C.F.R. » Title 42 » CHAPTER IV—CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES › SUBCHAPTER B—MEDICARE PROGRAM › PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES; PAYMENT FOR ACUTE KIDNEY INJURY DIALYSIS › Subpart C—Limits on Cost Reimbursement

42 C.F.R. § 413.30

Limitations on payable costs

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(a) Introduction—(1) Scope. This section implements section 1861(v)(1)(A) of the Act by setting forth the general rules under which CMS may establish limits on SNF and HHA costs recognized as reasonable in determining Medicare program payments. It also sets forth rules governing exemptions and exceptions to limits established under this section that CMS may make as appropriate in considering special needs or situations of particular providers.

(2) General principle. Reimbursable provider costs may not exceed the costs CMS estimates to be necessary for the efficient delivery of needed health care services. CMS may establish estimated cost limits for direct or indirect overall costs or for costs of specific services or groups of services. CMS imposes these limits prospectively and may calculate them on a per admission, per discharge, per diem, per visit, or other basis.

(b) Procedure for establishing limits. (1) In establishing limits under this section, CMS may classify SNFs and HHAs by factors that CMS finds appropriate and practical, including the following:

(i) Type of services furnished.

(ii) Geographical area where services are furnished, allowing for grouping of noncontiguous areas having similar demographic and economic characteristics.

(iii) Size of institution.

(iv) Nature and mix of services furnished.

(v) Type and mix of patients treated.

(2) CMS bases its estimates of the costs necessary for efficient delivery of health services on cost reports or other data providing indicators of current costs. CMS adjusts current and past period data to arrive at estimated costs for the prospective periods to which limits are applied.

(3) Before the beginning of a cost period to which revised limits will be applied, CMS publishes a notice in the Federal Register, establishing cost limits and explaining the basis on which they are calculated.

(4) In establishing limits under paragraph (b)(1) of this section, CMS may find it inappropriate to apply particular limits to a class of SNFs or HHAs due to the characteristics of the SNF or HHA class, the data on which CMS bases those limits, or the method by which CMS determines the limits. In these cases, CMS may exclude that class of SNFs or HHAs from the limits, explaining the basis of the exclusion in the notice setting forth the limits for the appropriate cost reporting periods.

(c) Requests regarding applicability of cost limits. For cost reporting periods beginning before July 1, 1998, a SNF may request an exception or exemption to the cost limits imposed under this section. An HHA may request only an exception to the cost limits. The SNF or HHA must make its request to its contractor within 180 days of the date on the contractor's notice of program reimbursement.

(1) Home health agencies. The contractor makes a recommendation on the HHA's request to CMS, which makes the decision. CMS responds to the request within 180 days from the date CMS receives the request from the contractor. The contractor notifies the HHA of CMS's decision. The time required by CMS to review the request is considered good cause for the granting of an extension of the time limit for requesting an contractor hearing or a Provider Reimbursement Review Board (Board) hearing as specified in §§ 405.1813 and 405.1836 of this chapter, respectively.

(2) Skilled nursing facility exception. The contractor makes the final determination on the SNF's exception request and notifies the SNF of its determination within 90 days from the date that the contractor receives the request from the SNF. If the contractor determines that the SNF did not provide adequate documentation from which a proper determination can be made, the contractor notifies the SNF that the request is denied. The contractor also notifies the SNF that it has 45 days from the date on the contractor's denial letter to submit a new exception request with the complete documentation and that otherwise, the denial is the final determination. The time required by the contractor to review the request is considered good cause for the granting of an extension of the time limit for requesting an contractor hearing or a Board hearing as specified in §§ 405.1813 and 405.1836 of this chapter, respectively.

(d) Exemptions. Exemptions from the limits imposed under this section may be granted to a new SNF with cost reporting periods beginning before July 1, 1998 as stated in § 413.1(g)(1). The contractor makes a recommendation on the provider's request to CMS, which makes the decision. A new SNF is a provider of inpatient services that has operated as a SNF (or the equivalent) for which it is certified for Medicare, under present and previous ownership, for less than 3 full years. An exemption granted under this paragraph expires at the end of the SNF's first cost reporting period beginning at least 2 years after the provider accepts its first inpatient.

(e) Exceptions. Limits established under this section may be adjusted upward for a SNF or HHA under the circumstances specified in paragraphs (e)(1) through (e)(5) of this section. An adjustment is made only to the extent that the costs are reasonable, attributable to the circumstances specified, separately identified by the SNF or HHA, and verified by the contractor.

(1) Atypical services. The SNF or HHA can show that the—

(i) Actual cost of services furnished by a SNF or HHA exceeds the applicable limit because the services are atypical in nature and scope, compared to the services generally furnished by SNFs or HHAs similarly classified; and

(ii) Atypical services are furnished because of the special needs of the patients treated and are necessary in the efficient delivery of needed health care.

(2) Extraordinary circumstances. The SNF or HHA can show that it incurred higher costs due to extraordinary circumstances beyond its control. These circumstances include, but are not limited to, strikes, fire, earthquake, flood, or other unusual occurrences with substantial cost effects.

(3) Areas with fluctuating populations. The SNF meets the following conditions:

(i) Is located in an area (for example, a resort area) that has a population that varies significantly during the year.

(ii) Is furnishing similar services in an area for which the appropriate health planning agency has determined does not have a surplus of beds or similar services and has certified that the beds or similar services furnished by the SNF are necessary.

(iii) Meets occupancy or capacity standards established by the Secretary.

(4) Medical and paramedical education. The SNF or HHA can demonstrate that, if compared to other SNFs or HHAs in its group, it incurs increased costs for services covered by limits under this section because of its operation of an approved education program specified in § 413.85.

(5) Unusual labor costs. The SNF or HHA has a percentage of labor costs that varies more than 10 percent from that included in the promulgation of the limits.

(f) Operational review. Any SNF or HHA that applies for an exception to the limits established under paragraph (e) of this section must agree to an operational review at the discretion of CMS. The findings from this review may be the basis for recommendations for improvements in the efficiency and economy of the SNF's or the HHA's operations. If recommendations are made, any future exceptions are contingent on the SNF's or HHA's implementation of these recommendations.

[64 FR 42612, Aug. 5, 1999; 65 FR 60104, Oct. 10, 2000, as amended at 67 FR 48802, July 26, 2002; 73 FR 30267, May 23, 2008; 73 FR 49357, Aug. 21, 2008]
Notes of Decisions
Cited in 68 cases, 1987–2015 · leading case: St. Luke's Methodist Hosp. v. Thompson, 182 F. Supp. 2d 765 (N.D. Iowa 2001).
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St. Luke's Methodist Hosp. v. Thompson, 182 F. Supp. 2d 765 (N.D. Iowa 2001). · cites it 47× “Exception requests are governed by 42 C.F.R. § 413.30 which provides, in certain circumstances, for discretionary reimbursement of provider costs which exceed applicable cost limits.”
St. Francis Health Care Centre v. Donna Shalala, 205 F.3d 937 (6th Cir. 2000). · cites it 23× “§ 1395yy(a)), a regulation interpreting that provision ( 42 C.F.R. § 413.30 ), and a PRM provision (PRM § 2534.”
Good Samaritan Hosp. v. Shalala, 508 U.S. 402 (1993). · cites it 5× “42 CFR § 413.30 (d) (1992). An exemption from the applicable cost limits can be obtained under certain specified situations — e.”
South Shore Hosp., Inc. v. Thompson, 308 F.3d 91 (1st Cir. 2002). · cites it 7× “The Health Care Financing Administration (HCFA) denied *95 the Hospital’s application on the ground that its purchase of determination of need (DON) rights from an unaffiliated nursing home rendered unavailable the so-called “new provider” exemption codified at 42 C.F.R. §…”
Canonsburg Gen. Hosp. v. Sylvia Mathews Burwell, 807 F.3d 295 (D.C. Cir. 2015). · cites it 6× “§ 1395yy(c); 42 C.F.R. § 413.30 (e). One such exception is the “atypical services” exception, which generally allows a healthcare provider to be reimbursed above the RCLs if the service it provides is, inter alia, “atypical in nature and scope.”
St. Luke's Methodist Hosp. v. Tommy G. Thompson, Sec'y of the United States Dep't of Health & Human Servs., 315 F.3d 984 (8th Cir. 2003). · cites it 9× “The relevant regulation, 42 C.F.R. § 413.30 (1996), sets forth general rules to establish “reasonable” limits for provider costs, as well as “rules governing .”
Paragon Health Network, Inc. v. Thompson, 251 F.3d 1141 (7th Cir. 2001). · cites it 17× “Paragon appealed to the Provider Reimbursement Review Board (“PRRB”), which conducted an evidentiary hearing and concluded that MSC was not entitled to the new provider exemption.”
St. Elizabeth's Med. Ctr. of Boston, Inc. v. Thompson, 396 F.3d 1228 (D.C. Cir. 2005). · cites it 5× “See 42 C.F.R. § 413.30 (e) (1997) (now codified at 42 C.”
Canonsburg Gen. Hosp. v. Sebelius, 989 F. Supp. 2d 8 (D.D.C. 2013). · cites it 6× “19, 1974); see also 42 C.F.R. § 413.30 . “Exemptions from [RCLs] imposed under [ 42 C.”
Jordan Hosp. v. Leavitt, 571 F. Supp. 2d 108 (D.D.C. 2008). · cites it 5× “” See 42 C.F.R. § 413.30 (a)-(b) (1996).. Because new skilled nursing facilities usually incur increased costs during their first years of operation, the “new provider exemption” establishes that reimbursement for certain new facilities is not constrained by routine service cost…”
Providence Health Sys.-Washington v. Thompson, 353 F.3d 661 (9th Cir. 2003). · cites it 20× “NELSON, Senior Circuit Judge: The Secretary of Health and Human Services (Secretary) appeals the district court’s reversal of the Secretary’s decision to deny Providence Health System-Washington (Providence) a “new provider” exemption under 42 C.F.R. § 413.30 (e) (1996). We hold…”
Ashtabula Cnty. Med. Ctr. v. Thompson, 191 F. Supp. 2d 884 (N.D. Ohio 2002). · cites it 4× “1877 (f), of a final administrative agency decision by the Provider Reimbursement Review Board (“PRRB” or “Board”) denying ACMC’s request to be classified as a “new provider” under 42 C.F.R. § 413.30 (e) 2 (“the new provider rule”).”
Show all 68 citing cases →
— 42 C.F.R. § 413.30(d)(2005) — 1 case
SC Mgmt., Inc. v. Leavitt, 413 F. Supp. 2d 1041 (E.D. Mo. 2005).
— 42 C.F.R. § 413.30(e) — 2 cases
Ashtabula Cnty. Med. Ctr. v. Thompson, 352 F.3d 1090 (6th Cir. 2003).
SC Mgmt., Inc. v. Leavitt, 413 F. Supp. 2d 1041 (E.D. Mo. 2005).
— 42 C.F.R. § 413.30(e)(1) — 1 case
SIERRA Med. Ctr., Plaintiff-Appellee, v. Louis W. SULLIVAN, M.D., Sec'y of Health & Human Servs., Defendant-Appellant, 902 F.2d 388 (5th Cir. 1990).
— 42 C.F.R. § 413.30(e)(1996) — 1 case
SC Mgmt., Inc. v. Leavitt, 413 F. Supp. 2d 1041 (E.D. Mo. 2005).
— 42 C.F.R. § 413.30(f) — 1 case
Eagle Healthcare, Inc. v. Shalala, 52 F. Supp. 2d 1 (D.D.C. 1999).
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