilitation facilities. 412.606 Patient assessments. 412.608 Patients' rights regarding the collection of patient assessment data. 412.610 Assessment schedule. 412.612 Coordination of the collection of patient assessment data. 412.614 Transmission of patient assessment data. 412.616 Release of information collected using the patient assessment instrument. 412.618 Assessment process for interrupted stays. 412.620 Patient classification system. 412.622 Basis of payment. 412.624 Methodology for calculating the Federal prospective payment rates. 412.626 Transition period. 412.628 Publication of the Federal prospective payment rates. 412.630 Limitation on review. 412.632 Method of payment under the inpatient rehabilitation facility prospective payment system. Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). Source: 50 FR 12741, Mar. 29, 1985, unless otherwise noted. (a) Purpose. (1) This part implements sections 1886(d) and (g) of the Act by establishing a prospective payment system for the operating costs of inpatient hospital services furnished to Medicare beneficiaries in cost reporting periods beginning on or after October 1, 1983 and a prospective payment system for the capital-related costs of inpatient hospital services furnished to Medicare beneficiaries in cost reporting periods beginning on or after October 1, 1991. Under these prospective payment systems, payment for the operating and capital-related costs of inpatient hospital services furnished by hospitals subject to the systems (generally, short-term, acute-care hospitals) is made on the basis of prospectively determined rates and applied on a per discharge basis. Payment for other costs related to inpatient hospital services (organ acquisition costs incurred by hospitals with approved organ transplantation centers, the costs of qualified nonphysician anesthetist's services, as described in Sec. 412.113(c), and direct costs of approved nursing and allied health educational programs) is made on a reasonable cost basis. Payment for the direct costs of graduate medical education is made on a per resident amount basis in accordance with Sec. 413.86 of this chapter. Additional payments are made for outlier cases, bad debts, indirect medical education costs, and for serving a disproportionate share of low-income patients. Under either prospective payment system, a hospital may keep the difference between its prospective payment rate and its operating or capital- [[Page 394]] related costs incurred in furnishing inpatient services, and the hospital is at risk for inpatient operating or inpatient capital-related costs that exceed its payment rate. (2) This part implements section 1886(j) of the Act by establishing a prospective payment system for the inpatient operating and capital costs of inpatient hospital services furnished to Medicare beneficiaries by a rehabilitation hospital or rehabilitation unit that meets the conditions of Sec. 412.604. (3) This part implements section 123 of Public Law 106-113, which provides for the establishment of a prospective payment system for the costs of inpatient hospital services furnished to Medicare beneficiaries by long-term care hospitals described in section 1886(d)(1)(B)(iv) of the Act, for cost reporting periods beginning on or after October 1, 2002. This part also reflects the provisions of section 307 of Public Law 106-554, which state that the Secretary shall examine and may provide for appropriate adjustments to the long-term care hospital prospective payment system, including adjustments to diagnosis-related group (DRG) weights, area wage adjustments, geographic reclassification, outlier adjustments, updates, and disproportionate share adjustments consistent with section 1886(d)(5)(F) of the Act. (b) Summary of content. (1) This subpart describes the basis of payment for inpatient hospital services under the prospective payment systems specified in paragraph (a)(1) of this section and sets forth the general basis of these systems. (2) Subpart B sets forth the classifications of hospitals that are included in and excluded from the prospective payment systems specified in paragraph (a)(1) of this section, and sets forth requirements governing the inclusion or exclusion of hospitals in the systems as a result of changes in their classification. (3) Subpart C sets forth certain conditions that must be met for a hospital to receive payment under the prospective payment systems specified in paragraph (a)(1) of this section. (4) Subpart D sets forth the basic methodology by which prospective payment rates for inpatient operating costs are determined under the prospective payment system specified in paragraph (a)(1) of this section. (5) Subpart E describes the transition ratesetting methods that are used to determine transition payment rates for inpatient operating costs during the first 4 years of the prospective payment system specified in paragraph (a)(1) of this section. (6) Subpart F sets forth the methodology for determining payments for outlier cases under the prospective payment system specified in paragraph (a)(1) of this section. (7) Subpart G sets forth rules for special treatment of certain facilities under the prospective payment system specified in paragraph (a)(1) of this section for inpatient operating costs. (8) Subpart H describes the types, amounts, and methods of payment to hospitals under the prospective payment system specified in paragraph (a)(1) of this section for inpatient operating costs. (9) Subpart K describes how the prospective payment system specified in paragraph (a)(1) of this section for inpatient operating costs is implemented for hospitals located in Puerto Rico. (10) Subpart L sets forth the procedures and criteria concerning applications from hospitals to the Medicare Geographic Classification Review Board for geographic redesignation under the prospective payment systems specified in paragraph (a)(1) of this section. (11) Subpart M describes how the prospective payment system specified in paragraph (a)(1) of this section for inpatient capital- related costs is implemented effective with reporting periods beginning on or after October 1, 1991. (12) Subpart O of this part describes the prospective payment system specified in paragraph (a)(3) of this section for long-term care hospitals and sets forth the general methodology for paying for the operating and capital-related costs of inpatient hospital services furnished by long-term care hospitals, effective with cost reporting periods beginning on or after October 1, 2002. [[Page 395]] (13) Subpart P describes the prospective payment system specified in paragraph (a)(2) of this section for rehabilitation hospitals and rehabilitation units and sets forth the general methodology for paying for the operating and capital-related costs of inpatient hospital services furnished by rehabilitation hospitals and rehabilitation units effective with cost reporting periods beginning on or after January 1, 2002. [66 FR 41385, Aug. 7, 2001, as amended at 67 FR 56048, Aug. 30, 2002]