Time Value of Money

10.7.2.3 - Time Value of Money (Rev. 2242, Issued: 06-17-11, Effective: 07-01-11, Implementation: 07-01-11) Effective for hospital outpatient services furnished in the first cost reporting period on or after January 1, 2009, at the time of any reconciliation under §10.7.2.2, OPPS outlier payment may be adjusted to account for the time value of money of any adjustments to OPPS outlier payments as a result of reconciliation. As described in 42 CFR 419.43(d)(6)(ii), the time value of money is applied from the midpoint of the hospital or CMHC’s cost reporting period being settled to the date on which the CMS Central Office receives notification from the Medicare contractor that reconciliation should be performed. If a hospital or CMHC’s OPPS outlier payments have met the criteria for reconciliation, CMS will calculate the aggregate adjustment using the instructions below concerning reprocessing claims and determine the additional amount attributable to the time value of money of that adjustment. The index that is used to calculate the time value of money is the monthly rate of return that the Medicare trust fund earns. This index can be found at http://www.ssa.gov/OACT/ProgData/newIssueRates.html. The following formula is used to calculate the rate of the time value of money: (Rate from Web site as of the midpoint of the cost report being settled / 365) * # of days from that midpoint until date of reconciliation. NOTE: The time value of money can be a positive or negative amount depending if the provider is owed money by CMS or if the provider owes money to CMS. For purposes of calculating the time value of money, the “date of reconciliation” is the day on which the CMS Central Office receives notification. This "date of reconciliation" is based solely on the date CMS Central Office receives notification and not on the date that reconciliation is approved by the CMS Central and Regional Offices. This date is either the postmark from the written notification sent to the CMS Central Office via mail by the Medicare contractor, or the date an email was received from the Medicare contractor by the CMS Central Office, whichever is first. The following is an example of the procedures for reconciliation and computation of the adjustment to account for the time value of money: EXAMPLE: Cost reporting period: 01/01/2009 - 12/31/2009 Midpoint of cost reporting period: 07/01/2009 Date of reconciliation: 12/31/2010 Number of days from midpoint until date of reconciliation: 548 Rate from Social Security Web site: 4.625% Overall ancillary CCR used to pay actual original claims in cost reporting period: 0.40 (This CCR could be from the tentatively settled 2006 or 2007 cost report.) Final settled operating CCR from 01/01/2009 - 12/31/2009 cost report: 0.50 Total OPPS outlier payout in 01/01/2009 - 12/31/2009 cost reporting period: $600,000 Because the CCR fluctuated from 0.40 at the time the claims were originally paid to 0.50 at the time of final settlement and the provider has an OPPS outlier payout greater than $500,000, the criteria have been met to trigger reconciliation. The Medicare contractor notifies the CMS Central and Regional Offices. The Medicare contractor reprices the claims in accordance with the process in §10.7.2.4 below. The repricing indicates the revised outlier payments are $700,000. Using the values above, the rate that is used for the time value of money is determined: (4.625 / 365) * 548 = 6.9438% Based on the claims reconciled, the provider is owed $100,000 ($700,000 - $600,000) for the reconciled amount and $6,943.80 for the time value of money.