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62 FR 43668, Aug. 15, 1997, unless otherwise noted. This subpart implements sections 1881 (b)(2) and (b)(7) of the Act by— (a) Setting forth the principles and authorities under which CMS is authorized to establish a prospective payment system for outpatient maintenance dialysis furnished in or under the supervision of a dialysis facility under part 494 of this chapter (referred to as “facility”). For purposes of this section and §413.172 through §413.198, “outpatient maintenance dialysis” means outpatient dialysis provided by a dialysis facility, home dialysis or self-dialysis as defined in §494.10 of this chapter and includes all items and services specified in §410.50 and §410.52 of this chapter. (b) Providing procedures and criteria under which a pediatric ESRD facility (an ESRD facility with at least a 50 percent pediatric patient mix as specified in §413.184 of this subpart) may receive an exception to the prospective payment rates; and (c) Establishing procedures that a facility must follow to appeal its payment amount under the prospective payment system. [62 FR 43668, Aug. 15, 1997, as amended at 70 FR 70330, Nov. 21, 2005; 73 FR 20474, Apr. 15, 2008] § 413.172 Principles of prospective payment.(a) Payments for outpatient maintenance dialysis are based on rates set prospectively by CMS. (b) All approved ESRD facilities must accept the prospective payment rates established by CMS as payment in full for covered outpatient maintenance dialysis. Approved ESRD facility means— (1) Any independent or hospital-based facility (as defined in accordance with §413.174(b) and §413.174(c) of this part) that has been approved by CMS to participate in Medicare as an ESRD supplier; or (2) Any approved independent facility with a written agreement with the Secretary. Under the agreement, the independent ESRD facility agrees— (i) To maintain compliance with the conditions for coverage set forth in part 494 of this chapter and to report promptly to CMS any failure to do so; and (ii) Not to charge the beneficiary or any other person for items and services for which the beneficiary is entitled to have payment made under the provisions of this part. (c) CMS publishes the methodology used to establish payment rates and the changes specified in §413.196(b) in the [62 FR 43668, Aug. 15, 1997, as amended at 73 FR 20474, Apr. 15, 2008] § 413.174 Prospective rates for hospital-based and independent ESRD facilities.(a) Establishment of rates. CMS establishes prospective payment rates for ESRD facilities using the following methodology: (1) For dialysis services furnished prior to January 1, 2009, the methodology differentiates between hospital-based and independent ESRD facilities; (2) For dialysis services furnished on or after January 1, 2009— (i) The composite rate paid to hospital-based facilities for dialysis services shall be the same as the composite rate paid for such services furnished by independent renal dialysis facilities. (ii) When applying the geographic index to hospital-based facilities, the labor share shall be based on the labor share otherwise applied for renal dialysis facilities. (3) Effectively encourages efficient delivery of dialysis services; and (4) Provides incentives for increasing the use of home dialysis. (b) Determination of independent facility. For purposes of rate-setting and payment under this section, CMS considers any facility that does not meet all of the criteria of a hospital-based facility to be an independent facility. A determination under this paragraph (b) is an initial determination under §498.3 of this chapter. (c) Determination of hospital-based facility. A determination under this paragraph (c) is an initial determination under §498.3 of this chapter. CMS determines that a facility is hospital-based if the— (1) Facility and hospital are subject to the bylaws and operating decisions of a common governing board. This governing board, which has final administrative responsibility, approves all personnel actions, appoints medical staff, and carries out similar management functions; (2) Facility's director or administrator is under the supervision of the hospital's chief executive officer and reports through him or her to the governing board; (3) Facility personnel policies and practices conform to those of the hospital; (4) Administrative functions of the facility (for example, records, billing, laundry, housekeeping, and purchasing) are integrated with those of the hospital; and (5) Facility and hospital are financially integrated, as evidenced by the cost report, which reflects allocation of overhead to the facility through the required step-down methodology. (d) Nondetermination of hospital-based facility. In determining whether a facility is hospital-based, CMS does not consider— (1) An agreement between a facility and a hospital concerning patient referral; (2) A shared service arrangement between a facility and a hospital; or (3) The physical location of a facility on the premises of a hospital. (e) Add-on amounts. If all the physicians furnishing services to patients in an ESRD facility elect the initial method of payment (as described in §414.313(c) of this chapter), the prospective rate (as described in paragraph (a) of this section) paid to that facility is increased by an add-on amount as described in §414.313. (f) Additional payment for separately billable drugs. CMS makes an additional payment for certain drugs furnished to ESRD patients by a Medicare-approved ESRD facility. CMS makes this payment directly to the ESRD facility. Payment for these drugs is made— (1) Only on an assignment basis, directly to the facility which must accept, as payment in full, the amount that CMS determines; (2) Subject to the Part B deductible and coinsurance; (3) Effective January 1, 2006, to hospital-based ESRD facilities in accordance with the methodology specified in §414.904 of this subchapter. (4) To independent ESRD facilities in accordance with the methodology specified in §405.517 of this subchapter. [62 FR 43668, Aug. 15, 1997, as amended at 70 FR 70330, Nov. 21, 2005; 73 FR 69935, Nov. 19, 2008] § 413.176 Amount of payments.(a) If the beneficiary has incurred the full deductible applicable under Part B of Medicare before the dialysis treatment, the intermediary pays the facility 80 percent of its prospective payment rate. (b) If the beneficiary has not incurred the full deductible applicable under Part B of Medicare before the dialysis treatment, the intermediary subtracts the amount applicable to the deductible from the facility's prospective rate and pays the facility 80 percent of the remainder, if any. § 413.178 Bad debts.(a) CMS will reimburse each facility its allowable Medicare bad debts, as defined in §413.89(b), up to the facility's costs, as determined under Medicare principles, in a single lump sum payment at the end of the facility's cost reporting period. (b) A facility must attempt to collect deductible and coinsurance amounts owed by beneficiaries before requesting reimbursement from CMS for uncollectible amounts. Section 413.89 specifies the collection efforts facilities must make. (c) A facility must request payment for uncollectible deductible and coinsurance amounts owed by beneficiaries by submitting an itemized list that specifically enumerates all uncollectable amounts related to covered services under the composite rate. (d) Bad debts arising from covered ESRD services paid under a reasonable charge-based methodology or a fee schedule are not reimbursable under the program. [62 FR 43668, Aug. 15, 1997, as amended at 70 FR 47489, Aug. 12, 2005; 71 FR 69785, Dec. 1, 2006] § 413.180 Procedures for requesting exceptions to payment rates.(a) Outpatient maintenance dialysis payments. All payments for outpatient maintenance dialysis furnished at or by facilities are made on the basis of prospective payment rates. (b) Criteria for requesting an exception. If a pediatric ESRD facility projects on the basis of prior year costs and utilization trends that it has an allowable cost per treatment higher than its prospective rate set under §413.174, and if these excess costs are attributable to one or more of the factors in §413.182, the facility may request, in accordance with paragraph (e) of this section, that CMS approve an exception to that rate and set a higher prospective payment rate. (c) Application of deductible and coinsurance. The higher payment rate is subject to the application of deductible and coinsurance in accordance with §413.176. (d) Payment rate exception request. Effective October 1, 2002, CMS may approve exceptions to a pediatric ESRD facility's updated prospective payment rate, if the pediatric ESRD facility did not have an approved exception rate as of October 1, 2002. A pediatric ESRD facility may request an exception to its payment rate at any time after it is in operation for at least 12 consecutive months. (e) Documentation for a payment rate exception request. If the facility is requesting an exception to its payment rate, it must submit to CMS its most recently completed cost report as required under §413.198 and whatever statistics, data, and budgetary projections as determined by CMS to be needed to adjudicate each type of exception. CMS may audit any cost report or other information submitted. The materials submitted to CMS must— (1) Separately identify elements of cost contributing to costs per treatment in excess of the facility's payment rate; (2) Show that the facility's costs, including those costs that are not directly attributable to the exception criteria, are allowable and reasonable under the reasonable cost principles set forth in this part; (3) Show that the elements of excessive cost are specifically attributable to one or more conditions specified in §413.182; (4) Specify the amount of additional payment per treatment the facility believes is required for it to recover its justifiable excess costs; and (5) Specify that the facility has compared its most recently completed cost report with cost reports from (at least 2) prior years. The facility must explain any material statistical data or cost changes, or both, and include an explanation with the documentation supporting the exception request. (f) Completion of requirements and criteria. The facility must demonstrate to CMS's satisfaction that the requirements of this section and the criteria in §413.182 are fully met. The burden of proof is on the facility to show that one or more of the criteria are met and that the excessive costs are justifiable under the reasonable cost principles set forth in this part. (g) Approval of an exception request. An exception request is deemed approved unless it is disapproved within 60 working days after it is filed with its intermediary. (h) Determination of an exception request. In determining the facility's payment rate under the exception process, CMS excludes all costs that are not reasonable or allowable under the reasonable cost principles set forth in this part. (i) Period of approval: Payment exception request. A prospective exception payment rate approved by CMS applies for the period from the date the complete exception request was filed with its intermediary until 30 days after the intermediary's receipt of the facility's letter notifying the intermediary of the facility's request to give up its exception rate and be subject to the basic case-mix adjusted composite payment rate methodology. ESRD facilities electing to retain their nonpediatric or pediatric exception rates (including self-dialysis training) do not need to notify their intermediaries. Once a facility notifies its fiscal intermediary in writing that it cannot retain its current exception rate, that decision cannot be subsequently reversed. (j) Denial of an exception request. CMS denies exception requests submitted without the documentation specified in §413.182 and the applicable regulations cited there. (k) Criteria for refiling a denied exception request. A pediatric ESRD facility that was denied an exception request may immediately file another exception request. Any subsequent exception request must address and document the issues cited in CMS' denial letter. [62 FR 43668, Aug. 15, 1997, as amended at 70 FR 70331, Nov. 21, 2005] § 413.182 Criteria for approval of exception requests.(a) CMS may approve exceptions to a pediatric ESRD facility's prospective payment rate if the pediatric ESRD facility did not have an approved exception rate as of October 1, 2002. (b) The pediatric ESRD facility must demonstrate, by convincing objective evidence, that its total per treatment costs are reasonable and allowable under the relevant cost reimbursement principles of part 413 and that its per treatment costs in excess of its payment rate are directly attributable to any of the following criteria: (1) Pediatric patient mix, as specified in §413.184. (2) Self-dialysis training costs in pediatric facilities, as specified in §413.186. [70 FR 70331, Nov. 21, 2005] § 413.184 Payment exception: Pediatric patient mix.(a) Qualifications. To qualify for an exception to its prospective payment rate based on its pediatric patient mix a facility must demonstrate that— (1) At least 50 percent of its patients are individuals under 18 years of age; (2) Its nursing personnel costs are allocated properly between each mode of care; (3) The additional nursing hours per treatment are not the result of an excess number of employees; (4) Its pediatric patients require a significantly higher staff-to-patient ratio than typical adult patients; and (5) These services, procedures, or supplies and their per treatment costs are clearly prudent and reasonable when compared to those of pediatric facilities with a similar patient mix. (b) Documentation. (1) A pediatric ESRD facility must submit a listing of all outpatient dialysis patients (including all home patients) treated during the most recently completed and filed cost report (in accordance with cost reporting requirements under §413.198) showing— (i) Age of patients and percentage of patients under the age of 18; (ii) Individual patient diagnosis; (iii) Home patients and ages; (iv) In-facility patients, staff-assisted, or self-dialysis; (v) Diabetic patients; and (vi) Patients isolated because of contagious disease. (2) The facility also must— (i) Submit documentation on costs of nursing personnel (registered nurses, licensed practical nurses, technicians, and aides) incurred during the most recently completed fiscal year cost report showing— (A) Amount each employee was paid; (B) Number of personnel; (C) Amount of time spent in the dialysis unit; and (D) Staff-to-patient ratio based on total hours, with an analysis of productive and nonproductive hours. (ii) Submit documentation on supply costs incurred during the most recently completed fiscal or calendar year cost report showing— (A) By modality, a complete list of supplies used routinely in a dialysis treatment; (B) The make and model number of each dialyzer and its component cost; and (C) That supplies are prudently purchased (for example, that bulk discounts are used when available). (iii) Submit documentation on overhead costs incurred during the most recently completed fiscal or calendar year cost reporting year showing— (A) The basis of the higher overhead costs; (B) The impact on the specific cost components; and (C) The effect on per treatment costs. [62 FR 43668, Aug. 15, 1997, as amended at 70 FR 70331, Nov. 21, 2005] § 413.186 Payment exception: Self-dialysis training costs in pediatric facilities.(a) Qualification. To qualify for an exception to the prospective payment rate based on self-dialysis training costs, the pediatric ESRD facility must establish that it incurs per treatment costs for furnishing self-dialysis and home dialysis training that exceed the facility's payment rate for the training sessions. (b) Justification. To justify its exception request, a facility must— (1) Separately identify those elements contributing to its costs in excess of the composite training rate; and (2) Demonstrate that its per treatment costs are reasonable and allowable. (c) Criteria for determining proper cost reporting. CMS considers the pediatric ESRD facility's total costs, cost finding and apportionment, including its allocation of costs, to determine if costs are properly reported by treatment modality. (d) Limitation of exception requests. Exception requests for a higher training rate are limited to those cost components relating to training such as technical staff, medical supplies, and the special costs of education (manuals and education materials). These requests may include overhead and other indirect costs to the extent that these costs are directly attributable to the additional training costs. (e) Documentation. The pediatric ESRD facility must provide the following information to support its exception request: (1) A copy of the facility's training program. (2) Computation of the facility's cost per treatment for maintenance sessions and training sessions including an explanation of the cost difference between the two modalities. (3) Class size and patients' training schedules. (4) Number of training sessions required, by treatment modality, to train patients. (5) Number of patients trained for the current year and the prior 2 years on a monthly basis. (6) Projection for the next 12 months of future training candidates. (7) The number and qualifications of staff at training sessions. (f) Accelerated training exception. (1) A pediatric ESRD facility may bill Medicare for a dialysis training session only when a patient receives a dialysis treatment (normally 3 times a week for hemodialysis). Continuous cycling peritoneal dialysis (CCPD) and continuous ambulatory peritoneal dialysis (CAPD) are daily treatment modalities; ESRD facilities are paid the equivalent of three hemodialysis treatments for each week that CCPD and CAPD treatments are provided. (2) If a pediatric ESRD facility elects to train all its patients using a particular treatment modality more often than during each dialysis treatment and, as a result, the number of billable training dialysis sessions is less than the number of actual training sessions, the facility may request a composite rate exception, limited to the lesser of the— (i) Facility's projected training cost per treatment; or (ii) Cost per treatment the facility receives in training a patient if it had trained patients only during a dialysis treatment, that is, three times per week. (3) An ESRD facility may bill a maximum of 25 training sessions per patient for hemodialysis training and 15 sessions for CCPD and CAPD training. (4) In computing the payment amount under an accelerated training exception, CMS uses a minimum number of training sessions per patient (15 for hemodialysis and 5 for CAPD and CCPD) when the facility actually provides fewer than the minimum number of training sessions. (5) To justify an accelerated training exception request, an ESRD facility must document that a significant number of training sessions for a particular modality are provided during a shorter but more condensed period. (6) The facility must submit with the exception request a list of patients, by modality, trained during the most recent cost report period. The list must include each beneficiary's— (i) Name; (ii) Age; and (iii) Training status (completed, not completed, being retrained, or in the process of being trained). (7) The total treatments from the patient list must be the same as the total treatments reported on the cost report filed with the request. [70 FR 70331, Nov. 21, 2005] § 413.194 Appeals.(a) Appeals under section 1878 of the Act. (1) A facility that disputes the amount of its allowable Medicare bad debts reimbursed by CMS under §413.178 may request review by the intermediary or the Provider Reimbursement Review Board (PRRB) in accordance with subpart R of part 405 of this chapter. (2) A facility must request and obtain a final agency decision prior to seeking judicial review of a dispute regarding the amount of allowable Medicare bad debts. (b) Other appeals. (1) A facility that has requested higher payment per treatment in accordance with §413.180 may request review from the intermediary or the PRRB if CMS has denied the request in whole or in part. In such a case, the procedure in subpart R of part 405 of this chapter is followed to the extent that it is applicable. (2) The PRRB has the authority to review the action taken by CMS on the facility's requests. However, the PRRB's decision is subject to review by the Administrator under §405.1875 of this chapter. (3) A facility must request and obtain a final agency decision, in accordance with paragraph (b)(1) of this section, prior to seeking judicial review of the denial, in whole or in part, of the exception request. (c) Procedure. (1) The facility must request review within 180 days of the date of the decision on which review is sought. (2) The facility may not submit to the reviewing entity, whether it is the intermediary or the PRRB, any additional information or cost data that had not been submitted to CMS at the time CMS evaluated the exception request. (d) Determining amount in controversy. For purposes of determining PRRB jurisdiction under subpart R of part 405 of this chapter for the appeals described in paragraph (b) of this section— (1) The amount in controversy per treatment is determined by subtracting the amount of program payment from the amount the facility requested under §413.180; and (2) The total amount in controversy is calculated by multiplying the amount in controversy per treatment by the projected number of treatments for the exception request period. § 413.196 Notification of changes in rate-setting methodologies and payment rates.(a) CMS or the facility's intermediary notifies each facility of changes in its payment rate. This notice includes changes in individual facility payment rates resulting from corrections or revisions of particular geographic labor cost adjustment factors. (b) Changes in payment rates resulting from incorporation of updated cost data or general revisions of geographic labor cost adjustment factors are announced by notice published in the § 413.198 Recordkeeping and cost reporting requirements for outpatient maintenance dialysis.(a) Purpose and Scope. This section implements section 1881(b)(2)(B)(i) of the Act by specifying recordkeeping and cost reporting requirements for ESRD facilities under part 494 of this chapter. The records and reports will enable CMS to determine the costs incurred in furnishing outpatient maintenance dialysis as defined in §413.170(a). (b) Recordkeeping and reporting requirements. (1) Each facility must keep adequate records and submit the appropriate CMS-approved cost report in accordance with §§413.20 and 413.24, which provide rules on financial data and reports, and adequate cost data and cost finding, respectively. (2) The cost reimbursement principles set forth in this part (beginning with §413.134, Depreciation, and excluding the principles listed in paragraph (b)(4) of this section), apply in the determination and reporting of the allowable cost incurred in furnishing outpatient maintenance dialysis treatments to patients dialyzing in the facility, or incurred by the facility in furnishing home dialysis service, supplies, and equipment. (3) Allowable cost is the reasonable cost related to dialysis treatments. Reasonable cost includes all necessary and proper expenses incurred by the facility in furnishing the dialysis treatments, such as administrative costs, maintenance costs, and premium payments for employee health and pension plans. It includes both direct and indirect costs and normal standby costs. Reasonable cost does not include costs that— (i) Are not related to patient care for outpatient maintenance dialysis; (ii) Are for services or items specifically not reimbursable under the program; (iii) Flow from the provision of luxury items or servicess (items or services substantially in excess of or more expensive than those generally considered necessary for the provision of needed health services); or (iv) Are found to be substantially out of line with other institutions in the same area that are similar in size, scope of services, utilization, and other relevant factors. (4) The following principles of this part do not apply in determining adjustments to allowable costs as reported by ESRD facilities: (i) Section 413.157, Return on equity capital of proprietary providers; (ii) Section 413.200, Reimbursement of OPAs and histocompatibility laboratories; (iii) Section 413.9, Cost related to patient care (except for the principles stated in paragraph (b)(3) of this section); and (iv) Sections 413.64, Payments to providers, and §§413.13, 413.30, 413.35, 413.40, 413.74, and §§415.55 through 415.70, §415.162, and §415.164 of this chapter, Principles of reimbursement for services by hospital-based physicians. [62 FR 43668, Aug. 15, 1997, as amended at 73 FR 20474, Apr. 15, 2008] § 413.200 Payment of independent organ procurement organizations and histocompatibility laboratories.(a) Principle. Covered services furnished after September 30, 1978 by organ procurement organizations (OPOs) and histocompatibility laboratories in connection with kidney acquisition and transplantation will be reimbursed under the principles for determining reasonable cost contained in this part. Services furnished by freestanding OPOs and histocompatibility laboratories, that have an agreement with the Secretary in accordance with paragraph (c) of this section, will be reimbursed by making an interim payment to the transplant hospitals using these services and by making a retroactive adjustment, directly with the OPO or laboratory, based upon a cost report filed by the OPO or laboratory. (The reasonable costs of services furnished by hospital based OPOs or laboratories will be reimbursed in accordance with the principles contained in §§413.60 and 413.64.) (b) Definitions. For purposes of this section: Freestanding refers to an OPO or a histocompatibility laboratory that is not— (1) Subject to the control of the hospital with respect to the hiring, firing, training, and paying of employees; and (2) Considered as a department of the hospital for insurance purposes (including malpractice insurance, general liability insurance, worker's compensation insurance, and employee retirement insurance). Histocompatibility laboratory means a laboratory meeting the standards and providing the services for kidneys or other organs set forth in §413.2171(d) of this chapter. OPO means an organization defined in §486.302 of this chapter. (c) Agreements with independent OPOs and laboratories. (1) Any freestanding OPO or histocompatibility laboratory that wishes to have the cost of its pretransplant services reimbursed under the Medicare program must file an agreement with CMS under which the OPO or laboratory agrees— (i) To file a cost report in accordance with §413.24(f) within three months after the end of each fiscal year; (ii) To permit CMS to designate an intermediary to determine the interim reimbursement rate payable to the transplant hospitals for services provided by the OPO or laboratory and to make a determination of reasonable cost based upon the cost report filed by the OPO or laboratory; (iii) To provide such budget or cost projection information as may be required to establish an initial interim reimbursement rate; (iv) To pay to CMS amounts that have been paid by CMS to transplant hospitals and that are determined to be in excess of the reasonable cost of the services provided by the OPO or laboratory; and (v) Not to charge any individual for items or services for which that individual is entitled to have payment made under section 1861 of the Act. (2) The initial cost report due from an OPO or laboratory is for its first fiscal year during any portion of which it had an agreement with the Secretary under paragraphs (c) (1) and (2) of this section. The initial cost report covers only the period covered by the agreement. (d) Interim reimbursement. (1) Hospitals eligible to receive Medicare reimbursement for renal transplantation will be paid for the pretransplantation services of a freestanding OPO or histocompatibility laboratory that has an agreement with the Secretary under paragraph (c) of this section, on the basis of an interim rate established by an intermediary for that OPO or laboratory. (2) The interim rate will be based on the average cost per service incurred by an OPO or laboratory, during its previous fiscal year, associated with procuring a kidney for transplantation. This interim rate may be adjusted if necessary for anticipated cost changes. If there is not adequate cost data to determine the initial interim rate, it will be determined according to the OPO's or laboratory's estimate of its projected costs for the fiscal year. (3) Payments made on the basis of the interim rate will be reconciled directly with the OPO or laboratory after the close of its fiscal year, in accordance with paragraph (e) of this section. (4) Information on the interim rate for all freestanding OPOs and histocompatibility laboratories shall be disseminated to all transplant hospitals and intermediaries. (e) Retroactive adjustment —(1) Cost reports. Information provided in cost reports by freestanding OPOs and histocompatibility laboratories must meet the requirements for cost data and cost finding specified in paragraphs (a) through (e) of §413.24. These cost reports must provide a complete accounting of the cost incurred by the agency or laboratory in providing covered services, the total number of Medicare beneficiaries who received those services, and any other data necessary to enable the intermediary to make a determination of the reasonable cost of covered services provided to Medicare beneficiaries. (2) Audit and adjustment. A cost report submitted by a freestanding OPO or histocompatibility laboratory will be reviewed by the intermediary and a new interim reimbursement rate for the succeeding fiscal year will be established based upon this review. A retroactive adjustment in the amount paid under the interim rate will be made in accordance with §413.64(f). If the determination of reasonable cost reveals an overpayment or underpayment resulting from the interim reimbursement rate paid to transplant hospitals, a lump sum adjustment will be made directly between that intermediary and the OPO or laboratory. (f) For services furnished on or after April 1, 1988, no payment may be made for services furnished by an OPO that does not meet the requirements of part 486, subpart G of this chapter. (g) Appeals. Any OPO or histocompatibility laboratory that disagrees with an intermediary's cost determination under this section is entitled to an intermediary hearing, in accordance with the procedures contained in §§405.1811 through 405.1833, if the amount in controversy is $1,000 or more. [62 FR 43668, Aug. 15, 1997, as amended at 71 FR 31046, May 31, 2006] § 413.202 Organ procurement organization (OPO) cost for kidneys sent to foreign countries or transplanted in patients other than Medicare beneficiaries.An OPO's total costs for all kidneys is reduced by the costs associated with procuring kidneys sent to foreign transplant centers or transplanted in patients other than Medicare beneficiaries. OPOs, as defined in §486.302 of this chapter, must separate costs for procuring kidneys that are sent to foreign transplant centers and kidneys transplanted in patients other than Medicare beneficiaries from Medicare allowable costs prior to final settlement by the Medicare fiscal intermediaries. Medicare costs are based on the ratio of the number of usable kidneys transplanted into Medicare beneficiaries to the total number of usable kidneys applied to reasonable costs. Certain long-standing arrangements that existed before March 3, 1988 (for example, an OPO that procures kidneys at a military transplant hospital for transplant at that hospital), will be deemed to be Medicare kidneys for cost reporting statistical purposes. The OPO must submit a request to the fiscal intermediary for review and approval of these arrangements. [62 FR 43668, Aug. 15, 1997, as amended at 71 FR 31046, May 31, 2006] § 413.203 Transplant center costs for organs sent to foreign countries or transplanted in patients other than Medicare beneficiaries.(a) A transplant center's total costs for all organs is reduced by the costs associated with procuring organs sent to foreign transplant centers or transplanted in patients other than Medicare beneficiaries. Organs are defined in §486.302 (only covered organs will be paid for on a reasonable cost basis). (b) Transplant center hospitals must separate costs for procuring organs that are sent to foreign transplant centers and organs transplanted in patients other than Medicare beneficiaries from Medicare allowable costs prior to final cost settlement by the Medicare fiscal intermediaries. (c) Medicare costs are based on the ratio of the number of usable organs transplanted into Medicare beneficiaries to the total number of usable organs applied to reasonable costs. 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