New Reimbursement Methodology for Critical Access Hospitals Effective December 1

For inpatient admissions on or after December 1, 2009, payment for inpatient services of Critical Access Hospitals (CAHs), as defined by Centers for Medicare and Medicaid Services (CMS), shall be reimbursed under the Reasonable Cost Method. For admissions before December 1, 2009, CAHs are reimbursed subject to the DRG-based payment system.

Note: All network CAHs must sign a new contract amendment to their current TRICARE agreement in order to implement this reimbursement change.

This change in reimbursement methodology also applies to outpatient services, ambulatory surgery, ambulance services, authorized Partial Hospitalization Programs (PHPs) and clinical diagnostic laboratory tests meeting the requirements for reimbursement under the reasonable cost method.

The reasonable cost method will not apply to Medicare certified inpatient psychiatric or rehabilitation distinct part units within the CAH. Psychiatric services are subject to the mental health per diem payment, and rehabilitation services shall be reimbursed based on billed charges or a discount off billed charges.

Reasonable Cost Methodology

Reasonable cost is based on the actual cost of providing services and excluding any costs that are unnecessary in the efficient delivery of services covered by the program.

1. TMA shall calculate an overall inpatient CCR (Cost-to Charge Ratio) and overall outpatient CCR, obtained from data on the hospital’s most recently filed Medicare cost report as of July 1 of each year. 
2. The inpatient and outpatient CCRs are calculated using Medicare charges, e.g., Medicare costs for outpatient services are derived by multiplying an overall hospital outpatient CCR (by department or cost center) by Medicare charges in the same category.
3. For FY 2010, TRICARE will pay the lesser of 2.31 (which is the FY cap) multiplied by the billed charges or 101% of costs (using the hospital’s CCR and billed charges) for inpatient services and the lesser of 1.26 (FY cap) multiplied by the billed charges or 101% of costs for outpatient services.

TMA shall provide a list of CAHS and their corresponding inpatient and outpatient CCRs to the Managed Care Support Contractors, including TriWest, by November 1 each year.

Billing and Coding Requirements

1. Bill type 11X should be used for inpatient services.
2. Bill type 85X should be used for all outpatient services including services approved as Ambulatory Surgery Center (ASC) services.
3. Bill type 12X should be used for ancillary/ambulance services.
4. Bill type 14X should be used for non-patient diagnostic services.
5. Bill type 18X should be used for swing bed services.
6. Ambulance services furnished by CAHs that are exempt from the allowable charge methodology will be paid under the reasonable cost method if the B2 condition code is entered on the claim. The B2 must be reported within the first five condition code fields in order to pay at the reasonable cost method. 

Published Date: 10/14/2009