Inpatient PPS Outlier Billing

Published 08/11/2020

Inpatient Prospective Payment Systems (PPS) outlier billing applies to Inpatient PPS Hospitals, Long Term Care Hospital (LTCH) PPS and Inpatient Rehabilitation Facility (IRF) PPS facilities. The methodology for using benefit days and reimbursing cost outliers is based on the beneficiary having:

  • A lifetime reserve (LTR) benefit day which the beneficiary elects to use; or
  • A regular benefit (regular or coinsurance) day beginning the day after the day covered charges are incurred in an amount that results in a cost outlier payment for the provider

Additional charges are considered covered for every day thereafter for which a beneficiary has, or elects to use, an available benefit day.

Diagnosis Resource Group (DRG) claims with cost outlier payments must have an occurrence code (OC) 47 on the claim unless:

  • There are enough full and/or coinsurance days to cover all the medically necessary days; or
  • The only available benefits are LTR days and there are enough LTR days to cover all the medically necessary days

DRG claims without cost outlier payments can never have regular benefit days combined with LTR benefit days.

Once the cost outlier is known, providers must add the daily covered charges for the claim until they determine the day that covered charges reach the cost outlier threshold. Providers must:

  • Exclude days and covered charges during non-covered spans
    • For example, during Occurrence Span Code (OSC) 74, 76 or 79 dates
  • Submit the date of the first full day of cost outlier status (the day after the ay that covered charges reach the cost outlier threshold) on the bill using OC 47
    • The OC 47 date cannot be equal to or during OSC 74, 76 or 79 dates
  • Determine the amount of regular, coinsurance, and LTR days the beneficiary has available per the Common Working File (CWF)
  • Any non-utilization days after the beneficiary exhausts coinsurance or LTR days before the OC 47 date will be identified using OSC 70
  • Facilities should not report OSC 70. The OSC 70 is reported by the Medicare Administrative Contractor (MAC) for any Non-utilization Dates: PPS inlier (free days) stay for which beneficiary has exhausted all regular days and/or coinsurance days, but which is covered on the cost report.

LTR days should be used as necessary and as elected by the beneficiary.

If coinsurance days are exhausted during the inlier period and there is a period of non-utilization indicated by the presence of OSC 70 and the beneficiary elects not to use LTR days, covered charges are limited to the exact amount of the cost outlier threshold.

  • Both OC A3 (shows the last covered day) and OC 47 (shows the following day which is the first full day of cost outlier status) must be shown

When coinsurance and/or LTR days are exhausted during the cost outlier period, OC A3 should be used to report the date benefits are exhausted. Covered charges should be accrued to reflect the entire period of the bill if:

  • The bill is fully covered; or
  • The entire period up to and including the date benefits were exhausted, if benefits were exhausted

For further information, please refer to the CMS IOM Publication 100-4, Chapter 3 Inpatient Hospital Billing Section 20 and Section 40 and MLN Special Edition SE1310 (PDF, 67 KB).