Prospective Payment Systems for Inpatient Hospital Services

Scope of part.

This provision defines the scope and applicability of the prospective payment systems for inpatient hospital services furnished to Medicare beneficiaries.

Changes in the DRG classification system.

This provision outlines the criteria and administrative process for updating the Diagnosis Related Group (DRG) classification system used for Medicare payments.

Special treatment: Kidney transplant programs.

This provision specifies the payment adjustments and cost-reporting requirements for hospitals with approved kidney transplant programs regarding organ acquisition costs.

Special treatment: Inpatient hospital payment adjustment for low-volume hospitals.

This provision establishes the eligibility criteria and calculation methodology for Medicare inpatient payment adjustments for hospitals with low discharge volumes.

Special treatment: Hospitals located in areas that are changing from urban to rural as a result of a geographic redesignation.

This provision outlines the payment adjustment methodology for hospitals redesignated from urban to rural status to mitigate the impact on their Medicare reimbursement.

Special treatment: Hospitals located in urban areas and that apply for reclassification as rural.

This provision establishes the criteria and application process for urban hospitals to seek reclassification as rural hospitals for the purpose of Medicare inpatient prospective payment system adjustments.

Special treatment: Hospitals with high percentage of ESRD discharges.

This provision establishes criteria and payment methodologies for additional Medicare reimbursement to hospitals with a high percentage of inpatient ESRD discharges involving dialysis.

Special treatment: Hospitals that incur indirect costs for graduate medical education programs.

CMS makes an additional payment to hospitals for indirect medical education costs using the following procedures:

Special treatment: Hospitals that serve a disproportionate share of low-income patients.

This provision establishes the criteria and methodology for calculating Medicare disproportionate share hospital (DSH) payment adjustments and uncompensated care payments for qualifying hospitals.

Special treatment: Hospitals that receive an additional update for FYs 1998 and 1999.

This provision specifies the criteria and payment update percentages for hospitals eligible for additional Medicare inpatient payment adjustments during fiscal years 1998 and 1999.

Special treatment: Medicare-dependent, small rural hospitals.

This provision establishes the criteria, classification procedures, payment methodology, and volume decrease adjustment processes for hospitals seeking Medicare-dependent, small rural hospital status.

Special treatment: Essential access community hospitals (EACHs).

This provision outlines the payment methodology, rural location criteria, and cost reporting adjustment processes for hospitals designated as Essential Access Community Hospitals.

Total Medicare payment.

This provision defines the formula for calculating the total Medicare payment for inpatient hospital services under the prospective payment systems.

Payments determined on a per case basis.

This provision specifies the components included in per-case payments for inpatient hospital services, including operating, capital, outlier, and new technology costs.

Other payments.

This provision outlines Medicare reimbursement methodologies for hospital capital-related costs, direct medical education, anesthesia services, organ and stem cell acquisition, and specific resource costs for N95 respirators and essential medicine buffer stocks.

Additional payments.

This provision outlines additional Medicare payments to hospitals for bad debts, blood clotting factor administration for hemophiliac patients, and costs associated with submitting patient records to Quality Improvement Organizations.

Method of payment.

This provision outlines the methods for Medicare inpatient hospital payments, including standard discharge-based billing, periodic interim payments, special interim payments for long stays, and accelerated payment procedures.

Reductions to total payments.

This provision outlines the reduction of total Medicare payments to hospitals based on applicable deductible and coinsurance amounts and coordination with other primary payers.

Effect of change of ownership on payments under the prospective payment systems.

This provision establishes the rules for billing and payment eligibility when a hospital undergoes a change of ownership.

Retroactive adjustments for incorrectly excluded hospitals and units.

This provision defines the process for retroactive payment adjustments when hospitals or units are incorrectly excluded from the prospective payment system.

Participation, data submission, and validation requirements under the Hospital Inpatient Quality Reporting (IQR) Program.

This provision outlines the requirements for hospital participation, data submission, validation, reconsideration, and measure management within the Hospital Inpatient Quality Reporting (IQR) Program.

Basis and scope of subpart.

This provision establishes the statutory basis for CMS programs that adjust inpatient hospital payments based on readmission rates, value-based performance, and hospital-acquired conditions.

Definitions for the Hospital Readmissions Reduction Program.

This provision defines key terms used in the Hospital Readmissions Reduction Program, including aggregate payments, excess readmission ratios, and applicable conditions.

Payment adjustments under the Hospital Readmissions Reduction Program.

This provision outlines the methodology for calculating readmission payment adjustments, the extraordinary circumstance exception process, and hospital review rights for readmission data.

§§ 412.155-412.159 [Reserved]

These sections are currently reserved and contain no regulatory content.

Definitions for the Hospital Value-Based Purchasing (VBP) Program.

This provision defines key terms and metrics used to administer the Hospital Value-Based Purchasing Program, including performance standards, payment adjustments, and hospital eligibility criteria.

Applicability of the Hospital Value-Based Purchasing (VBP) Program.

This provision establishes that the Hospital Value-Based Purchasing Program applies to hospitals as defined in the program's regulatory framework.

Process for reducing the base operating DRG payment amount and applying the value-based incentive payment amount adjustment under the Hospital Value-Based Purchasing (VBP) Program.

This provision outlines the methodology for calculating value-based incentive payments and adjusting base operating DRG payments based on hospital performance scores.

Process for making hospital-specific performance information under the Hospital Value-Based Purchasing (VBP) Program available to the public.

This provision mandates the public reporting of hospital performance data under the VBP program and provides a 30-day window for hospitals to review and correct their data.

Measure selection under the Hospital Value-Based Purchasing (VBP) Program.

This provision outlines the criteria and processes for selecting, updating, and removing quality measures used in the Hospital Value-Based Purchasing Program.

Performance scoring under the Hospital Value-Based Purchasing (VBP) Program.

This provision establishes the methodology for calculating hospital performance scores and the process for requesting extraordinary circumstance exceptions under the VBP program.

Appeal under the Hospital Value-Based Purchasing (VBP) Program.

This provision outlines the administrative appeal rights and procedures for hospitals to challenge VBP performance scores and related CMS decisions.

Special rules for FY 2022 and FY 2023.

This provision specifies the scoring and payment methodology for the Hospital VBP Program for fiscal years 2022 and 2023.

[Reserved]

This provision is reserved and contains no regulatory content.

Definitions for the Hospital-Acquired Condition Reduction Program.

This provision provides definitions for terms used in the Hospital-Acquired Condition Reduction Program, including applicable hospitals and performance periods.

Payment adjustments under the Hospital-Acquired Condition Reduction Program.

This provision establishes the methodology for Medicare payment adjustments based on hospital-acquired condition performance scores and outlines the process for reporting, risk adjustment, and extraordinary circumstance exceptions.

Overall Hospital Quality Star Rating.

This provision establishes the methodology, data sources, and reporting requirements for the CMS Overall Hospital Quality Star Rating program.

Basis of payment.

This provision establishes the prospective payment system methodology for inpatient hospital services, including operating and capital-related costs, and defines the scope of covered services and exclusions.

Hospital services subject to the prospective payment systems.

This provision identifies which inpatient hospital services are subject to the prospective payment system and specifies exclusions for certain facility types and payment arrangements.

General provisions.

This provision establishes that hospitals in Puerto Rico are subject to the prospective payment system for inpatient operating costs, with specific methodology exceptions.

Payment to hospitals located in Puerto Rico.

This provision details the historical and current methodology for calculating inpatient operating cost payments for hospitals located in Puerto Rico.

Puerto Rico rates for Federal fiscal year 1988.

This provision establishes the methodology for determining the Puerto Rico adjusted DRG prospective payment rate for inpatient operating costs for fiscal year 1988.

Puerto Rico rates for Federal fiscal years 1989 through 2003.

This provision outlines the methodology for calculating Puerto Rico adjusted prospective payment rates for inpatient operating costs for fiscal years 1989 through 2003.

Puerto Rico rates for Federal fiscal year 2004 and subsequent fiscal years.

This provision details the methodology for determining Puerto Rico adjusted prospective payment rates for inpatient operating costs for fiscal year 2004 and beyond, including wage index adjustments.

National rate.

This provision specifies the methodology for calculating the national prospective payment rate for inpatient operating costs for hospitals located in Puerto Rico.

Excluded hospitals and hospital units: General rules.

This provision establishes the criteria for hospitals and hospital units to be excluded from the Inpatient Prospective Payment System and outlines the governance, medical staff, and operational requirements for co-located hospitals and satellite facilities to maintain that status.

Special treatment of certain hospitals located in Puerto Rico.

This provision specifies that certain prospective payment system rules for sole community hospitals and referral centers do not apply to hospitals located in Puerto Rico.

Excluded hospitals: Classifications.

Hospitals that meet the requirements for the classifications set forth in this section are not reimbursed under the prospective payment systems specified in § 412.1(a)(1):

Criteria for an individual hospital seeking redesignation to another rural area or an urban area.

This provision establishes the regulatory criteria and data requirements for hospitals seeking geographic reclassification to adjust their wage index for Medicare inpatient prospective payment purposes.

Criteria for all hospitals in a rural county seeking urban redesignation.

This provision outlines the specific geographic, wage, and data submission criteria that rural hospitals must meet as a group to be redesignated to an urban area for Medicare prospective payment purposes.

Criteria for all hospitals in an urban county seeking redesignation to another urban area.

This provision establishes the proximity and wage criteria that urban hospitals must satisfy as a group to be redesignated to a different urban area for Medicare payment purposes.

Criteria for all hospitals in a State seeking a statewide wage index redesignation.

This provision specifies the requirements for all prospective payment system hospitals within a state to apply as a group for a statewide wage index redesignation, including application procedures and payment impacts.

Requirements under the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program.

This provision outlines the mandatory registration, data submission, quality measure management, and reporting exception processes for cancer hospitals participating in the PCHQR program.

MGCRB members.

This provision defines the composition, appointment, and term limits for members of the Medicare Geographical Classification Review Board.

Number of members needed for a decision or a hearing.

This provision establishes the quorum requirements for the Medicare Geographical Classification Review Board and procedures for conducting hearings with fewer than a quorum.

Excluded hospital units: Common requirements.

This provision establishes the operational, financial, and record-keeping requirements that psychiatric and rehabilitation units must meet to be excluded from the prospective payment system.

Sources of MGCRB's authority.

The Medicare Geographic Classification Review Board (MGCRB) must comply with the Social Security Act, CMS regulations, and CMS rulings when issuing decisions.

Applications.

Individual hospitals or groups of hospitals may submit applications to the MGCRB to request redesignation to a different rural or urban area.

Proceedings before MGCRB.

The MGCRB typically issues decisions based on written evidence and comments, though it may hold oral hearings if necessary.

Application requirements.

Hospitals must submit complete written applications for reclassification to the MGCRB by specified deadlines, including supporting data and criteria.

Parties to MGCRB proceeding.

The parties to an MGCRB proceeding are the hospital or group of hospitals requesting reclassification, with CMS permitted to submit comments and recommendations.

Time and place of the oral hearing.

If an oral hearing is necessary, the MGCRB must provide written notice of the time and place to the parties and CMS at least 10 days in advance.

Disqualification of an MGCRB member.

MGCRB members must not participate in cases where they have a conflict of interest, and parties may request disqualification in writing.

Evidence and comments in MGCRB proceeding.

The MGCRB governs the submission of evidence, prohibits ex parte communications, and rules on the admissibility of evidence in reclassification proceedings.

Availability of wage data.

Hospitals may obtain necessary average hourly wage data for MGCRB applications from Federal Register documents published by CMS.

Subpoenas.

The MGCRB may issue subpoenas for witnesses or documents when necessary for a case, with CMS covering the associated costs.

Excluded psychiatric units: Additional requirements.

In order to be excluded from the prospective payment system as specified in § 412.1(a)(1), and paid under the prospective payment system as specified in § 412.1(a)(2), a psychiatric unit must meet the following requirements:

Witnesses.

This provision establishes the requirements for witness testimony under oath or affirmation during oral hearings before the Medicare Geographic Classification Review Board.

Record of proceedings before the MGCRB.

This provision mandates that a complete record of proceedings be maintained for all cases before the Medicare Geographic Classification Review Board.

Withdrawing an application, terminating an approved 3-year reclassification, or reinstating a previous termination.

This provision defines the procedures and timelines for hospitals to withdraw, terminate, or reinstate geographic reclassification applications and approvals.

Scope and effect of an MGCRB decision.

This provision specifies the scope, effective dates, and duration of geographic reclassification decisions issued by the Medicare Geographic Classification Review Board.

Timing of MGCRB decision and its appeal.

This provision establishes the timeline for the Medicare Geographic Classification Review Board to issue decisions and the deadline for hospitals to request Administrator review.

Administrator's review.

This provision outlines the procedures, criteria, and timelines for the CMS Administrator to review decisions made by the Medicare Geographic Classification Review Board.

Representation.

This provision permits parties to be represented by legal counsel or other appointed representatives in proceedings before the MGCRB or the Administrator.

Classification criteria for payment under the inpatient rehabilitation facility prospective payment system.

To be excluded from the prospective payment systems described in § 412.1(a)(1) and to be paid under the prospective payment system specified in § 412.1(a)(3), an inpatient rehabilitation hospital or an inpatient rehabilitation unit of a...

Admissions.

This provision establishes the criteria for inpatient admission for Medicare Part A payment, including requirements for physician orders, admitting privileges, and the two-midnight rule.

[Reserved]

This provision is a reserved section in the Code of Federal Regulations and contains no substantive regulatory requirements.

Scope of subpart and definition.

This provision defines the scope of the prospective payment system for inpatient hospital capital-related costs and establishes the criteria for identifying a new hospital for payment purposes.

Introduction to capital costs.

This provision defines the methodology for categorizing and reporting Medicare inpatient hospital capital-related costs, distinguishing between old and new capital costs for reimbursement purposes.

Implementation of the capital prospective payment system.

This provision establishes the capital prospective payment system for inpatient hospital discharges and outlines payment methodologies for new and existing hospitals.

Determining and updating the Federal rate.

This provision details the methodology for calculating and annually updating the standard Federal rate for capital-related inpatient hospital payments.

Payment based on the Federal rate.

This provision defines the formula for calculating capital payments per discharge, including adjustments for DRG weights, geography, disproportionate share, and medical education.

Geographic adjustment factors.

This provision specifies the geographic adjustment factors applied to the Federal rate, including local cost variations, large urban area adjustments, and cost-of-living adjustments for Alaska and Hawaii.

Disproportionate share adjustment factor.

This provision establishes the criteria and calculation methodology for the disproportionate share hospital (DSH) adjustment factor for capital prospective payments.

Indirect medical education adjustment factor.

This provision defines the methodology for calculating the indirect medical education (IME) adjustment factor based on resident-to-census ratios.

General description.

This provision describes the transition methodologies for capital payments, including fully prospective and hold-harmless payment methods for new and existing hospitals.

Determining and updating the hospital-specific rate.

This provision establishes the methodology for intermediaries to calculate and update hospital-specific rates for Medicare inpatient capital-related costs, including base-year cost reporting, case-mix adjustments, and transfer adjustment factors.

Determining hospital-specific rates in cases of hospital merger, consolidation, or dissolution.

This provision establishes the methodology for calculating hospital-specific capital payment rates when hospitals undergo mergers, consolidations, or dissolutions.

Payment based on the hospital-specific rate.

This provision defines the calculation for the payment amount per discharge based on the hospital-specific rate, DRG weighting factors, and applicable percentages.

Transition period payment methodologies.

This provision outlines the transition period payment methodologies for hospital capital costs, including criteria for fully prospective versus hold-harmless payment models.

Fully prospective payment methodology.

A hospital paid under the fully prospective payment methodology receives a payment per discharge based on a proportion of the hospital-specific rate and the Federal rate as follows:

Hold-harmless payment methodology.

This provision details the hold-harmless payment methodology for hospital capital costs, including the calculation of old and new capital costs and election of payment alternatives.

Exception payments.

This provision establishes the criteria and methodology for Medicare exception payments to hospitals for capital-related costs, including provisions for extraordinary circumstances and special project exceptions.

Budget neutrality adjustment.

For FY 1992 through FY 1995, CMS will determine an adjustment to the hospital-specific rate and the Federal rate proportionately so that the estimated aggregate payments under this subpart for inpatient hospital capital costs each fiscal...

General provisions for hospitals located in Puerto Rico.

This provision establishes that hospitals in Puerto Rico are subject to the prospective payment system for inpatient hospital capital-related costs, subject to specific exceptions.

Payments to hospitals located in Puerto Rico.

This provision specifies the calculation methodology for capital-related cost payments to hospitals in Puerto Rico under the prospective payment system for various fiscal years.

Discharges and transfers.

This provision defines the criteria for hospital inpatient discharges and transfers for the purpose of determining prospective payment system reimbursement.

General requirements.

Hospitals must meet specific subpart conditions to receive Medicare prospective payment system reimbursement, with failure to comply resulting in payment withholding or provider agreement termination.

Basis and scope of subpart.

This section implements the per diem-based prospective payment system for inpatient psychiatric facilities, outlining the framework for federal rate development and payment adjustments.

Definitions.

This section provides definitions for terms used in the inpatient psychiatric facility prospective payment system, including facility types, payment rates, and clinical criteria.