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Extension of Rural Medicare Protections & Enhancement of Medicare Low-Volume Hospital Payment Adjustments

The Patient Protection and Affordable Care Act (PPACA) includes a number of provisions that take effect over the next four years. These provisions include extensions of the following:

• Outpatient Hold Harmless Provision (Outpatient Corridor Payments)
• Medicare Reasonable Costs Payments for Certain Clinical Diagnostic Laboratory Tests Furnished to Hospital Patients in Certain Rural Areas
• Temporary Improvements to the Medicare Inpatient Hospital Payment Adjustment for Low-Volume Hospitals

One Year Extension of the Outpatient Hold Harmless Provision

The Balanced Budget Refinement Act (BBRA) established a 3-year transitional corridor to ensure that providers did not experience substantial payment reduction under the hospital Outpatient Prospective Payment System (OPPS). Under these provisions, a hospital whose payments are less than its 1996 payment-to-cost ratio are eligible for an additional payment known as "Transitional Outpatient Corridor" payment. The provisions as related to certain small rural hospitals with 100 or fewer beds were set to expire on December 31, 2009.

The PPACA provides a one year extension for certain rural hospitals as outlined below:

For services furnished on or after January 1, 2006, and before January 1, 2011, rural hospitals with 100 or fewer beds that are not sole community hospitals will receive reimbursement for 85% of the difference between the OPPS payments and the pre-BBRA amounts (cost for outpatient services furnished in the 1996 cost reporting year).

For services furnished on or after January 1, 2009, and before January 1, 2011, sole community hospitals with 100 or fewer beds will receive reimbursement for 85% of the difference between the OPPS payments and the pre-BBRA amounts (cost for outpatient services furnished in the 1996 cost reporting year). This provision is extended to all sole community hospitals for the period January 1, 2010, through December 31, 2010, even if the hospitals have more than 100 beds.

Extension of Reasonable Cost Payment for Clinical Lab Tests Furnished by Hospitals with Fewer than 50 Beds in Qualified Rural Areas

The PPACA re-institutes reasonable cost payment for clinical laboratory tests performed by hospitals with fewer than 50 beds in qualified rural areas as part of their outpatient services for cost reporting periods beginning on or after July 1, 2010, through June 30, 2011.

The Fiscal Intermediary (FI) or Medicare Administrative Contractor (MAC) will use the Medicare Zip Code File to identify qualified rural areas with population densities in the lowest quartile of all rural county populations and will calculate payment on a reasonable cost basis for outpatient clinical laboratory services on a Revenue Code 030X line submitted on either a 12X or 13X Type of Bill (TOB).

Payment Adjustment for Low-Volume Hospitals

The PPACA provides for a temporary enhancement for hospitals qualifying for additional payment due to the higher incremental costs associated with a low volume of discharges.

Prior to federal fiscal year 2011, to qualify for payment a hospital must have fewer than 200 total discharges during the fiscal year, as included in its cost report, and be located more than 25 miles from another like hospital. For FY 2011 and FY 2012, the PPACA modifies the low volume hospital eligibility requirements. The number of eligible discharges necessary to qualify for payment was changed from 200 total discharges or under to less than 1,600 Medicare discharges for all individuals entitled to, or enrolled for, benefits under Part A. The distance requirement was changed from 25 miles from a like hospital to 15 miles.

The payment adjustment as applied to the Diagnostic Related Group payment amount ranges from 25% to just under 2% as follows:

In order to qualify, a hospital must provide to its FI or MAC sufficient evidence to document that it meets the number of Medicare discharges and distance requirements. A hospital must continue to qualify as a low volume hospital in order to receive the payment adjustment. Eligibility is not based on a one-time qualification.

Example: Low-Volume Hospital Adjustment

HORNE LLP can assist you with these provision extensions.  Form more information, please contact HORNE Director Paul Garrett at paul.garrett@horne-llp.com or 601.326.1315.