42 CFR 413.5 - Cost reimbursement: General.

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There are 9 Updates appearing in the Federal Register for 42 CFR 413. View below or at eCFR (GPOAccess)
§ 413.5 Cost reimbursement: General.
(a) In formulating methods for making fair and equitable reimbursement for services rendered beneficiaries of the program, payment is to be made on the basis of current costs of the individual provider, rather than costs of a past period or a fixed negotiated rate. All necessary and proper expenses of an institution in the production of services, including normal standby costs, are recognized. Furthermore, the share of the total institutional cost that is borne by the program is related to the care furnished beneficiaries so that no part of their cost would need to be borne by other patients. Conversely, costs attributable to other patients of the institution are not to be borne by the program. Thus, the application of this approach, with appropriate accounting support, will result in meeting actual costs of services to beneficiaries as such costs vary from institution to institution. However, payments to providers of services for services furnished Medicare beneficiaries are subject to the provisions of §§ 413.13 and 413.30.
(b) Putting these several points together, certain tests have been evolved for the principles of reimbursement and certain goals have been established that they should be designed to accomplish. In general terms, these are the tests or objectives:
(1) That the methods of reimbursement should result in current payment so that institutions will not be disadvantaged, as they sometimes are under other arrangements, by having to put up money for the purchase of goods and services well before they receive reimbursement.
(2) That, in addition to current payment, there should be retroactive adjustment so that increases in costs are taken fully into account as they actually occurred, not just prospectively.
(3) That there be a division of the allowable costs between the beneficiaries of this program and the other patients of the provider that takes account of the actual use of services by the beneficiaries of this program and that is fair to each provider individually.
(4) That there be sufficient flexibility in the methods of reimbursement to be used, particularly at the beginning of the program, to take account of the great differences in the present state of development of recordkeeping.
(5) That the principles should result in the equitable treatment of both nonprofit organizations and profit-making organizations.
(6) That there should be a recognition of the need of hospitals and other providers to keep pace with growing needs and to make improvements.
(c) As formulated herein, the principles given recognition to such factors as depreciation, interest, bad debts, educational costs, compensation of owners, and an allowance for a reasonable return on equity capital (in the case of certain proprietary providers). With respect to allowable costs some items of inclusion and exclusion are:
(1) An appropriate part of the net cost of approved educational activities will be included.
(2) Costs incurred for research purposes, over and above usual patient care, will not be included.
(3) [Reserved]
(4) The value of services provided by nonpaid workers, as members of an organization (including services of members of religious orders) having an agreement with the provider to furnish such services, is includable in the amount that would be paid others for similar work.
(5) Discounts and allowances received on the purchase of goods or services are reductions of the cost to which they relate.
(6) Bad debts growing out of the failure of a beneficiary to pay the deductible, or the coinsurance, will be reimbursed (after bona fide efforts at collection).
(7) Charity and courtesy allowances are not includable, although “fringe benefit” allowances for employees under a formal plan will be includable as part of their compensation.
(8) A reasonable allowance of compensation for the services of owners in profitmaking organizations will be allowed providing their services are actually performed in a necessary function.
(9) Reasonable cost of physicians' direct medical and surgical services (including supervision of interns and residents in the care of individual patients) furnished in a teaching hospital may be reimbursed as a provider cost (as described in § 415.162 of this chapter) if elected as provided for in § 415.160 of this chapter.
(d) In developing these principles of reimbursement for the Medicare program, all of the considerations inherent in allowances for depreciation were studied. The principles, as presented, provide options to meet varied situations. Depreciation will essentially be on an historical cost basis but since many institutions do not have adequate records of old assets, the principles provide an optional allowance in lieu of such depreciation for assets acquired before 1966. For assets acquired after 1965, the historical cost basis must be used. All assets actually in use for production of services for Medicare beneficiaries will be recognized even though they may have been fully or partially depreciated for other purposes. Assets financed with public funds may be depreciated. Although funding of depreciation is not required, there is an incentive for it since income from funded depreciation is not considered as an offset which must be taken to reduce the interest expense that is allowable as a program cost.
(e) A return on the equity capital of proprietary facilities, as described in § 413.157, is an allowance in addition to the reasonable cost of covered services furnished to beneficiaries.
(f) Renal dialysis items and services furnished under the ESRD provision are reimbursed and reported under §§ 413.170 and 413.174 respectively. For special rules concerning health maintenance organizations (HMOs), and providers of services and other health care facilities that are owned or operated by an HMO, or related to an HMO by common ownership or control, see §§ 417.242(b)(14) and 417.250(c) of this chapter.
[51 FR 34793, Sept. 30, 1986; 51 FR 37398, Oct. 22, 1986, as amended at 52 FR 21225, June 4, 1987; 52 FR 23398, June 19, 1987; 57 FR 39829, Sept. 1, 1992; 60 FR 63189, Dec. 8, 1995; 61 FR 63748, Dec. 2, 1996]

Title 42 published on 2013-10-01

The following are only the Rules published in the Federal Register after the published date of Title 42.

For a complete list of all Rules, Proposed Rules, and Notices view the Rulemaking tab.

  • 2014-08-22; vol. 79 # 163 - Friday, August 22, 2014
    1. 79 FR 49854 - Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Fiscal Year 2015 Rates; Quality Reporting Requirements for Specific Providers; Reasonable Compensation Equivalents for Physician Services in Excluded Hospitals and Certain Teaching Hospitals; Provider Administrative Appeals and Judicial Review; Enforcement Provisions for Organ Transplant Centers; and Electronic Health Record (EHR) Incentive Program
      GPO FDSys XML | Text
      DEPARTMENT OF HEALTH AND HUMAN SERVICES, Centers for Medicare & Medicaid Services
      Final rule.
      Effective Date: These final rules are effective on October 1, 2014. Applicability Dates: The amendments to 42 CFR 405.1811 and 405.1835 are applicable to appeals based on untimely contractor determinations that are pending or were filed on or after August 21, 2008, subject to the rules of administrative finality and reopening at 42 CFR 405.1807 and 405.1885. The provisions discussed in section IV.I.4.c. of the preamble of this final rule are applicable on or after July 1, 2015; and the provisions discussed in section IV.I.5.a. of the preamble of this final rule are applicable on or after January 1, 2015.
      42 CFR Parts 405, 412, 413, 415, 422, 424, 485, and 488

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Title 42 published on 2013-10-01

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 42 CFR 413 after this date.

  • 2014-08-22; vol. 79 # 163 - Friday, August 22, 2014
    1. 79 FR 49854 - Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Fiscal Year 2015 Rates; Quality Reporting Requirements for Specific Providers; Reasonable Compensation Equivalents for Physician Services in Excluded Hospitals and Certain Teaching Hospitals; Provider Administrative Appeals and Judicial Review; Enforcement Provisions for Organ Transplant Centers; and Electronic Health Record (EHR) Incentive Program
      GPO FDSys XML | Text
      DEPARTMENT OF HEALTH AND HUMAN SERVICES, Centers for Medicare & Medicaid Services
      Final rule.
      Effective Date: These final rules are effective on October 1, 2014. Applicability Dates: The amendments to 42 CFR 405.1811 and 405.1835 are applicable to appeals based on untimely contractor determinations that are pending or were filed on or after August 21, 2008, subject to the rules of administrative finality and reopening at 42 CFR 405.1807 and 405.1885. The provisions discussed in section IV.I.4.c. of the preamble of this final rule are applicable on or after July 1, 2015; and the provisions discussed in section IV.I.5.a. of the preamble of this final rule are applicable on or after January 1, 2015.
      42 CFR Parts 405, 412, 413, 415, 422, 424, 485, and 488