Reasonable Cost-Based Payments - General

10 - Reasonable Cost-Based Payments - General (Rev. 30, 09-05-03) Chapter 18, Subchapter A, sets forth the rules CMS follows in determining the amount CMS will pay to Health Care Prepayment Plans (HCPPs) for services furnished on a reasonable cost basis. Chapter 18, Subchapter A, deals with general requirements, bill processing options, budget and enrollment forecasting, interim payments and reports, adjustments of payments, interim settlement procedures, final cost reports, final settlement, general payment principles for HCPPs, the prudent buyer principle, reimbursable costs, record keeping, and accounting standards. Chapter 18, Subchapter B, gives the provider payment principles applicable to cost-based contracts, references specific cost topics in the Medicare Provider Reimbursement Manual (Pub. 15), and provides specific guidelines on provider of services, physician and other Part B service costs, and costs related to enrollment, marketing, membership, and reinsurance for HCPPs. Chapter 18, Subchapter C, covers cost apportionment for HCPPs. Background The HCPPs are public or private entities that are organized under the laws of a state to provide health services on a prepayment basis to enrolled members. These HMO/CMPs are eligible to enter into agreement with the Secretary of the Department of Health and Human Services under §1833 of the Social Security Act (the Act) to furnish services to Medicare beneficiaries. Chapter 18 of the manual is in effect for HCPPs with active agreements and those who have left the program without final settlement. The HCPPs are paid the reasonable cost actually incurred in providing Medicare-covered services to Medicare enrollees. These organizations are paid each month, in advance, an interim per capita rate for each Medicare enrollee. The total monthly payment is determined by multiplying the interim per capita rate by the number of the HCPP's Medicare enrollees, plus or minus adjustments made by CMS. Further adjustments may be made at the end of the contract period to bring the interim payments made to the HCPP during the period into agreement with the reimbursement amount determined payable to the HCPP for services rendered to Medicare enrollees during that period. Total payment is calculated based on the HCPP's final cost report. In addition, the HCPP may furnish services to Medicare beneficiaries who are not enrolled in the organization. Since payment to the HCPP under §1833 of the Act is limited to the HCPP's Medicare enrollees, services furnished to nonenrolled Medicare beneficiaries are outside the scope of the HCPP's agreement with the Secretary. Medicare payments for services furnished to nonenrolled beneficiaries are made through the original Medicare Fee-For-Service (FFS) payment system in accordance with the usual Medicare payment process.