Final prospective payment rules contain important revisions.

The final rules for the first year of Medicare's prospective payment contain a number of crucial revisions of the interim rules: Payment standards. Because of a revised estimate of inflation, the adjusted federal standardized payment amounts have been reduced about $12. Update factors. Revised inflation updating factors will be applied to the hospital-specific portion of payment rates and will reflect a lower (0.1 percent) budget-neutrality adjustment. Outliers. For the three-year transitional period, additional payments for outlier patients will be based entirely on a smaller percentage of the federal payment amounts. Permissible charges to beneficiaries. Hospitals may charge beneficiaries for custodial care and medically unnecessary services before the day-outlier threshold is passed if the hospital or its utilization review committee determines that the beneficiary no longer needs inpatient care; this determination is confirmed by the attending physician or external medical review entity; and the patient is notified of the determination and potential charges. Periodic interim payment. This payment may be adjusted semiannually, or more frequently at a hospital's request. Biweekly payments will be made for items reimbursed on a reasonable-cost basis.