Medicare DSH & Worksheet S-10 Kentucky HFMA March 29, 2018
Medicare DSH DSH Disproportionate Share Hospital Original intent was to provide additional reimbursement under PPS for hospitals that incur higher-than-average costs per case because they serve a disproportionate share of low income patients. Low income patients tend to have more health issues and are more costly to treat. These hospitals tend to have higher operating costs overall. 2
Medicare DSH Key Term: Traditional DSH Adjustment: Aka Operating DSH or Empirical DSH Wkst E part A, Line 34 Based on product of provider s disproportionate patient percentage x DRG payments. Effective 2014 IPPS final rule Enacted by the Affordable Care Act (ACA) Now represents 25 percent of providers Medicare DSH Reimbursement 3
Medicare DSH The traditional DSH add-on is based on the sum of two fractions: (1) Medicare / SSI Fraction Days for patients entitled to Medicare Part A and entitled to SSI benefits Divided By Days for patients entitled to Medicare Part A (2) Medicaid Fraction: Days for patients eligible for Medicaid and not entitled to Medicare Part A Divided By Days for patients in acute care areas (including nursery) 4
Medicare DSH 5
ACA Changes Section 3133 of PPACA requires significant revisions to Medicare DSH. Effective for discharges on or after 10/1/13 Traditional Medicare DSH Payment is reduced by 75% Establishes new DSH Payment for Uncompensated Care The new Medicare DSH will have two components: Part One will be 25% of the amount determined using the traditional payment calculation ( Empirically Justified ). Part Two will be an allocation of a pool of funds (Uncompensated Care Payment ) 6
Medicare DSH Key Term: Uncompensated Care Payment: AHA definition - an overall measure of hospital care provided for which no payment was received from the patient or insurer. Bad Debt & Charity Uninsured patient population Section 3133 of the Affordable Care Act amends the Medicare DSH adjustment provision Uncompensated care payment based on providers share of insured low income days reported by Medicare DSH hospitals. Low income days are the sum of Medicaid Days and Medicaid SSI Days. Uncompensated Care Payment: Wkst E, part A, Line 35 7
DSH / Uncompensated Care Reimbursement 25% Empirical Justified Adjustment 75% Uncompensated Care Adjustment 8
UCC Pool Factors Factor 1: Fund UCC Pool with 75% of total projected DSH payments Factor 2: Adjustment for change in uninsured Factor 3: New method distributes funds to hospitals based on the ratio their specific UCC to total UCC 9
Factor 1 Calculation 75 percent of the estimated DSH payments that would otherwise be made under the old DSH methodology (section (d)(5)(f) of the Social Security Act); Source is Chief Actuary of CMS Factor 1 for FY 2018 is $11,664,704,643.27, which is equal to 75 percent of the total amount of estimated Medicare DSH payments for FY 2018 ($15,552,939,524.36 minus $3,888,234,881.09). 10
Factor 2 Calculation 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured (minus 0.1 percentage points for FY 2014, and minus 0.2 percentage points for FY 2015 through FY 2018) Source going forward Uninsured estimates produced by CMS Office of the Actuary (OACT) as part of the development of the National Health Expenditure Accounts. (See page 38200 of the 2018 final rule) The FY 2018 final uncompensated care amount is: $11,664,704,643.27.0.5801 = $6,766,695,163.56. 11
Factor 3 Recent Changes in determining Factor 3 CMS is now using a three years of data to protect hospitals from undue payment fluctuations. For FFY 2018, data from Worksheet S-10 has been incorporated into the calculation of Factor 3. By FFY 2020, UCC payment will be based totally on Worksheet S-10 uncompensated care factors. 12
Uncompensated Care (UCC) CMS is phasing in the cost of uncompensated care to calculate the hospital-specific uncompensated care (UCC) disproportionate share (DSH) payment. Worksheet S-10 Cost of uncompensated care will replace the low-income patient days (Medicaid + SSI) as the proxy for distributing the UCC payment pool 1 year S-10, 2 years low-income days in FFY 2018 2 years S-10, 1 year low-income days in FFY 2019 3 years S-10 in FFY 2020 13
Uncompensated Care (UCC) 14
Example of Factor 3 Difference Southeast Alabama Hospital 01-0001 Two years of low-income (Medicaid + Medicare SSI) days One (2014) year of uncompensated care cost (UCC) Note the significant difference in hospital-specific proportion to total from using UCC versus lowincome 15
Uncompensated Care in Factor 3 Year 1 Year 2 Year 3 A 2012 Medicaid Days 15,723 2013 Medicaid Days 16,084 Uncompensated B 2014 SSI Days 6,129 2015 SSI Days 5,345 Care Cost-2014 22,856,852 C A + B Proxy days 21,852 Proxy days 21,429 Total Uncompensated Care 25,199,302,174 D Per CMS Proxy Denominator 37,065,316 Proxy Denominator 37,311,194 E C D Factor 3 Components 0.000589554 0.000574332 0.000907043 F Scaling factor 0.984830486 0.984830486 0.984830486 G ⅓ of E F Portion of Factor 3 0.00019354 0.00018854 0.00029776 Sum of G for each year Total Factor 3 0.00067984 Per CN FY18 0.00067984 Factor 2 - FFY 2018 6,766,695,163 Factor 3 Impact Southeast Alabama Medical Center Provider 01-0001 Year 1 Factor 3 0.0001935369 1,309,605 Year 2 Factor 3 0.0001885398 1,275,791 Year 3 Factor 3 0.0002977612 2,014,859 Calculated Uncompensated Care 4,600,256 UC from CN FY18 4,600,256 Difference (0) 16
Uncompensated Care in Factor 3 17
Worksheet S-10 CMS issued clarification on reporting, specifically Charity care charges and uninsured discounts and patient payments Different filing requirements for cost reporting periods beginning on or after October 1, 2016 Applies to Critical Access Hospitals and IPPS Hospitals CMS Transmittal 1681 instructed MACs to accept S-10 revisions to FFY 2014 & 2015 Medicare cost reports All revisions were due January 2, 2018 Do not expect CMS to allow additional revisions to these cost reports for S-10 Anticipate revision period for FFY 2016 reports 18
Worksheet S-10 Document 19
Worksheet S-10 Focus Areas Main Impact Focus Areas 1. Charity Care 2. Bad Debts 3. Cost-to-Charge Ratio 20
Charity on WS S-10 Line 20 Cost Reporting Periods On/After October 1, 2016 1. Total charges or portion of total charges written off to charity care 2. Write-offs in the cost reporting period regardless of when the services were provided (match GL reporting) Cost Report Periods Prior to October 1, 2016 1. Full charges, or the initial obligation of the patient 2. Services received in the cost reporting period 21
Charity Payments on WS S-10 Line 22 Cost Reporting Periods On/After October 1, 2016 Little to no patient receipts since Hospital claimed the charity write-off only on line 20. *** Cost Report Periods Prior to October 1, 2016 Actual and expected patient receipts for the portion of charges not written off to charity. ***Include receipts on an account claimed as charity in cost reporting periods prior to October 1, 2016 if the Hospital had recorded the entire charge and not the expected receipt. 22
Charity on WS S-10 For cost reporting periods on or after October 1, 2016 Hospitals: Will claim net charity write-off balances on line 20 Should have little to no patient receipts on line 22 Sliding Scale Charity Example 4 in MLN Matters No. SE17031 Uninsured gross charge = $1,000, charity w/o =60%, or $600 Patient owes balance of $400, pays $100 $600 to line 20, $0 to line 22 as $100 payment on remaining non-charity liability (if $300 balance remains unpaid could claim as BD) 23
Charity on WS S-10 Include self-pay discounts applied uniformly and documented in Hospital policy (correspondence with CMS 2/6/18) Exclude courtesy or prompt pay discounts (WS S-10 Q&A Number 1): For Medicare purposes, any discount given to a patient that is not part of the hospital s charity care policy or that is not a discount given as part of the hospital s written financial assistance policy (FAP) for uninsured patients, is excluded from uncompensated care. Some examples of discounts given to patients that are not part of a charity care policy or FAP include: courtesy discounts, prompt pay discounts, employee discounts, friends and family discounts, etc. 24
Bad Debt on Line 26 Instructions are the same as for cost reporting periods prior to October 1, 2016 Total facility bad debts Written off during the cost report period (GL balance) Exclude recoveries and professional fee write-offs Include Medicare and non-medicare on line 26 as cost report will offset Medicare bad debt on line 27 Cost equals non-medicare bad debts multiplied by CCR plus 100% of difference of Medicare bad debts less Medicare reimbursable bad debts (35% difference) 25
Worksheet S-10 Example 26
Cost-to-Charge Ratio (CCR) Monitor changes in CCR Review cost report overhead allocations to assess accuracy and appropriateness Billed charges compared to GL charges Charge structure review: Uninsured patients Specific arrangements that have reduced charges or different mark-ups Allowable costs determination 27
Factors to Consider Understand your hospitals relative ranking for uncompensated care cost compared to other like facilities. Does it make sense? What is the financial impact for your facility? All future Factor 3 calculations will incorporate Worksheet S-10 data. SSI and Medicaid-eligible days will be no longer utilized. Still important in empirical DSH calculation (340B) Understand how uncompensated care cost are determined. 2017-18 cost report Worksheet S-10 factors will be accumulated differently than in prior years 28
Review WS S-10 UCC Verify the Hospital captures all its charity write-offs with a thorough review of the transaction codes Inclusion of uninsured discounts (per FAP only) Does it correlate with what you would file on IRS form 990? Verify that the Hospital captures Medicare crossover write-offs in the bad debt account, not a contractual account Exclude professional fees on the charity and bad debt balances on WS S-10 and the gross revenue on WS C 29
Review WS S-10 UCC Anticipate review of FFY 2016 Medicare cost report for S-10 revision Choose to amend? FFY 2017 subject to audit by MACs (2018 Final Rule page 38208) Ensure patient detailed listings readily available to support all reported information Medicare Electronic Health Record review of charity on WS S-10 may provide an indication of how they will audit 30
Questions? Nick Ficklin nficklin@blueandco.com 502-992-3490 Clint Brill cbrill@blueandco.com 502-992-3512 31