Section 412.304 - Implementation of the capital prospective payment system(a)General rule. As described in §§ 412.312 through 412.370 , effective with cost reporting periods beginning on or after October 1, 1991, CMS pays an amount determined under the capital prospective payment system for each inpatient hospital discharge as defined in § 412.4 . This amount is in addition to the amount payable under the prospective payment system for inpatient hospital operating costs as determined under subpart D of this part.(b)Cost reporting periods beginning on or after October 1, 1991 and before October 1, 2001. For cost reporting periods beginning on or after October 1, 1991 and before October 1, 2001, the capital payment amount is based on either a combination of payments for old capital costs and new capital costs or a fully prospective rate, as determined under § 412.324 through § 412.348 .(c)Cost reporting periods beginning on or after October 1, 2001 - (1)General. Except as provided in paragraph (c)(2) of this section, for cost reporting periods beginning on or after October 1, 2001, the capital payment amount is based solely on the Federal rate determined under §§ 412.308(a) and (b) and updated under § 412.308(c) .(2)Payment to new hospitals. For cost reporting periods beginning on or after October 1, 2002-(i) A new hospital, as defined under § 412.300(b) , is paid 85 percent of its allowable Medicare inpatient hospital capital-related costs through its cost report ending at least 2 years after the hospital accepts its first patient, unless the new hospital elects to be paid under the capital prospective payment system based on 100 percent of the Federal rate. (A) If the new hospital elects to be paid based on 100 percent of the Federal rate, the new hospital must submit a written request to the fiscal intermediary by the later of December 1, 2002 or 60 days before the beginning of its cost reporting period.(B) Once a new hospital elects to be paid based on 100 percent of the Federal rate, it may not revert to payment at 85 percent of its allowable Medicare inpatient hospital capital-related costs.(ii) For the third year and subsequent years, the hospital is paid based on the Federal rate as described under § 412.312 .(d)Interim payments. Interim payments are made to the hospital as provided in § 412.116 .56 FR 43449, Aug. 30, 1991, as amended at 67 FR 50113 , Aug. 1, 2002; 70 FR 47487 , Aug. 12, 2005