HI 00601.600 Provider Charges to Beneficiaries for Excess Costs

A provider which anticipates that its costs for items or services will exceed the applicable cost limit, and believes it is eligible to charge beneficiaries based on its excess costs, and wishes to impose such charges, may submit to its intermediary a request for validation of the specified charges. The provider’s charge to the beneficiary for an item or service may not exceed the amount by which its allowable costs (or, if less, the customary charge) for the item or service, in the second preceding cost reporting period exceeds the current applicable cost limit for such items or services. (In the case of a new provider, an estimated equivalent is calculated for the cost for the second preceding cost period.) The provider may make such charges only if the following conditions are met:

A. The charges for excess costs are validated

The intermediary determines that the charges, based on excess costs, have been calculated in accordance with CMS instructions and notifies the CMS Regional Office in writing of the validated amounts.

B. Notice given to the public

The CMS RO publishes, in a newspaper or general circulation serving the provider’s locality, notice to the public that the provider is authorized to make the specified charges to Medicare beneficiaries (e.g., for general routine service costs) because its costs exceed those determined to be necessary in the efficient delivery of health services under Medicare. (The CMS RO arranges for the publication of the notice with the assistance of the servicing DO.) The CMS RO provides a copy of the notice and the press release for the DO servicing the provider. The following language is used:

  • Notice is hereby given, in accordance with section 1866(a)(2)(B)(ii) of the Social Security Act, that (Name of Provider) is entitled to charge its Medicare patients during the period (Date at least 15 days after publication and not before beginning of applicable cost year) to (End of applicable cost year) for certain services in addition to the payment for such services by the Centers for Medicare & Medicaid Services because the (Hospital, Skilled Nursing Facility, etc.) expects to incur costs in providing such services which will exceed the costs determined to be necessary for the efficient delivery of health care under the Medicare program. These charges may not be made, however, where the services furnished the patient are emergency services or where the physician attending the patient has a direct or indirect financial interest in the (Hospital, Skilled Nursing Facility, etc.). The permissible charges, which are in addition to charges permitted for deductible, coinsurance, and non-covered services, are as follows:

    (Example) Room, board, and other general routine services, $5.00 per day.

    Regional Administrator.

    Centers for Medicare & Medicaid Services.

C. Advance notice given to the beneficiary

In arranging for the beneficiary"s admission, first service or start of care, the provider gives or sends to him (or his representative) a schedule of all the items or services which the individual might need and for which the provider imposes a charge based on excess cost. This schedule should be given no later than the time of admission or the initiation of services.

D. Services not emergency services

No charge may be made for emergency services, i.e., services furnished in an emergency and not available in an equally accessible participating hospital which does not impose excess cost charges.

E. Admitting physician has no significant financial interest

If the admitting physician has a direct or indirect financial interest of 5 percent or more in the provider, the latter cannot impose charges for excess costs upon the beneficiary.

Authorization to make charges for excess costs is effective only prospectively and does not extend beyond the end of the cost period for which the cost limit is applicable. Thus, where all requirements for imposing charges for excess costs (e.g., public notice of the charges) are not met, until after the beginning of the cost period for which the charges would be applicable, the charges can be made only during the remainder of the cost period.

Where program reimbursement for items or services to which the limits are applied plus the provider’s charges to beneficiaries exceed the provider’s actual cost for the cost period, program reimbursement will be reduced by the amount of the excess.

Where a provider requests a review of the applicable costs limits and the limit is raised as a result (e.g., because of a typical services) the provider is responsible for refunding to the beneficiary (or whoever paid the charges) amounts which, on the