[Code of Federal Regulations]
[Title 42, Volume 2]
[Revised as of October 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR412.25]

[Page 475-478]
 
                         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 B_Hospital Services Subject to and Excluded From the Prospective 
  Payment Systems for Inpatient Operating Costs and Inpatient Capital-
                              Related Costs
 
Sec.  412.25  Excluded hospital units: Common requirements.

    (a) Basis for exclusion. In order to be excluded from the 
prospective payment systems as specified in Sec.  412.1(a)(1) and be 
paid under the inpatient psychiatric facility prospective payment system 
as specified in Sec.  412.1(a)(2) or the inpatient rehabilitation 
facility prospective payment system as specified in Sec.  412.1(a)(3), a 
psychiatric or rehabilitation unit must meet the following requirements.
    (1) Be part of an institution that--
    (i) Has in effect an agreement under part 489 of this chapter to 
participate as a hospital;
    (ii) Is not excluded in its entirety from the prospective payment 
systems; and

[[Page 476]]

    (iii) Has enough beds that are not excluded from the prospective 
payment systems to permit the provision of adequate cost information, as 
required by Sec.  413.24(c) of this chapter.
    (2) Have written admission criteria that are applied uniformly to 
both Medicare and non-Medicare patients.
    (3) Have admission and discharge records that are separately 
identified from those of the hospital in which it is located and are 
readily available.
    (4) Have policies specifying that necessary clinical information is 
transferred to the unit when a patient of the hospital is transferred to 
the unit.
    (5) Meet applicable State licensure laws.
    (6) Have utilization review standards applicable for the type of 
care offered in the unit.
    (7) Have beds physically separate from (that is, not commingled 
with) the hospital's other beds.
    (8) Be serviced by the same fiscal intermediary as the hospital.
    (9) Be treated as a separate cost center for cost finding and 
apportionment purposes.
    (10) Use an accounting system that properly allocates costs.
    (11) Maintain adequate statistical data to support the basis of 
allocation.
    (12) Report its costs in the hospital's cost report covering the 
same fiscal period and using the same method of apportionment as the 
hospital.
    (13) As of the first day of the first cost reporting period for 
which all other exclusion requirements are met, the unit is fully 
equipped and staffed and is capable of providing hospital inpatient 
psychiatric or rehabilitation care regardless of whether there are any 
inpatients in the unit on that date.
    (b) Changes in the size of excluded units. For purposes of 
exclusions from the prospective payment systems under this section, 
changes in the number of beds and square footage considered to be part 
of each excluded unit are allowed as specified in paragraphs (b)(1) 
through (b)(3) of this section.
    (1) Increase in size. Except as described in paragraph (b)(3) of 
this section, the number of beds and square footage of an excluded unit 
may be increased only at the start of a cost reporting period.
    (2) Decrease in size. Except as described in paragraph (b)(3) of 
this section, the number of beds and square footage of an excluded unit 
may be decreased at any time during a cost reporting period if the 
hospital notifies its fiscal intermediary and the CMS Regional Office in 
writing of the planned decrease at least 30 days before the date of the 
decrease, and maintains the information needed to accurately determine 
costs that are attributable to the excluded unit. Any decrease in the 
number of beds or square footage considered to be part of an excluded 
unit made during a cost reporting period must remain in effect for the 
rest of that cost reporting period.
    (3) Exception to changes in square footage and bed size. The number 
of beds in an excluded unit may be decreased, and the square footage 
considered to be part of the unit may be either increased or decreased, 
at any time, if these changes are made necessary by relocation of a 
unit--
    (i) To permit construction or renovation necessary for compliance 
with changes in Federal, State, or local law affecting the physical 
facility; or
    (ii) Because of catastrophic events such as fires, floods, 
earthquakes, or tornadoes.
    (c) Changes in the status of hospital units. For purposes of 
exclusions from the prospective payment systems under this section, the 
status of each hospital unit (excluded or not excluded) is determined as 
specified in paragraphs (c)(1) and (c)(2) of this section.
    (1) The status of a hospital unit may be changed from not excluded 
to excluded only at the start of the cost reporting period. If a unit is 
added to a hospital after the start of a cost reporting period, it 
cannot be excluded from the prospective payment systems before the start 
of a hospital's next cost reporting period.
    (2) The status of a hospital unit may be changed from excluded to 
not excluded at any time during a cost reporting period, but only if the 
hospital notifies the fiscal intermediary and the CMS Regional Office in 
writing of the change at least 30 days before the date of the change, 
and maintains the information needed to accurately determine costs that 
are or are not attributable

[[Page 477]]

to the excluded unit. A change in the status of a unit from excluded to 
not excluded that is made during a cost reporting period must remain in 
effect for the rest of that cost reporting period.
    (d) Number of excluded units. Each hospital may have only one unit 
of each type (psychiatric or rehabilitation) excluded from the 
prospective payment systems.
    (e) Satellite facilities. (1) For purposes of paragraphs (e)(2) 
through (e)(5) of this section, a satellite facility is a part of a 
hospital unit that provides inpatient services in a building also used 
by another hospital, or in one or more entire buildings located on the 
same campus as buildings used by another hospital.
    (2) Except as provided in paragraphs (e)(3) and (e)(6) of this 
section, effective for cost reporting periods beginning on or after 
October 1, 1999, a hospital that has a satellite facility must meet the 
following criteria in order to be excluded from the acute care hospital 
inpatient prospective payment systems for any period:
    (i) In the case of a unit excluded from the prospective payment 
systems for the most recent cost reporting period beginning before 
October 1, 1997, the unit's number of State-licensed and Medicare-
certified beds, including those at the satellite facility, does not 
exceed the unit's number of State-licensed and Medicare-certified beds 
on the last day of the unit's last cost reporting period beginning 
before October 1, 1997.
    (ii) The satellite facility independently complies with--
    (A) For a rehabilitation unit, the requirements under Sec.  
412.23(b)(2); or
    (B) For a psychiatric unit, the requirements under Sec.  412.27(a).
    (iii) The satellite facility meets all of the following 
requirements:
    (A) Effective for cost reporting periods beginning on or after 
October 1, 2002, it is not under the control of the governing body or 
chief executive officer of the hospital in which it is located, and it 
furnishes inpatient care through the use of medical personnel who are 
not under the control of the medical staff or chief medical officer of 
the hospital in which it is located.
    (B) It maintains admission and discharge records that are separately 
identified from those of the hospital in which it is located and are 
readily available.
    (C) It has beds that are physically separate from (that is, not 
commingled with) the beds of the hospital in which it is located.
    (D) It is serviced by the same fiscal intermediary as the hospital 
unit of which it is a part.
    (E) It is treated as a separate cost center of the hospital unit of 
which it is a part.
    (F) For cost reporting and apportionment purposes, it uses an 
accounting system that properly allocates costs and maintains adequate 
statistical data to support the basis of allocation.
    (G) It reports its costs on the cost report of the hospital of which 
it is a part, covering the same fiscal period and using the same method 
of apportionment as the hospital of which it is a part.
    (3) Except as specified in paragraphs (e)(4) and (e)(5) of this 
section, the provisions of paragraph (e)(2) of this section do not apply 
to any unit structured as a satellite facility on September 30, 1999, 
and excluded from the prospective payment systems on that date, to the 
extent the unit continues operating under the same terms and conditions, 
including the number of beds and square footage considered to be part of 
the unit at the satellite facility on September 30, 1999.
    (4) In applying the provisions of paragraph (e)(3) of this section, 
any unit structured as a satellite facility on September 30, 1999, may 
increase or decrease the square footage of the satellite facility or may 
decrease the number of beds in the satellite facility considered to be 
part of the satellite facility at any time, if these changes are made by 
the relocation of a facility--
    (i) To permit construction or renovation necessary for compliance 
with changes in Federal, State, or local law affecting the physical 
facility; or
    (ii) Because of catastrophic events such as fires, floods, 
earthquakes, or tornadoes.

[[Page 478]]

    (5) For cost reporting periods beginning on or after October 1, 
2006, in applying the provisions of paragraph (e)(3) of this section--
    (i) Any unit structured as a satellite facility on September 30, 
1999, may increase the square footage of the unit only at the beginning 
of a cost reporting period or decrease the square footage or number of 
beds considered to be part of the satellite facility subject to the 
provisions of paragraph (b)(2) of this section, without affecting the 
provisions of paragraph (e)(3) of this section; and
    (ii) If the unit structured as a satellite facility decreases its 
number of beds below the number of beds considered to be part of the 
satellite facility on September 30, 1999, subject to the provisions of 
paragraph (b)(2) of this section, it may subsequently increase the 
number of beds at the beginning or a cost reporting period as long as 
the resulting total number of beds considered to be part of the 
satellite facility does not exceed the number of beds at the satellite 
facility on September 30, 1999.
    (6) The provisions of paragraph (e)(2)(i) of this section do not 
apply to any inpatient rehabilitation facility that is subject to the 
inpatient rehabilitation facility prospective payment system under 
subpart P of this part, effective for cost reporting periods beginning 
on or after October 1, 2003.
    (f) Changes in classification of hospital units. For purposes of 
exclusions from the prospective payment system under this section, the 
classification of a hospital unit is effective for the unit's entire 
cost reporting period. Any changes in the classification of a hospital 
unit is made only at the start of a cost reporting period.
    (g) CAH units not meeting applicable requirements. If a psychiatric 
or rehabilitation unit of a CAH does not meet the requirements of Sec.  
485.647 with respect to a cost reporting period, no payment may be made 
to the CAH for services furnished in that unit for that period. Payment 
to the CAH for services in the unit may resume only after the start of 
the first cost reporting period beginning after the unit has 
demonstrated to CMS that the unit meets the requirements of Sec.  
485.647.

[50 FR 12741, Mar. 29, 1985, as amended at 57 FR 39820, Sept. 1, 1992; 
58 FR 46337, Sept. 1, 1993; 59 FR 45400, Sept. 1, 1994; 64 FR 41540, 
July 30, 1999; 66 FR 39933, Aug. 1, 2001; 66 FR 41387, Aug. 7, 2001; 67 
FR 50111, Aug. 1, 2002; 68 FR 45469 and 45698, Aug. 1, 2003; 69 FR 
49241, Aug. 11, 2004; 69 FR 66976, Nov. 15, 2004; 70 FR 47952, Aug. 15, 
2005; 71 FR 48137, Aug. 18, 2006]