[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: 42CFR413.1] [Page 530-534] TITLE 42--PUBLIC HEALTH CHAPTER IV--CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES PART 413_PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR Subpart A_Introduction and General Rules Sec. 413.1 Introduction. END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES--Table of Contents Subpart A_Introduction and General Rules Sec. 413.1 Introduction. 413.5 Cost reimbursement: General. 413.9 Cost related to patient care. 413.13 Amount of payment if customary charges for services furnished are less than reasonable costs. 413.17 Cost to related organizations. Subpart B_Accounting Records and Reports 413.20 Financial data and reports. 413.24 Adequate cost data and cost finding. Subpart C_Limits on Cost Reimbursement 413.30 Limitations on payable costs. 413.35 Limitations on coverage of costs: Charges to beneficiaries if cost limits are applied to services. 413.40 Ceiling on the rate of increase in hospital inpatient costs. Subpart D_Apportionment 413.50 Apportionment of allowable costs. 413.53 Determination of cost of services to beneficiaries. [[Page 531]] 413.56 [Reserved] Subpart E_Payments to Providers 413.60 Payments to providers: General. 413.64 Payments to providers: Specific rules. 413.65 Requirements for a determination that a facility or an organization has provider-based status. 413.70 Payment for services of a CAH. 413.74 Payment to a foreign hospital. Subpart F_Specific Categories of Costs 413.75 Direct GME payments: General requirements. 413.76 Direct GME payments: Calculation of payments for GME costs. 413.77 Direct GME payments: Determination of per resident amounts. 413.78 Direct GME payments: Determination of the total number of FTE residents. 413.79 Direct GME payments: Determination of the weighted number of FTE residents. 413.80 Direct GME payments: Determination of weighting factors for foreign medical graduates. 413.81 Direct GME payments: Application of community support and redistribution of costs in determining FTE resident counts. 413.82 Direct GME payments: Special rules for States that formerly had a waiver from Medicare reimbursement principles. 413.83 Direct GME payments: Adjustment of a hospital's target amount or prospective payment hospital-specific rate. 413.85 Cost of approved nursing and allied health education activities. 413.87 Payments for Medicare+Choice nursing and allied health education programs. 413.88 Incentive payments under plans for voluntary reduction in number of medical residents. 413.89 Bad debts, charity, and courtesy allowances. 413.90 Research costs. 413.92 Costs of surety bonds. 413.94 Value of services of nonpaid workers. 413.98 Purchase discounts and allowances, and refunds of expenses. 413.100 Special treatment of certain accrued costs. 413.102 Compensation of owners. 413.106 Reasonable cost of physical and other therapy services furnished under arrangements. 413.114 Payment for posthospital SNF care furnished by a swing-bed hospital. 413.118 Payment for facility services related to covered ASC surgical procedures performed in hospitals on an outpatient basis. 413.122 Payment for hospital outpatient radiology services and other diagnostic procedures. 413.123 Payment for screening mammography performed by hospitals on an outpatient basis. 413.124 Reduction to hospital outpatient operating costs. 413.125 Payment for home health agency services. Subpart G_Capital-Related Costs 413.130 Introduction to capital-related costs. 413.134 Depreciation: Allowance for depreciation based on asset costs. 413.139 Depreciation: Optional allowance for depreciation based on a percentage of operating costs. 413.144 Depreciation: Allowance for depreciation on fully depreciated or partially depreciated assets. 413.149 Depreciation: Allowance for depreciation on assets financed with Federal or public funds. 413.153 Interest expense. 413.157 Return on equity capital of proprietary providers. Subpart H_Payment for End-Stage Renal Disease (ESRD) Services and Organ Procurement Costs 413.170 Scope. 413.172 Principles of prospective payment. 413.174 Prospective rates for hospital-based and independent ESRD facilities. 413.176 Amount of payments. 413.178 Bad debts. 413.180 Procedures for requesting exceptions to payment rates. 413.182 Criteria for approval of exception requests. 413.184 Payment exception: Atypical service intensity (patient mix). 413.186 Payment exception: Isolated essential facility. 413.188 Payment exception: Extraordinary circumstances. 413.190 Payment exception: Self-dialysis training costs. 413.192 Payment exception: Frequency of dialysis. 413.194 Appeals. 413.196 Notification of changes in rate-setting methodologies and payment rates. 413.198 Recordkeeping and cost reporting requirements for outpatient maintenance dialysis. 413.200 Payment of independent organ procurement organizations and histocompatibility laboratories. 413.202 Organ procurement organization (OPO) cost for kidneys sent to foreign countries or transplanted in patients other than Medicare beneficiaries. [[Page 532]] 413.203 Transplant center costs for organs sent to foreign countries or transplanted in patients other than Medicare beneficiaries. Subpart I_Prospectively Determined Payment Rates for Low-Volume Skilled Nursing Facilities, for Cost Reporting Periods Beginning Prior to July 1, 1998 413.300 Basis and scope. 413.302 Definitions. 413.304 Eligibility for prospectively determined payment rates. 413.308 Rules governing election of prospectively determined payment rates. 413.310 Basis of payment. 413.312 Methodology for calculating rates. 413.314 Determining payment amounts: Routine per diem rate. 413.316 Determining payment amounts: Ancillary services. 413.320 Publication of prospectively determined payment rates or amounts. 413.321 Simplified cost reports for SNFs. Subpart J_Prospective Payment for Skilled Nursing Facilities 413.330 Basis and scope. 413.333 Definitions. 413.335 Basis of payment. 413.337 Methodology for calculating the prospective payment rates. 413.340 Transition period. 413.343 Resident assessment data. 413.345 Publication of Federal prospective payment rates. 413.348 Limitation on review. 413.350 Periodic interim payments for skilled nursing facilities receiving payment under the skilled nursing facility prospective payment system for Part A services. 413.355 Additional payment: QIO photocopy and mailing costs. Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and (n), 1871, 1881, 1883, and 1886 of the Social Security Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n), 1395hh, 1395rr, 1395tt, and 1395ww). Source: 51 FR 34793, Sept. 30, 1986, unless otherwise noted. (a) Basis, scope, and applicability--(1) Statutory basis--(i) Basic provisions. (A) Section 1815 of the Act requires that the Secretary make interim payments to providers and periodically determine the amount that should be paid under Part A of Medicare to each provider for the services it furnishes. (B) Section 1814(b) of the Act (for Part A) and section 1833(a) (for Part B) provide for payment on the basis of the lesser of a provider's reasonable costs or customary charges. (C) Section 1861(v) of the Act defines ``reasonable cost''. (ii) Additional provisions. (A) Section 1138(b) of the Act specifies the conditions for Medicare payment for organ procurement costs. (B) Section 1814(j) of the Act provides for exceptions to the ``lower of costs or charges'' provisions. (C) Sections 1815(a) and 1833(e) of the Act provide the Secretary with authority to request information from providers to determine the amount of Medicare payment due providers. (D) Section 1833(a)(4) and (i)(3) of the Act provide for payment of a blended amount for certain surgical services furnished in a hospital's outpatient department. (E) Section 1833(n) of the Act provides for payment of a blended amount for outpatient hospital diagnostic procedures such as radiology. (F) Section 1834(c)(1)(C) of the Act establishes the method for determining Medicare payment for screening mammograms performed by hospitals. (G) Section 1834(g) of the Act provides that payment for critical access hospital (CAH) outpatient services is the reasonable costs of the CAH in providing these services, as determined in accordance with section 1861(v)(1)(A) of the Act and the applicable principles of cost reimbursement in this part and in part 415 of this chapter. (H) Section 1881 of the Act authorizes payment for services furnished to ESRD patients. (I) Section 1883 of the Act provides for payment for post-hospital SNF care furnished by a rural hospital that has swing-bed approval. (J) Sections 1886(a) and (b) of the Act impose a ceiling on the rate of increase in hospital inpatient costs. (K) Section 1886(h) of the Act provides for payment to a hospital for the services of interns and residents in approved teaching programs on the basis of a ``per resident'' amount. [[Page 533]] (2) Scope. This part sets forth regulations governing Medicare payment for services furnished to beneficiaries by-- (i) Hospitals and critical access hospitals (CAHs); (ii) Skilled nursing facilities (SNFs); (iii) Home health agencies (HHAs); (iv) Comprehensive outpatient rehabilitation facilities (CORFs); (v) End-stage renal disease (ESRD) facilities; (vi) Providers of outpatient physical therapy and speech pathology services (OPTs); and (vii) Organ procurement agencies (OPAs) and histocompatibility laboratories. (3) Applicability. The payment principles and related policies set forth in this part are binding on CMS and its fiscal intermediaries, on the Provider Reimbursement Review Board, and on the entities listed in paragraph (a)(2) of this section. (b) Reasonable cost reimbursement. Except as provided under paragraphs (c) through (h) of this section, Medicare is generally required, under section 1814(b) of the Act (for services covered under Part A) and under section 1833(a)(2) of the Act (for services covered under Part B) to pay for services furnished by providers on the basis of reasonable costs as defined in section 1861(v) of the Act, or the provider's customary charges for those services, if lower. Regulations implementing section 1861(v) are found generally in this part beginning at Sec. 413.5. (c) Outpatient maintenance dialysis and related services. Section 1881 of the Act authorizes special rules for the coverage of and payment for services furnished to ESRD patients. Sections 413.170 and 413.174 implement various provisions of section 1881. In particular, Sec. 413.170 establishes a prospective payment method for outpatient maintenance dialysis services that applies both to hospital-based and independent ESRD facilities, and under which Medicare pays for both home and infacility dialysis services furnished on or after August 1, 1983. (d) Payment for inpatient hospital services. (1) For cost reporting periods beginning before October 1, 1983, the amount paid for inpatient hospital services is determined on a reasonable cost basis. (2) Payment to short-term general hospitals located in the 50 States and the District of Columbia for the operating costs of hospital inpatient services for cost reporting periods beginning on or after October 1, 1983, and for the capital-related costs of inpatient services for cost reporting periods beginning on or after October 1, 1991, are determined prospectively on a per discharge basis under part 412 of this chapter except as follows: (i) Payment for capital-related costs for cost reporting periods beginning before October 1, 1991, medical education costs, kidney acquisition costs, and the costs of certain anesthesia services, is described in Sec. 412.113 of this chapter. (ii) Payment to children's and psychiatric hospitals (as well as separate psychiatric units (distinct parts) of short-term general hospitals) that are excluded from the prospective payment systems under subpart B of Part 412 of this subchapter and hospitals outside the 50 states and the District of Columbia is on a reasonable cost basis, subject to the provisions of Sec. 413.40. (iii) Payment to hospitals subject to a State reimbursement control system is described in paragraph (e) of this section. (iv) For cost reporting periods beginning before January 1, 2002, payment to rehabilitation hospitals (as well as separate rehabilitation units (distinct parts) of short-term general hospitals), that are excluded under subpart B of part 412 of this subchapter from the prospective payment systems is made on a reasonable cost basis, subject to the provisions of Sec. 413.40. (v) For cost reporting periods beginning on or after January 1, 2002, payment to rehabilitation hospitals (as well as separate rehabilitation units (distinct parts) of short-term general hospitals) that meet the conditions of Sec. 412.604 of this chapter is based on prospectively determined rates under subpart P of part 412 of this subchapter. (vi) For cost reporting periods beginning before October 1, 2002, payment to long-term care hospitals that are excluded under subpart B of Part 412 of this subchapter from the prospective payment systems is on a reasonable [[Page 534]] cost basis, subject to the provisions of Sec. 413.40. (vii) For cost reporting periods beginning on or after October 1, 2002, payment to the long-term hospitals that meet the condition for payment of Sec. Sec. 412.505 through 412.511 of this subchapter is based on prospectively determined rates under subpart O of Part 412 of this subchapter. (e) State reimbursement control systems. Beginning October 1, 1983, Medicare reimbursement for inpatient hospital services may be made in accordance with a State reimbursement control system rather than under the Medicare reimbursement principles set forth in this part, if the State system is approved by CMS. Regulations implementing this alternative reimbursement authority are set forth in subpart C of part 403 of this chapter. (f) Services of qualified nonphysician anesthetists. For cost reporting periods, or any part of a cost reporting period, beginning on or after January 1, 1989, costs incurred for the services of qualified nonphysician anesthetists are not paid on a reasonable cost basis unless the provisions of Sec. 412.113(c)(2) of this chapter apply. These services are paid under the special rules set forth in Sec. 405.553 of this chapter. (g) Payment for services furnished in SNFs. (1) Except as specified in paragraph (g)(2)(ii) of this section, the amount paid for services furnished in cost reporting periods beginning before July 1, 1998, is determined on a reasonable cost basis or, where applicable, in accordance with the prospectively determined payment rates for low- volume SNFs established under section 1888(d) of the Act, as set forth in subpart I of this part. (2) The amount paid for services (other than those described in Sec. 411.15(p)(2) of this chapter)-- (i) That are furnished in cost reporting periods beginning on or after July 1, 1998, to a resident who is in a covered Part A stay, is determined in accordance with the prospectively determined payment rates for SNFs established under section 1888(e) of the Act, as set forth in subpart J of this part. (ii) That are furnished on or after July 1, 1998, to a resident who is not in a covered Part A stay, is determined in accordance with any applicable Part B fee schedule or, for a particular item or service to which no fee schedule applies, by using the existing payment methodology utilized under Part B for such item or service. (h) Payment for services furnished by HHAs. The amount paid for home health services as defined in section 1861(m) of the Act (except durable medical equipment and the covered osteoporosis drug as provided for in that section) that are furnished beginning on or after October 1, 2000 to an eligible beneficiary under a home health plan of care is determined according to the prospectively determined payment rates for HHAs set forth in part 484, subpart E of this chapter. [51 FR 34793, Sept. 30, 1986, as amended at 57 FR 33898, July 31, 1992; 57 FR 39829, Sept. 1, 1992; 58 FR 30670, May 26, 1993; 59 FR 6578, Feb. 11, 1994; 60 FR 33136, June 27, 1995; 60 FR 37594, July 21, 1995; 60 FR 50441, Sept. 29, 1995; 62 FR 31, Jan. 2, 1997; 62 FR 46032, 46037, Aug. 29, 1997; 63 FR 26309, May 12, 1998; 65 FR 18537, Apr. 7, 2000; 65 FR 40535, June 30, 2000; 65 FR 41211, July 3, 2000; 65 FR 46796, July 31, 2000; 66 FR 41394, Aug. 7, 2001; 67 FR 44077, July 1, 2002; 67 FR 56055, Aug. 30, 2002]