The Qualifying DSH Percent uses the following provider type codes to enable Pricer to
calculate the appropriate rates for these facilities:

• 14 for a MDH that is not an RRC;

• 15 for a MDH that is also an RRC;

• 16 for a rebased SCH that is not an RRC; and

• 17 for a rebased SCH that is also an RRC.

The A/B MAC (A) calculates the HSP rate and determines the greatest HSP rate (for
SCHs, FY 1982, 1987, 1996 or 2006; for MDHs, FY 1982, 1987 or 2002). Then the A/B
MAC (A) updates the HSP rate to the applicable FY and enters that amount in the PPS
Facility Specific Rate of the Provider-Specific File (PSF), for the applicable effective date.
The HSP rate is to be entered even if the Federal rate is expected to result in higher
payments than the applicable HSP rate. Preloading the applicable HSP rate before the
effective date is acceptable as long as the correct effective date is used for the PSF record.
The A/B MAC (A) leaves the field blank if the hospital was not in operation during any of
the applicable HSP base years

Pricer will calculate the payment based on the higher of the Federal rate or the HSP rate.
Where the HSP rate is higher, Pricer reports the amount of the difference in the hospitalspecific
field. The A/B MAC (A) carries this amount forward in the hospital-specific
payment field to its PS&R record for use at cost settlement.

**Billing Applicable to PPS**

**Stays Prior to and Discharge After IPPS Implementation Date**

**A3-3610.4, HO-415.7**

When the admission is before the hospital's PPS effective date and the discharge is later
than that date (transition claims), the Medicare payment for the period before PPS is on a
reasonable cost basis and the payment for the period after PPS is on a DRG basis.

The hospital must submit two bills. The first bill is for the period before the PPS effective
date and is processed and paid in accordance with requirements in effect before the
hospital's PPS effective date. The second bill is processed under PPS but the amount of
payment on the first bill is subtracted from it. A/B MACs (A) make the adjustment by
subtracting the interim payment from the prospective payment (before any deduction for
deductible or coinsurance) for the inpatient operating costs applicable to the days in the
prior period. The interim payment applicable to the prior period is adjusted to exclude
estimated costs related to capital and direct medical education, kidney acquisition costs,
and for bad debts for uncollectible deductible and coinsurance. A/B MACs (A) will make
an estimate if necessary.

For hospitals previously receiving interim payment on the basis of an average cost per
diem or under PIP, the A/B MAC (A) determines and removes a per diem amount for the
excluded costs for that period from the interim payments before reducing the prospective
payment amount applicable to the discharge in the subsequent period under PPS.
Similarly, for hospitals that received a percentage of billed charges, the portion of the
percentage applicable to the excluded cost items is removed. The net percentage to the
charges billed in the prior period (cut-off bill) is applied. The resulting amount is
subtracted from the PPS payment applicable to the discharge in the subsequent period.

For transition claims, payment must not exceed the higher of what would have been paid
under PPS including the outlier adjustment or any earlier cost payment. The final amount
is not reduced to less than zero. No further adjustments are appropriate.

The interim payments used to reduce the prospective payment amounts are considered to
represent fairly the inpatient operating costs incurred and fair payment for the portion of
the stay occurring in the prior period. Therefore, the adjustment is final and not subject to
further modification.

On bills covering two cost reporting periods:

• Each bill includes charges and covered days that apply to the period covered.

• The cut-off bill for the cost period is completed per Chapter 25.

• The PPS bill contains principal diagnosis and surgical procedures for the entire
stay.

The PPS bill shows the admission date, but the period covered begins with the first
day of the new accounting year.

• Where discharge is on the first day of the new accounting year, a PPS bill is still
due. Some payment may be due the provider, and the open admission must be
closed on CMS' records. There are no accommodation charges on the day of
discharge; the hospital will report ancillary charges for the day of discharge on the
prior bill.

• Coinsurance days and related amounts are applied separately to each bill, i.e., the
proper deduction for coinsurance days reported on the second bill is taken from
that bill.