TN 2 (12-23)

HI 00401.205 Reasonable Cost Reimbursement

Participating providers are reimbursed on a reasonable cost basis for services under both HI and SMI. An important role of the fiscal intermediary, in addition to claims processing and payment, and other assigned responsibilities, is to furnish consultative services to providers in the development of accounting and cost-finding procedures which will assure them equitable payment under the program.

In formulating methods for making fair and equitable reimbursement for services rendered beneficiaries of the program, payment is made on the basis of current costs of the individual provider. All necessary and proper expenses of an institution in the production of services, including normal standby costs, are recognized. The share of the total institutional cost that is borne by the program is related to the case furnished beneficiaries so that no part of their costs 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.