Provider Receiving Payment Under the Prospective Payment

70 - Provider Receiving Payment Under the Prospective Payment System PPS (Rev. 4, 10-01-01) Payment to an HMO/CMP for provider services provided either directly or under arrangements shall be determined in accordance with 42 CFR Parts 405, 412, or 413, as appropriate, unless the organization can demonstrate in accordance with 42 CFR 417.548 that payment in excess of the amount authorized is justified on the basis of advantages gained by the organization. For example, for inpatient hospital services provided by a hospital participating under Medicare’s Prospective Payment System (PPS), the hospital is paid a predetermined amount for each inpatient stay by a Medicare patient based on the principal diagnosis or the inpatient stay. Additional payments are made for certain pass through costs, cost outliers, etc. Each hospital stay is grouped by principal diagnosis into one of the many Diagnosis Related Groups (DRGs). Based on the DRG, CMS’s PPS determines the amount the hospital receives for the inpatient stay, with some exceptions (e.g., cost outliers and day outliers). Payment is made with no retrospective adjustments to the DRG payment. However, an adjustment to a particular prospective payment would be needed, for example, where, upon medical review, the payment made was found to be improper or inaccurate. The Medicare HMO/CMP will be paid the same amount that Medicare would otherwise pay that hospital under PPS. This would include all amounts paid by the intermediary to the hospital for services rendered to the organization’s Medicare enrollees, including a proportionate share of pass through costs, payments for cost outliers, etc. Effective July 1, 1999, all Skilled Nursing Facilities (SNFs) are paid using the PPS. Prior to this date, some SNFs had the option to be paid on a prospective basis under §1888 of the Act. Payment to the HMO/CMP will be determined in accordance with the provider’s election. This rule applies to: • Inpatient hospital and SNF services provided by facilities owned or operated by the HMO/CMP; • Inpatient hospital and SNF services provided by facilities related to the HMO/CMP by common ownership or control; and • Inpatient hospital and SNF services provided by facilities with which the HMO/CMP has an arrangement.