How to Calculate Medicare Outlier Payments

Outlier payments are payments that are required when hospitals incur an abnormal amount of costs while taking care of a patient. There is a threshold in place, which the costs must exceed, in order for the hospital to be eligible to charge for outlier payments. A percentage of costs, based on the marginal cost factor, is then applied to only the costs exceeding the threshold to figure out the payment. Both operating costs and capital (asset) costs are applied when calculating the outlier payments.

Instructions

• 1

  Add together the operating costs and the capital costs. Add the fixed operating and fixed capital thresholds together. Compare the two totals to see if the hospital is eligible for outlier payments.

• 2

  Subtract the operating outlier threshold from the operating costs allocated to taking care of the patient. Multiply this number by the marginal cost factor to get the operating outlier payment.

• 3

  Subtract the capital outlier threshold from the capital costs. Multiply this number with the marginal cost factor to get the capital outlier payment. If this number comes out negative, the capital outlier payment is considered zero.

• 4

  Add together the operating outlier payment and the capital outlier payment to get the total medicare outlier payment due. This is the marginal operating cost above the fixed threshold set by the federal government.