Initial/Tentative Retroactive Adjustments (a.k.a. Tentative

10.5 – Initial/Tentative Retroactive Adjustments (a.k.a. Tentative Settlements) (Rev. 27, 12-19-03) Section 42 CFR 413.64 and the Provider Reimbursement Manual, Part 1 (PRM-I), §2408.2, stipulate that an initial/tentative retroactive adjustment must be made as quickly as possible after the receipt of a cost report from the provider. Therefore, make such adjustments within 60 days of the acceptance of the provider’s cost report. Prompt initial/tentative retroactive adjustments are essential to ensure proper cash flow to providers. Reducing or delaying tentative settlements until a final determination could jeopardize the financial viability of some providers. You are not required to make initial/tentative retroactive adjustments where one of the conditions listed in §2408.2 of PRM-I applies. You are also not required to make initial/tentative retroactive adjustments for Skilled Nursing Facilities (SNFs) and Home Health Agencies (HHAs) when the provider did not receive Periodic Interim Payments (PIP) or other interim payments and the cost report does not include a claim for any reimbursement (e.g., bad debts, drug expenses) paid outside of the PPS system. However, you must complete initial/tentative retroactive adjustments of SNF and HHA cost reports when a portion of the provider’s payment is based on amounts determined through the cost report methodology (e.g., bad debts, drug expenses) or when the provider received PIP or non-PIP interim payments. For the purpose of initial/tentative retroactive adjustment, accept costs as reported. However, to avoid creating an overpayment, reduce the payment by any amounts attributable to obvious errors or inconsistencies in the cost report. Also give consideration to amounts owed the program by the provider (e.g., possible adjustments for prior periods and current period for unresolved issues, unrecovered overpayment). If the current year’s tentative settlement results in an underpayment and the provider has existing Medicare overpayments, follow the instructions in Chapter 3 of this manual. In instances where a provider is in bankruptcy or is part of bankruptcy proceedings, bankruptcy procedures will supersede these instructions. Cost-to-charge ratios (CCRs) are used in determining outlier payments, payments for pass-through devices, and monthly interim transitional corridor payments under the outpatient prospective payment system (OPPS). CCRs are also used to determine payments for extraordinarily high cost cases (cost outliers) under the acute care hospitals inpatient and long term care hospitals prospective payment systems (IPPS and LTCH PPS, respectively). You are required to update the CCRs for providers reimbursed under the OPPS, IPPS, and LTCH PPS to reflect cost and charge information from a provider’s most recent cost reporting period, whether tentatively settled or final settled. Therefore, immediately after completion of the tentative settlement, calculate the updated CCRs in a manner described below and input them into the Outpatient Provider Specific File (OPSF) and Provider Specific File (PSF). • If you made adjustments during the tentative settlement for prior year audit adjustments or other changes and these adjustments have an impact of more than 20% (plus/minus) on the CCRs from the “as filed” cost report, calculate the updated CCRs using the tentative settlement data. • If the tentative settlement adjustments have an impact of 20% or less on the CCRs from the “as filed” cost report, or if no adjustments to the tentative settlement were made, calculate the updated CCRs using the hospital’s “as filed” cost report.