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Operating and Capital Cost-to-Charge Ratios (CCR)

The purpose of this post is to explain how Medicare calculates the operating and capital cost to charge ratios.

Which cost report is used to calculate the cost-to-charge ratios?

Medicare informs that it is the latest settled or tentatively settled cost report that is used for calculating cost-to-charge ratios.

How is the OPERATING cost-to-charge ratio calculated?

First, we must obtain a statistic from D-1, line 53 from the provider. Let’s take a look at line 53:

Medicare Cost Report 2552-10, D-1, Part II, line 53

Medicare Cost Report 2552-10, D-1, Part II, line 53

This tells us that our operating costs, net of capital costs and pass-thru costs (medical education, non-physician anesthetists, etc.) total $6,180,220. Nursery costs are generally excluded (line 42).

Second, we need to obtain the total charges. We can obtain this from D-4 on lines 25-30 and line 103 (2552-96) or the 2552-10 equivalent on D-3.

D-4, Adult-Pediatric

D-4, Adult-Pediatric

We add lines 25-30 and line 103. This gives us $8,325,607 + $4,720,929 = $13,046,536.

Third, we divide the costs in step 1 ($6,180,220) by step 2 ($13,046,536). This gives us approximately 47.4%.

How is the CAPITAL cost-to-charge ratio calculated?

First , much like the calculation for the operating cost to charge ratios, we start with the D worksheets. In this, case we need to go back to the capital costs we eliminated from line 53 on D-1. Our first step is to obtain the routine and ancillary provider capital costs from D, Part I and D, Part II.

D, Part I Provider

D, Part I Provider

Total D, Part II

Total D, Part II

From D, Part I we need to obtain the routine capital costs, the sums of line 25-30 or the 2552-10 equivalent. The sum here is $197,987. To this, we add line 101 from D, Part II or the 2552-10 equivalent. Line 101 totals $104,381. We now add the two amounts to get $302,368.

Second , we obtain the total charges from D-4 (2552-96) or D-3 (2552-10) as we did for the operating cost-to-charge ratio from step #2 above. The total was $13,046,536.

Third , We divide the totals from step 1 ($302,368) by step 2 ($13,046,536) to get 2.31%..

Resources: Medicare Claims Processing Manual: Chapter 3, 20.1.2.1″

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