Payment Adjustment for Certain Cancer Hospitals

10.6.3 - Payment Adjustment for Certain Cancer Hospitals (Rev. 2453, Issued: 04-26-12, Effective: 01-01-12, Implementation: 05-29 -12) Section 3138 of the Affordable Care Act requires CMS to conduct a study to determine if, under the OPPS, outpatient costs incurred by 11 specified cancer hospitals exceed the costs incurred by other hospitals furnishing services under the OPPS. In addition, Section 3138 of the Affordable Care Act provides that if the specified cancer hospitals’ costs are determined to be greater than the costs of other hospitals furnishing services under the OPPS, CMS shall provide a payment adjustment to the 11 specified cancer hospitals that will appropriately reflect these higher outpatient costs. We determined that outpatient costs incurred by the 11 specified cancer hospitals were greater than the costs incurred by other OPPS hospitals. Therefore, consistent with Section 3138 of the Affordable Care Act, we adopted a policy to provide additional payments to each of the 11 cancer hospitals so that each cancer hospital’s final payment to cost ratio (PCR) for services provided in a given calendar year is equal to the weighted average PCR (which we refer to as the “target PCR”) for other hospitals paid under the OPPS. The target PCR is set in advance of the calendar year and is calculated using the most recent submitted or settled cost report data that are available at the time of final rulemaking for the calendar year. The cancer hospital payment adjustment will be made through interim monthly payments with the final payment adjustment amount calculated based on the provider’s settled cost report. The calculation for the monthly cancer hospital payment adjustment amount is described as follows: Step 1 - Compute the cancer hospital target payment amount for each month by first multiplying the total charges for covered services for all OPPS services on claims paid during the month and adjust the total charges to cost by multiplying them by the outpatient cost-to-charge ratio and then multiplying this amount by the target PCR for the calendar year. Step 2 - Add together the total Medicare program payments, unreduced coinsurance and deductible applied for all APCs, as well as all outlier payments (including reconciled outlier payments and the time value of money) and transitional pass-through payments for drugs, biological and/or devices for those same claims paid during the month as those used in Step 1. If the result is greater than the result of Step 1, go to Step 4. No additional payment is due this month. Step 3 - Subtract the result of Step 2 from the result of Step 1 and pay .85 times this amount. Step 4 - When the result of step 2 is greater than the result of Step 1 for the final month of a provider’s cost report period, do nothing more. When the result of Step 2 is greater than the result of Step 1 for any other month, store all Step 1 and Step 2 totals and include these totals with the totals for the next month’s additional payment calculation.