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Issue 2006-04, April 2006
MLN Matters. . .Information for Medicare Providers
(Issued by the Centers for Medicare & Medicaid Services)
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Changes in Transitional Outpatient Payments (TOP) for Rural Sole Community Hospitals and Small Rural Hospitals for 2006
Provider Types Affected
Providers (hospitals) billing Medicare fiscal intermediaries (FIs)
Provider Action Needed
Impact to You
This article is based on Change Request (CR) 4367, which provides details regarding the changes in transitional outpatient payments (TOPs) for rural sole community hospitals (SCH) and small rural hospitals for 2006.
What You Need to Know
In accordance with the provisions of the Deficit Reduction Act (DRA), hold harmless transitional outpatient payments (TOPs) will continue for services rendered through December 31, 2008, for rural hospitals having 100 or fewer beds that are not SCH.
What You Need to Do
See the Background section of this article for further details regarding TOPs and interim TOPs for 2006.
Background
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; Pub. L. 108-173; Section 411; http://www.cms.hhs.gov/MMAUpdate/  ) extended the hold harmless provision for small rural hospitals having 100 or fewer beds through December 31, 2005.
The MMA (Section 411) also provided that the hold harmless transitional corridor payments apply through December 31, 2005 to sole community hospitals (SCH) located in rural areas. The hold harmless provisions for both of these hospitals expired December 31, 2005. The DRA, Section 5105, reinstituted the hold harmless transitional outpatient payments (TOPs) through December 31, 2008, for rural hospitals having 100 or fewer beds that are not SCH.
Note: Hold harmless transitional outpatient payments (TOPs) will continue for services rendered through December 31, 2008, for rural hospitals having 100 or fewer beds that are not SCH.
Interim TOP Payments
The interim TOP payments for these hospitals will continue to be calculated as 85 percent of the hold harmless amount, that is:
- TOP = 0.85 X (Hold Harmless Amount)
The hold harmless amount is the amount by which the provider’s charges times the cost-to-charge ratio (CCR), times the payment-to-cost ratio (PCR) exceeds the provider’s OPPS payments. Therefore, the payment calculation is as follows:
- TOP = 0.85 X [( (Provider’s charges X CCR X PCR) - Provider’s OPPS payments)]
Definition of Sole Community Hospitals (SCH) in Rural Areas
For purposes of receiving TOPs and interim TOPs, a hospital will be treated as an SCH located in a rural area if the hospital qualifies as both:
- A rural hospital having 100 or fewer beds; and
- A sole community hospital (SCH) located in a rural area.
Note: These hospitals are not eligible for TOPs for services furnished on or after January 1, 2006.
For purposes of TOPs, a hospital is considered rural if it is either:
- Geographically rural; or
- Classified to rural for wage index purposes.
For example, for purposes of TOPs:
- A hospital that is geographically rural is always considered rural, even if it is reclassified to urban for wage index purposes; or
- If a hospital is urban, but reclassified to rural for the wage index, it is considered rural.
Note: Your FI will use the Inpatient Provider Specific File (IPSF) to determine if a hospital is rural.
The Centers for Medicare & Medicaid Services (CMS) is also instructing your FI to ensure that all qualified rural hospitals have:
- A PCR and CCR entered in their Outpatient Provider Specific File (OPSF); and
- Receive interim TOPs payments.
Appropriate interim payments will be made retroactive to January 1, 2006.
Implementation
The implementation date for CR4367 is March 6, 2006.
Additional Information
For complete details, please see the official instruction issued to your intermediary regarding this change. That instruction may be viewed at http://www.cms.hhs.gov/Transmittals/downloads/R877CP.pdf  on the CMS Web site.
If you have any questions, please contact your intermediary at their toll-free number, which may be found at http://www.cms.hhs.gov/apps/contacts/ on the CMS Web site.
Disclaimer
This article was prepared as a service to the public and is not intended to grant rights or impose obligations. This article may contain references or links to statutes, regulations, or other policy materials. The information provided is only intended to be a general summary. It is not intended to take the place of either the written law or regulations. We encourage readers to review the specific statutes, regulations and other interpretive materials for a full and accurate statement of their contents.
Pub. 100-4, Transmittal# R877CP, CR# 4367
Medlearn Matters Number: MM4367
Related CR Release Date: February 24, 2006
Effective Date: January 1, 2006
Implementation Date: March 6, 2006
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