New Jersey Administrative Code
Title 10 - HUMAN SERVICES
Chapter 52 - HOSPITAL SERVICES MANUAL
Subchapter 14 - METHODOLOGY FOR ESTABLISHING DRG PAYMENT RATES FOR INPATIENT SERVICES AT GENERAL ACUTE CARE HOSPITALS BASED ON DRG WEIGHTS AND A STATEWIDE BASE RATE
Section 10:52-14.11 - Cost outlier payment calculation

(a) A cost outlier is defined as an inpatient stay with an estimated cost, which exceeds the greater of the State designated cost outlier threshold or the cost outlier statistical limit for a certain DRG. The cost outlier calculation is set forth in (e) below.

(b) The cost outlier statistical limit is the statistical limit for each DRG, defined as the sum of the Statewide average cost per stay for that DRG, and 1.96 times the standard deviation of the Statewide average cost per stay for that DRG.

(c) The cost outlier threshold is the fixed dollar amount cost outlier limit established by the Division, which applies to all DRGs. Applying this threshold in the cost outlier calculation assures that no cost outlier payments will be made for any DRG with a cost outlier statistical limit less than the threshold amount.

(d) The marginal cost percentage is the State-designated percentage used to determine the proportion of estimated cost that will be reimbursed as a cost outlier payment as described in (e) below. The State-designated marginal cost percentage applies to all DRGs and all hospitals.

(e) To calculate the estimated cost of a claim, the hospital's cost-to-charge ratio (CCR) is multiplied by the total covered charges on the claim. If the estimated cost amount exceeds the higher of the statistical cost outlier limit for the assigned DRG or the State-designated cost outlier threshold amount, the hospital will receive a cost outlier payment. The amount of the estimated cost in excess of the applicable cost outlier threshold or cost outlier statistical limit is multiplied by the marginal cost percentage. The resulting amount is the cost outlier payment.

(f) The cost outlier payment is made to the hospital in addition to the standard DRG payment amount.

(g) For claims with alternate level of care days, charges used to calculate cost outlier payments do not include routine per diem charges for alternate level of care days.

(h) The hospital specific CCRs used to develop the final rates were calculated using 2003 audited Medicare cost report data and 2003 claims data. Specifically, the 2003 CCRs were derived from the process used to convert charges to cost for calculating the DRG weights, as described in 10:52-14.3. In the initial rate year, the hospital specific CCRs used to calculate cost outlier payments were calculated using the most recent available submitted Medicare cost report data, subject to review and adjustment by the Division if necessary.