Medicare Delivers Interim Financial Relief for Rural Hospitals as Debate Continues Over Role of APCs

Despite debate over whether rural hospitals should be exempt from all or part of the outpatient prospective payment system (OPPS), Medicare recently decided to hold harmless rural hospitals with fewer than 100 beds 80 percent of all rural hospitals through 2003. These hospitals will receive transitional payments to fully replace any losses they might have incurred under APCs. In essence, they will be paid as if APCs had not gone into effect. During the transition, fiscal intermediaries (FIs) are supposed to make monthly TOP payments to rural hospitals based on a cost-to-charge ratio of 80 percent.

In April the Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare policy, voted to recommend that Congress provide relief for rural hospitals. MedPAC called for a one-year, $22 million increase in payments to low-volume hospitals. The commission also supported creation of a fund to raise the cap on the disproportionate share allotment a hospital can receive to 10 percent, compared to the current 5.25 percent. In addition, MedPAC urged HCFA to study labor costs affecting Medicare payment in rural areas.

With its recent decision, HCFA advises administrators of the affected rural hospitals to check the accuracy of the reimbursement they receive from Medicares FIs under the Transitional Outpatient Payment (TOP) program. However, according to Karen Peppmuller, director of finance with the Nebraska Association of Hospitals and Health Systems in Lincoln, Neb., there is some confusion among providers and FIs about how the data for this program are calculated. TOP payments must be calculated correctly for fair reimbursement, she warns.

According to HCFA, FIs are using its PRICER software for the TOPs calculations. HCFA advises small rural hospitals to work with their FIs to check the accuracy of TOP payments, but states that there really is no simple way to know what the payments will be. Hospitals will just have to rely on what PRICER does. (If you choose to check without the software, the HCFA calculation rules FIs must use are at the end of this article.)

There is a glimmer of hope that HCFA will annually change the basis (now founded on 1996 cost-to-charge ratio data) it uses for calculating TOPs payments. But, it is unlikely to be retroactive because differences between the interim TOPs payments and the final payment are determined during the settlement of the hospitals cost report.

Interim Strategies

Hospital financial officers and billing departments have a concern that their FIs are not making any TOPs payments. But, experts are reluctant to offer specific guidelines to fix problems because no data have been collected on how well rural hospitals are doing
under APCs.

However, in a recent Coding Institute teleconference, Sandra Soerries, CPC, CPC-H, [...]

- Published on 2001-05-01