42 C.F.R. Subpart F—Payment Methods for Other Institutional and Noninstitutional Services
Title 42 - Public Health
Source: 43 FR 45253, Sept. 29, 1978, unless otherwise noted. Redesignated at 46 FR 47973, Sept. 30, 1981, and further redesignated at 58 FR 6095, Jan. 26, 1993.
In this subpart, §§447.302 through 447.334 and 447.361 implement section 1902(a)(30) of the Act, which requires that payments be consistent with efficiency, economy and quality of care. Section 447.371 implements section 1902(a)(13)(F) of the Act, which requires that the State plan provide for payment for rural health clinic services in accordance with regulations prescribed by the Secretary. [46 FR 48560, Oct. 1, 1981, as amended at 61 FR 38398, July 24, 1996] For the purposes of this subpart— Brand name means any registered trade name commonly used to identify a drug. Estimated acquisition cost means the agency's best estimate of the price generally and currently paid by providers for a drug marketed or sold by a particular manufacturer or labeler in the package size of drug most frequently purchased by providers. Multiple source drug means a drug marketed or sold by two or more manufacturers or labelers or a drug marketed or sold by the same manufacturer or labeler under two or more different proprietary names or both under a proprietary name and without such a name. [52 FR 28657, July 31, 1987] A State plan must provide that the requirements of this subpart are met. [46 FR 48560, Oct. 1, 1981] (a) The Medicaid agency must not pay more than the upper limits described in this subpart. (b) In the case of payments made under the plan for deductibles and coinsurance payable on an assigned Medicare claim for noninstitutional services, those payments may be made only up to the reasonable charge under Medicare. (c) FFP is not available for a State's expenditures for services that are in excess of the amounts allowable under this subpart. Note: The Secretary may waive any limitation on reimbursement imposed by subpart F of this part for experiments conducted under section 402 of Pub. L. 90–428, Incentives for Economy Experimentation, as amended by section 222(b) of Pub. L. 92–603, and under section 222(a) of Pub. L. 92–603. [46 FR 48560, Oct. 1, 1981; 46 FR 54744, Nov. 4, 1981, as amended at 66 FR 3176, Jan. 12, 2001] (a) Scope. This section applies to rates set by the agency to pay for outpatient services furnished by hospitals and clinics within one of the following categories: (1) State government-owned or operated facilities (that is, all facilities that are either owned or operated by the State). (2) Non-State government-owned or operated facilities (that is, all government facilities that are neither owned nor operated by the State). (3) Privately-owned and operated facilities. (b) General rules. (1) Upper payment limit refers to a reasonable estimate of the amount that would be paid for the services furnished by the group of facilities under Medicare payment principles in subchapter B of this chapter. (2) Except as provided in paragraph (c) of this section, aggregate Medicaid payments to a group of facilities within one of the categories described in paragraph (a) of this section may not exceed the upper payment limit described in paragraph (b)(1) of this section. (c) Exception—Indian Health Services and tribal facilities. The limitation in paragraph (b) of this section does not apply to Indian Health Services facilities and tribal facilities that are funded through the Indian Self-Determination and Education Assistance Act (Public Law 93–638). (d) Compliance dates. Except as permitted under paragraph (e) of this section, a State must comply with the upper payment limit described in paragraph (b)(1) of this section by one of the following dates: (1) For non-State government-owned or operated hospitals—March 19, 2002. (2) For all other facilities—March 13, 2001. (e) Transition periods—(1) Definitions. For purposes of this paragraph, the following definitions apply: (i) Transition period refers to the period of time beginning March 13, 2001 through the end of one of the schedules permitted under paragraph (e)(2)(ii) of this section. (ii) UPL stands for the upper payment limit described in paragraph (b)(1) of this section for the referenced year. (iii) X stands for the payments to a specific group of providers described in paragraph (a) of this section in State FY 2000 that exceeded the amount that would have been under the upper payment limit described in paragraph (b) of this section if that limit had been applied to that year. (2) General rules. (i) The amount that a State's payment exceeded the upper payment limit described in paragraph (b) of this section must not increase. (ii) A State with an approved State plan amendment payment provision effective on one of the following dates and that makes payments that exceed the upper payment limit described in paragraph (b) of this section to providers described in paragraph (a) of this section may follow the respective transition schedule: (A) For State plan provisions that are effective after September 30, 1999 and were approved before January 22, 2001, payments may exceed the upper payment limit in paragraph (b) of this section until September 30, 2002. (B) For approved plan provisions that are effective after October 1, 1992 and before October 1, 1999, payments during the transition period may not exceed the following— (1) For State FY 2003: State FY 2003 UPL + .75X. (2) For State FY 2004: State FY 2004 UPL + .50X. (3) For State FY 2005: State FY 2005 UPL + .25X. (4) For State FY 2006; State FY 2006 UPL. (C) For approved plan provisions that are effective on or before October 1, 1992, payments during the transition period may not exceed the following: (1) For State FY 2004: State FY 2004 UPL + .85X. (2) For State FY 2005: State FY 2005 UPL + .70X. (3) For State FY 2006: State FY 2006 UPL + .55X. (4) For State FY 2007: State FY 2007 UPL + .40X. (5) For State FY 2008: State FY 2008 UPL + .25X. (6) For the portion of State FY 2009 before October 1, 2008: State FY 2009 UPL + .10X. (7) Beginning October 1, 2008: UPL described in paragraph (b) of this section. (D) For State plan provisions that were effective after September 30, 1999, submitted to CMS before March 13, 2001, and approved by CMS after January 21, 2001, payments may exceed the limit in paragraph (b) of this section until the later of November 5, 2001, or 1 year from the approved effective date of the State plan provision. (iii) When State FY 2003 begins after September 30, 2002, the reduction schedule in paragraphs (e)(2)(ii)(C)(1) through (e)(2)(ii)(C)(7) will begin on State FY 2003. (iv) If a State meets the criteria in paragraph (e)(2)(ii) of this section and its State plan amendment expires before the end of the applicable transition period, the State may continue making payments that exceed the UPL described in paragraph (b) of this section in accordance with the applicable transition schedule described in paragraph (e)(2)(ii) of this section. (v) A State with an approved State plan amendment payment provision that makes payments up to 150 percent of the UPL described in paragraph (b)(1) of this section to providers described in paragraph (a)(2) of this section does not qualify for a transition period. (f) Reporting requirements for payments during the transition periods. States that are eligible for a transition period described in paragraph (e) of this section, and that make payments that exceed the limit under paragraph (b)(1) of this section, must report annually the following information to CMS: (1) The total Medicaid payments made to each facility for services furnished during the entire State fiscal year. (2) A reasonable estimate of the amount that would be paid for the services furnished by the facility under Medicare payment principles. [66 FR 3176, Jan. 12, 2001, as amended at 66 FR 46399, Sept. 5, 2001; 67 FR 2611, Jan. 18, 2002]
Title 42: Public Health
PART 447—PAYMENTS FOR SERVICES
Subpart F—Payment Methods for Other Institutional and Noninstitutional Services
§ 447.300 Basis and purpose.
§ 447.301 Definitions.
§ 447.302 State plan requirements.
§ 447.304 Adherence to upper limits; FFP.
Outpatient Hospital and Clinic Services
§ 447.321 Outpatient hospital and clinic services: Application of upper payment limits.
Other Inpatient and Outpatient Facilities
§ 447.325 Other inpatient and outpatient facility services: Upper limits of payment.
The agency may pay the customary charges of the provider but must not pay more than the prevailing charges in the locality for comparable services under comparable circumstances.
Drugs
§ 447.331 Drugs: Aggregate upper limits of payment.
(a) Multiple source drugs. Except for brand name drugs that are certified in accordance with paragraph (c) of this section, the agency payment for multiple source drugs must not exceed, the amount that would result from the application of the specific limits established in accordance with §447.332. If a specific limit has not been established under §447.332, then the rule for “other drugs” set forth in paragraph (b) applies.
(b) Other drugs. The agency payments for brand name drugs certified in accordance with paragraph (c) of this section and drugs other than multiple source drugs for which a specific limit has been established under §447.332 must not exceed in the aggregate, payment levels that the agency has determined by applying the lower of the—
(1) Estimated acquisition costs plus reasonable dispensing fees established by the agency; or
(2) Providers' usual and customary charges to the general public.
(c) Certification of brand name drugs. (1) The upper limit for payment for multiple source drugs for which a specific limit has been established under §447.332 does not apply if a physician certifies in his or her own handwriting that a specific brand is medically necessary for a particular recipient.
(2) The agency must decide what certification form and procedure are used.
(3) A checkoff box on a form is not acceptable but a notation like “brand necessary” is allowable.
(4) The agency may allow providers to keep the certification forms if the forms will be available for inspection by the agency or HHS.
[52 FR 28657, July 31, 1987]
§ 447.332 Upper limits for multiple source drugs.
(a) Establishment and issuance of a listing. (1) CMS will establish listings that identify and set upper limits for multiple source drugs that meet the following requirements:
(i) All of the formulations of the drug approved by the Food and Drug Administration (FDA) have been evaluated as therapeutically equivalent in the most current edition of their publication, Approved Drug Products with Therapeutic Equivalence Evaluations (including supplements or in successor publications).
(ii) At least three suppliers list the drug (which has been classified by the FDA as category “A” in its publication, Approved Drug Products with Therapeutic Equivalence Evaluations, including supplements or in successor publications) based on all listings contained in current editions (or updates) of published compendia of cost information for drugs available for sale nationally.
(2) CMS publishes the list of multiple source drugs for which upper limits have been established and any revisions to the list in Medicaid program instructions.
(3) CMS will identify the sources used in compiling these lists.
(b) Specific upper limits. The agency's payments for multiple source drugs identified and listed in accordance with paragraph (a) of this section must not exceed, in the aggregate, payment levels determined by applying for each drug entity a reasonable dispensing fee established by the agency plus an amount established by CMS that is equal to 150 percent of the published price for the least costly therapeutic equivalent (using all available national compendia) that can be purchased by pharmacists in quantities of 100 tablets or capsules (or, if the drug is not commonly available in quantities of 100, the package size commonly listed) or, in the case of liquids, the commonly listed size.
[52 FR 28658, July 31, 1987]
§ 447.333 State plan requirements, findings and assurances.
(a) State plan. The State plan must describe comprehensively the agency's payment methodology for prescription drugs.
(b) Findings and assurances. Upon proposing significant State plan changes in payments for prescription drugs, and at least annually for multiple source drugs and triennially for all other drugs, the agency must make the following findings and assurances:
(1) Findings. The agency must make the following separate and distinct findings:
(i) In the aggregate, its Medicaid expenditures for multiple source drugs, identified and listed in accordance with §447.332(a) of this subpart, are in accordance with the upper limits specified in §447.332(b) of this subpart; and
(ii) In the aggregate, its Medicaid expenditures for all other drugs are in accordance with §447.331 of this subpart.
(2) Assurances. The agency must make assurances satisfactory to CMS that the requirements set forth in §§447.331 and 447.332 concerning upper limits and in paragraph (b)(1) of this section concerning agency findings are met.
(c) Recordkeeping. The agency must maintain and make available to CMS, upon request, data, mathematical or statistical computations, comparisons, and any other pertinent records to support its findings and assurances.
[52 FR 28658, July 31, 1987]
§ 447.334 Upper limits for drugs furnished as part of services.
The upper limits for payment for prescribed drugs in this subpart also apply to payment for drugs provided as part of skilled nursing facility services and intermediate care facility services and under prepaid capitation arrangements.
§ 447.342 [Reserved]
Prepaid Capitation Plans
§ 447.362 Upper limits of payment: Nonrisk contract.
Under a nonrisk contract, Medicaid payments to the contractor may not exceed—
(a) What Medicaid would have paid, on a fee-for-service basis, for the services actually furnished to recipients: plus
(b) The net savings of administrative costs the Medicaid agency achieves by contracting with the plan instead of purchasing the services on a fee-for-service basis.
[48 FR 54025, Nov. 30, 1983]
Rural Health Clinic Services
§ 447.371 Services furnished by rural health clinics.
The agency must pay for rural health clinic services, as defined in §440.20(b) of this subchapter, and for other ambulatory services furnished by a rural health clinic, as defined in §440.20(c) of this subchapter, as follows:
(a) For provider clinics, the agency must pay the reasonable cost of rural health clinic services and other ambulatory services on the basis of the cost reimbursement principles in part 413 of this chapter. For purposes of this section, a provider clinic is an integral part of a hospital, skilled nursing facility, or home health agency that is participating in Medicare and is licensed, governed, and supervised with other departments of the facility.
(b) For clinics other than provider clinics that do not offer any ambulatory services other than rural health clinic services, the agency must pay for rural health clinic services at the reasonable cost rate per visit determined by a Medicare carrier under §§405.2426 through 405.2429 of this chapter.
(c) For clinics other than provider clinics that do offer ambulatory services other than rural health clinic services, the agency must pay for the other ambulatory services by one of the following methods:
(1) The agency may pay for other ambulatory services and rural health clinic services at a single rate per visit that is based on the cost of all services furnished by the clinic. The rate must be determined by a Medicare carrier under §§405.2426 through 405.2429 of this chapter.
(2) The agency may pay for other ambulatory services at a rate set for each service by the agency. The rate must not exceed the upper limits in this subpart. The agency must pay for rural health clinic services at the Medicare reimbursement rate per visit, as specified in §405.2426 of this chapter.
(3) The agency may pay for dental services at a rate per visit that is based on the cost of dental services furnished by the clinic. The rate must be determined by a Medicare carrier under §§405.2426 through 405.2429 of this chapter. The agency must pay for ambulatory services other than dental services under paragraph (c) (1) or (2) of this section.
(d) For purposes of paragraph (c) (1) and (3) of this section, “visit” means a face-to-face encounter between a clinic patient and any health professional whose services are reimbursed under the State plan. Encounters with more than one health professional, and multiple encounters with the same health professional, that take place on the same day and at a single location constitute a single visit, except when the patient, after the first encounter, suffers illness or injury requiring additional diagnosis or treatment.
[43 FR 45253, Sept. 29, 1978, as amended at 51 FR 34833, Sept. 30, 1986]
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