CMS Finalizes Plan To Cut Medicare DSH Payments to Kentucky Hospitals
Friday, August 04, 2017 8:22 AM
On Wednesday, the Centers for Medicare and Medicaid Services (CMS) released its Medicare inpatient hospital prospective payment
system (IPPS) final rule for fiscal year 2018. This rule will significantly
change the methodology for making Medicare disproportionate share hospital (DSH) payments. The new
methodology will be phased in over three years.
Preliminary estimates are that the new methodology will reduce
Medicare DSH payments to Kentucky hospitals by about $77 million
when the new method is fully in place in fiscal year (FY) 2020. KHA filed comments strongly objecting to these changes. Please note, this methodology only affects hospitals paid on a DRG basis, who also qualify for Medicare DSH.
Summary of Medicare DSH Changes
Hospitals that qualify for Medicare DSH payments will continue to receive
25 percent of the Medicare DSH funds under the pre-FY 2014 DSH formula,
known as the empirically justified DSH payments. The remaining 75 percent
of payments, which are paid from a national pool to hospitals based on
their proportion of uncompensated care, will be distributed according to
the new methodology.
Under the new method, CMS will begin to incorporate data from the Medicare
Cost Report, Worksheet S-10, and will also exclude
Medicaid shortfalls from the definition of uncompensated care. Only charity
care and non-Medicare bad debt expenses will be considered as uncompensated
care for purposes of distributing this portion of Medicare DSH payments.
Under the phase-in, Medicare DSH payments will be made as follows:
- FY 2018 would be based on two years of proxy data (2012 and 2013 Medicaid
days, 2014 and 2015 Medicare SSI days) and one year of Worksheet S-10 data
from 2014 Cost reports,
- FY 2019 would reflect one year of proxy data (2013 Medicaid days, 2015
Medicare SSI days) and two years of S-10 data from 2014 and 2015 cost
- FY 2020 and thereafter would be based on 3 years of S-10 data. FY 2020
payments would use S-10 data from 2014, 2015 and 2016 cost reports.
KHA argued that the exclusion of Medicaid shortfalls would harm Medicaid
expansion states and advantage non-expansion states. KHA also requested
changes in the Medicare cost report to delineate Medicaid DSH and Medicaid
supplemental payments so that CMS could accurately account for Medicaid
shortfalls. In their response to these comments, CMS indicated “…there are
other compelling arguments for excluding Medicaid shortfalls form the
definition of uncompensated care, including the fact that several key
stakeholders do not consider Medicaid shortfalls in their definition of
uncompensated care, and that it is most consistent with section 3133 of the
Affordable Care Act for Medicare uncompensated care payments to target
hospitals that incur a disproportionate share of uncompensated care for
patients with no insurance.” CMS indicated that the redistribution of
payments from hospitals that serve a greater number of Medicaid patients to
hospitals that serve more uninsured patients is consistent with the intent
of the ACA.
As to the suggestions for changes to Worksheet S-10, CMS
indicated that adjusting the definition of uncompensated care to include
Medicaid shortfalls would not be a feasible option at this time due to
computational limitations including the inability to separate a single DSH
payment into the portion covering the uninsured versus Medicaid shortfalls
and accounting for the repayment of provider taxes through higher Medicaid
revenue in some states. CMS indicated that a stop loss policy was not
needed to mitigate the effect of large changes in DSH payments because a
three year phase in is sufficient to provide reasonable stability in
KHA also opposed the new methodology because the data on Worksheet S-10 has
not been audited, and the use of erroneous data, which may overstate a
hospital’s uncompensated care, would result in a windfall for that hospital
and a reduction for all other hospitals, since DSH is paid on a prorate
basis from a fixed pool of funds. Even though CMS was presented with
evidence of aberrant S-10 data, they chose to finalize the new method
because two studies concluded that the accuracy of the S-10 data has
improved such that CMS claimed they could no longer conclude that
alternative data to the Worksheet S-10 are available that are a better
proxy for uninsured uncompensated costs. CMS did indicate a willingness to
work with stakeholders to address concerns relating to reporting on
Worksheet S-10 through provider education and further refinement of the
CMS is providing an opportunity for hospitals to revise and resubmit
their Worksheet S-10 data by submitting revised data to the MAC by September 30, 2017. CMS previously allowed hospitals to submit revisions to their FY 2014
data by September 30, 2016. They will now allow another opportunity to
resubmit data for the FY 2014 Worksheet S-10 as well as for FY 2015 cost
reports (through submission of an amended FY 2014 or FY 2015 cost report
containing the revised Worksheet S-10 or a completed Worksheet S-10 if no
data were included) to the MAC no later than September 30, 2017.
If your hospital receives Medicare DSH payments and has not already
done so, please review the uncompensated care, bad debt and other
data on the Worksheet S-10 for FY 2014 and FY 2015 and submit any
changes as may be needed by the September 30, 2017, deadline.
Hospitals also have until
August 31, 2017,
to review and submit comments on the accuracy of the table and
supplemental data file
published in conjunction with the final rule, which lists the uncompensated
care factor for each hospital that will receive a Medicare DSH payment.
Please access the supplemental data file at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2018-IPPS-Final-Rule-Home-Page.html
and submit comments to the CMS inbox at Section3133DSH@cms.hhs.gov.
KHA will be providing each IPPS hospital with an additional analysis of the
IPPS final rule and a hospital specific impact report once staff members have analyzed
the entire rule.If you have any questions, please contact Nancy Galvagni (email@example.com) or Carl Herde ( firstname.lastname@example.org) at KHA.