C.F.R. » Title 42 » CHAPTER IV—CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES › SUBCHAPTER B—MEDICARE PROGRAM › PART 412—PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES › Subpart F—Payments for Outlier Cases, Special Treatment Payment for New Technology, and Payment Adjustment for Certain Replaced Devices

42 C.F.R. § 412.80

Outlier cases: General provisions

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(a) Basic rule—(1) Discharges occurring on or after October 1, 1994 and before October 1, 1997. For discharges occurring on or after October 1, 1994, and before October 1, 1997, except as provided in paragraph (b) of this section concerning transferring hospitals, CMS provides for additional payment, beyond standard DRG payments, to a hospital for covered inpatient hospital services furnished to a Medicare beneficiary if either of the following conditions is met:

(i) The beneficiary's length-of-stay (including days at the SNF level of care if a SNF bed is not available in the area) exceeds the mean length-of-stay for the applicable DRG by the lesser of the following:

(A) A fixed number of days, as specified by CMS; or

(B) A fixed number of standard deviations, as specified by CMS.

(ii) The beneficiary's length-of-stay does not exceed criteria established under paragraph (a)(1)(i) of this section, but the hospital's charges for covered services furnished to the beneficiary, adjusted to operating costs and capital costs by applying cost-to-charge ratios as described in § 412.84(h), exceed the DRG payment for the case plus a fixed dollar amount (adjusted for geographic variation in costs) as specified by CMS.

(2) Discharges occurring on or after October 1, 1997 and before October 1, 2001. For discharges occurring on or after October 1, 1997 and before October 1, 2001, except as provided in paragraph (b) of this section concerning transfers, CMS provides for additional payment, beyond standard DRG payments, to a hospital for covered inpatient hospital services furnished to a Medicare beneficiary if the hospital's charges for covered services, adjusted to operating costs and capital costs by applying cost-to-charge ratios, as described in § 412.84(h), exceed the DRG payment for the case, payments for indirect costs of graduate medical education (§ 412.105), and payments for serving disproportionate share of low-income patients (§ 412.106), plus a fixed dollar amount (adjusted for geographic variation in costs) as specified by CMS.

(3) Discharges occurring on or after October 1, 2001. For discharges occurring on or after October 1, 2001, except as provided in paragraph (b) of this section concerning transfers, CMS provides for additional payment, beyond standard DRG payments and beyond additional payments for new medical services or technology specified in §§ 412.87 and 412.88, to a hospital for covered inpatient hospital services furnished to a Medicare beneficiary if the hospital's charges for covered services, adjusted to operating costs and capital costs by applying cost-to-charge ratios as described in § 412.84(h), exceed the DRG payment for the case (plus payments for indirect costs of graduate medical education (§ 412.105), payments for serving a disproportionate share of low-income patients (§ 412.106), and additional payments for new medical services or technologies) plus a fixed dollar amount (adjusted for geographic variation in costs) as specified by CMS.

(b) Outlier cases in transferring hospitals. CMS provides cost outlier payments to a transferring hospital for cases paid in accordance with § 412.4(f), if the hospital's charges for covered services furnished to the beneficiary, adjusted to costs by applying cost-to-charge ratios as described in § 412.84(h), exceed the DRG payment for the case plus a fixed dollar amount (adjusted for geographic variation in costs) as specified by CMS, divided by the geometric mean length of stay for the DRG, and multiplied by an applicable factor determined as follows:

(1) For transfer cases paid in accordance with § 412.4(f)(1), the applicable factor is equal to the length of stay plus 1 day.

(2) For transfer cases paid in accordance with § 412.4(f)(2), the applicable factor is equal to 0.5 plus the product of the length of stay plus 1 day multiplied by 0.5.

(c) Publication and revision of outlier criteria. CMS will issue threshold criteria for determining outlier payment in the annual notice of the prospective payment rates published in accordance with § 412.8(b).

[62 FR 46028, Aug. 29, 1997, as amended at 63 FR 41003, July 31, 1998; 66 FR 46924, Sept. 7, 2001; 67 FR 50111, Aug. 1, 2002]
Notes of Decisions
Cited in 23 cases (2 in the last 5 years), 1987–2022 · leading case: Banner Health v. Sebelius, 905 F. Supp. 2d 174 (D.D.C. 2012).
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Banner Health v. Sebelius, 905 F. Supp. 2d 174 (D.D.C. 2012). · cites it 4× “§ 1395ww(d)(5)(A); see also 42 C.F.R. §§ 412.80 ^12.86 (implementing regulations).”
Banner Health v. Sebelius, 945 F. Supp. 2d 1 (D.D.C. 2013). · cites it 3× “§ 1395ww(d)(5)(A)(ii), (iv); 42 C.F.R. § 412.80 (a)(2)-(3). This fixed dollar amount is known as the “fixed loss threshold.”
Banner Health v. Sebelius, 797 F. Supp. 2d 97 (D.D.C. 2011). · cites it 3× “§ 1395ww(d)(5)(A)(ii), (iv); 42 C.F.R. § 412.80 (a)(2)-(3). This fixed dollar amount is known as the “fixed loss threshold.”
Banner Health v. Sebelius, 126 F. Supp. 3d 28 (D.D.C. 2015). · cites it 3× “1, 1994) (amending 42 C.F.R. § 412.80 ). The” agency acknowledged that the language of the statutory amendment contained some ambiguity as to whether the new formula was required for future discharges or whether it provided an optional alternative to the previous outlier payment…”
Banner Health v. Thomas Price, 867 F.3d 1323 (D.C. Cir. 2017). “80-86 ; and (2) annual threshold regulations determining the fixed-loss threshold and other criteria used to define “outlier cases” for the upcoming fiscal year, see 42 C.F.R, § 412.80(c), The latter regulation sets the threshold based on the payment regulations and other…”
Clarian Health West, LLC v. Eric Hargan, 878 F.3d 346 (D.C. Cir. 2017). “See 42 C.F.R. §§ 412.80 (a)(1), 412.84. The 2003 rule specifically authorizes the' agency to adjust the payments pursuant to the reconciliation calculation procedures set forth at 42 C.”
Banner Health v. Sebelius, 55 F. Supp. 3d 1 (D.D.C. 2014). · cites it 2× “§ 1395ww(d)(5)(A)(ii), (iv); 42 C.F.R. § 412.80 (a)(2)-(3). This fixed dollar amount is known as the “fixed loss threshold.”
Charleston Area Med. Ctr. v. Burwell, 216 F. Supp. 3d 18 (D.D.C. 2016). “See 42 C.F.R. § 412.80 (a). Broadly speaking, those yearly thresholds take into consideration adjustments for historical data of past years’ outlier payments and inflation.”
Sisters of Charity Hosp. v. Riley, 231 A.D.2d 272 (N.Y. App. Div. 1997). · cites it 2× “Congress therefore authorized additional reimbursement to hospitals where a patient’s stay exceeds the average length of stay by a fixed number of days, which is defined as the "outlier threshold”, or where the hospital’s costs exceed some set figure or multiple of the DRG rate…”
Transtn Hosp Corp LA v. Shalala, Donna E., 222 F.3d 1019 (D.C. Cir. 2000). “See 42 C.F.R. §§ 412.80 et seq. 8 . The statute excludes from PPS "a rehabilitation hospital (as defined by the Secretary).”
Vencor Inc. v. Nat'l States Ins. Co., 303 F.3d 1024 (9th Cir. 2002). “§ 1395ww(d)(5)(A)(i); 42 C.F.R. § 412.80 et seq. . If the insurer violates this requirement, it is subject to a civil monetary penalty of up to $25,000.”
Boca Raton Cmty. Hosp., Inc. v. Tenet Healthcare Corp., 238 F.R.D. 679 (S.D. Fla. 2006). · cites it 2× “§ 1395ww(d)(5); 42 C.F.R §§ 412.80, 412.84; Shalala, 192 F.”
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— 42 C.F.R. § 412.80(c) — 1 case
Banner Health v. Thomas Price, 867 F.3d 1323 (D.C. Cir. 2017). “80-86 ; and (2) annual threshold regulations determining the fixed-loss threshold and other criteria used to define “outlier cases” for the upcoming fiscal year, see 42 C.F.R, § 412.80(c), The latter regulation sets the threshold based on the payment regulations and other…”
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