In an effort to balance funding distribution for Medicare Disproportionate Share Hospital (DSH) payments, the Centers for Medicare and Medicaid Services (CMS) is phasing in a changed approach to allocating those funds. Based around the S-10 worksheet, a tool used by hospitals to report charity care and non- Medicare bad debt expenses and collect uncompensated care (UCC) payments, this change has major implications for hospitals across the country.
In the Inpatient Prospective Payment System (IPPS) final rule, CMS determined that it will phase in payments based on information collected from Line 30 of the S-10 worksheet of the Medicare cost report in order to determine the UCC payment factor (Factor 3), starting with federal fiscal year (FFY) 2014 cost reports for DSH payments in FFY 2018. CMS had stated in the proposed rule that if, in the future, it was to continue this transition using a similar methodology for FFYs 2019 and 2020, the data used would be one year of proxy data (2013 Medicaid days, 2015 Medicare SSI days) and two years of S-10 data (2014, 2015) for FFY 2019 DSH payments, and three years of S-10 data for FFY 2020 DSH payments and thereafter. In the final rule, CMS states that as it gradually incorporates cost report data, it will be leaving the door open for the future inclusion of proxies based on blends of Worksheet S-10 data, low-income insured days, or three-year Factor 3 averaging currently in place, as detailed in Figure 1 under the assumption that CMS phases S-10 in fully over a three year period.
CMS’ trimming methodology in the FFY 2018 IPPS final rule targets the cost-to-charge ratio of providers that report very high values on the S-10.
DataGen has analyzed how this change will impact hospitals around the country, and Medicaid expansion states are generally hit harder than non-expansion states. Figure 2 estimates the proportionate increases and decreases in funding for each state based on this rule change.
CMS will work with stakeholders through provider education and further refinement of the instructions regarding completion of Worksheet S-10. CMS is developing audit protocols for Worksheet S-10 data for use in future rulemaking as the S-10 data will be subject to a desk review beginning with FFY 2017 cost reports.
HOW PROVIDERS CAN PREPARE FOR THE CHANGE
Providers should be preparing today for how they will handle this change. CMS has opened a window for hospitals to correct their FFY 2014 and 2015 S-10s, which closes after September 30, 2017. Any participating hospital should capitalize on this opportunity now to potentially avoid major losses in the future.
If you foresee major budgetary shortfalls in the future, begin strategizing now on how to mitigate those losses by increasing efficiency or implementing more drastic savings measures.CMS, Disproportionate Share Hospital, dsh, ipps, medicare, s10