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Critical Access Hospital (CAH) Reimbursement

Critical Access Hospitals (CAHs) are reimbursed based upon the cost methodology. For Inpatient services, the provider is paid on a per diem basis. For their Outpatient Part B Services, two payment options are available, Method I (Standard Method) and Method II (Optional Method). The difference between the two methods is the payment of the physician professional services.

Under Method I, physician professional services are to be billed to the Part B carrier. Under Method II, physician services are billed to the fiscal intermediary/Medicare Administrative Contractor (MAC) and paid based upon the fee schedule amount.

Method I

For cost reports beginning before January 1, 2004, under Method I, a CAH will be paid 80% of its reasonable cost for facility services after the application of the Part B deductible. These facility services (which includes technical services and Ambulatory Surgical Classification (ASC) services) should be billed under Type of Bill (TOB) 85X. Non-patient referenced diagnostic services (revenue code 300-319) will be billed on a 14X TOB and are reimbursed under the lab fee schedule.

Professional services, or services provided by a physician or other non-physician practitioner (i.e. physician assistant or nurse practitioner) are billed directly to the Part B carrier under Method I.

Effective for cost reporting periods beginning on or after January 1, 2004, payment for facility services under Method I will be the lesser of (1) 80% of 101% of the reasonable cost, or (2) 101% of the reasonable cost less the applicable Part B coinsurance and deductible amounts. Facility services (including technical services and ASC services) will continue to be billed under TOB 85X and referenced diagnostic services will continue to be billed on a 14X TOB. Professional services are still billed to and reimbursed by the Part B carrier.

Method II

Method II allows the CAH to receive cost-based payment for facility services, plus 115% of fee schedule payment for professional services. For facility services, payment will be the same as indicated under Method I. Professional services are billed to and reimbursed by the fiscal intermediary/MAC. Method II became available with services furnished on or after July 1, 2001 and was implemented with cost reporting periods starting on or after October 1, 2001.