preparing for the complete overhaul of medicare dsh · preparing for the complete overhaul of...

Preparing for the Complete Overhaul of Medicare DSH

Hal Guthrie Kathe HootsSenior Manager DirectorDixon Hughes Goodman LLP Dixon Hughes Goodman LLPAtlanta, GA Hendersonville, NC

• Medicare DSH Background• PPACA revisions to Medicare DSH• Proposed IP PPS Rule (April 26, 2013) to

implement “New” DSH• Case Study – Dollar impact of “New” DSH• Recommendations• Case Law Update

Objectives

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All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

Disclaimer

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• Enacted by statute in 1986.• Purpose is to provide additional reimbursement

for hospitals that serve a disproportionate share of low income patients.

• Low income patients tend to have more health issues and do less health maintenance and thus increase the amount of resources required to serve their health needs.

• Medicare DSH reimbursement has increased significantly over the last ten years.

Medicare DSH Background

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Medicare DSH Reimbursement

• FY 2000 5.18• FY 2001 5.68• FY 2002 6.63• FY 2003 7.10• FY 2004 7.82• FY 2005 9.00• FY 2006 9.18

• FY 2007 9.40• FY 2008 10.12• FY 2009 10.42• FY 2010 10.83• FY 2011 11.59• FY 2012 11.93

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Total federal spending: ($ billions)

Source: CMS, Office of the Actuary


• FY 2003: 63%• FY 2004: 67%• FY 2005: 71%• FY 2006: 73%• FY 2007: 75%

• FY 2008: 75%• FY 2009: 77%• FY 2010: 76%• FY 2011: 78%• FY 2012: 78%

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Percentage of Inpatient Hospitals that Qualify for Medicare DSH

Source: CMS, Office of the Actuary

The DSH add-on is based on the sum of two fractions:

(1) Medicare / SSI FractionDays for patients entitled to Medicare Part A and entitled to SSI benefitsDivided ByDays for patients entitled to Medicare Part A

(2) Medicaid Fraction:Days for patients eligible for Medicaid and not entitled to Medicare Part ADivided ByDays for patients in acute care areas (including nursery)


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Medicare DSH“New” Methodology

• Section 3133 of PPACA requires significant revisions to Medicare DSH

• Effective FY 2014 beginning October 1, 2013.

• CMS issued proposed rule on April 26, 2013.

Medicare DSH “New” Methodology

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• The “new” Medicare DSH will have two components:– Part I will be 25% of the amount determined using

the current payment calculation– Part II will be an allocation of a pool of funds: The pool will be based on the remaining 75%,

adjusted downward by a factor estimating the change in the aggregate uninsured rate

Each hospital’s share of the pool will be based on the hospital’s uncompensated care as a percentage of total uncompensated care for all hospitals sharing the pool


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• UCC portion of funds to be allocated based on 75% of what would have been paid for DSH under old rule less reduction in uninsured less statutory reduction.

• Source used for estimated DSH payments for 2014 under old rule – Office of Actuary.

Medicare DSH Proposed Rule FFY 2014

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• Factor 1 = DSH Payment under old rule = $12.34B, 75% = $9.25B

• Factor 2 = Reduction applied to Factor 1 to account for decrease in uninsured. Uninsured percentages based on CBO estimates.

• Factor 3 = Allocation methodology (low income days).


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• Factor 2: Uninsured for 2013 published in 2010 = 18%, estimate for 2014 published in Feb 2013 = 16%.

• Factor 2: 1-[(.16-.18)/.18] = 1 - .111 = .889 less statutory reduction .001 = .888.

• $9.2535B x .888 = $8.217B• Total DSH funds for allocation of UCC (using

Factor 3) = $8.217B.


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• Total DSH funds for allocation of UCC = $8.217B.

• How will these funds be allocated? Months of speculation in the industry. Most believed the source would be cost report Worksheet S-10.

• CMS proposes use of a proxy to estimate UCC. Proxy is Medicaid days plus Medicare SSI days.


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• Why was S-10 not used as the source?• Proposed rule discusses in some length. • S-10 is “a new data source” and has been

“used for specific payment purposes only in relatively restricted ways” (EHR)

• S-10 has not been subject to audit other than related to EHR.

• CMS believes that when information requested drives payment, it is more likely to be accurate.


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• CMS uses wage index as example that information must be audited to be used for payment purposes.

• Hospitals expressed concern that they have not had enough time to learn how to submit accurate and consistent data on Worksheet S-10.

• S-10 instructions still require clarification to ensure consistency.

• May propose to use S-10 in the future “once hospitals are submitting accurate and consistent data”.


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• Medicaid days have been the driver of the DSH payment since the inception of the DSH regulation. They have also been subject to audit.

• Many providers contacted CMS to voice concerns over issues with using S-10.

• CMS requested comments from the proposed rule related to S-10.


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• Same rules apply for counting Medicaid days.

• Source for Medicaid days – “most recent available filed cost report”.

• Source for Medicare SSI days – “most recent available SSI ratios”

• Table published that includes Medicaid and Medicare SSI days and hospital percentages for allocation.


17

• Table is on CMS web page: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html

• Most provider Medicaid days data appears to be based on cost report period beginning in FFY 2011.

• If amended cost report was processed by MAC, those appear to be included. If additional Medicaid days included for audit, those are not included in Table because final settlement is not complete.


18

• Currently most recent SSI is 2010 but CMS expects to update to 2011 in final rule

• Hospitals have 60 days from Proposed rule to notify CMS of change in subsection (d) status.

• No change can be made to Medicaid days. • ACA prescribes that the estimates used by

the Secretary are not subject to judicial review. Estimates include the factors used as well as the time period used.


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• What will be the timing of payment determination?– Prospectively paid on federal fiscal year

regardless of hospital year. – Paid on an interim rate and subject to cost

report settlement? No cost settlement except for SCH.

• Will all hospitals be allowed to share in the 75% pool or just those also eligible for the 25% payment? Only those eligible for any DSH payment. Provider must reach the 15% threshold to receive any DSH.


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• How will the 12% cap currently applicable for many rural and certain urban hospitals be applied?

• Cap is not addressed in the proposed rule at all. Impact to providers is probably minimal.

• Because the denominator is fixed, changes to one hospital will change the allocation to all others.


21

• SCH – whether or not they will participate in the interim DSH pool will be estimated. If the estimate is incorrect, adjustment will be made at cost report settlement.

• SCHs should check their status on the Table.• SCH comparison for Inpatient HSP

reimbursement does not include the 75% UCC component.


22

• No redistribution per proposed rule! If SCH received allocation and should not have, no retroactive change to other hospital percentages.

• No reconciliation of the total DSH funds that would otherwise have been paid for DSH (denominator/ $8.217B).


23

• Reason provided in proposed rule – this is “inherent use of estimates”. (CMS) “does not know of any reason to believe there will be a bias toward systematic overpayment or underpayment.”

• Is there any other Medicare/ Medicaid reimbursement system that is not reconciled?


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Implications of Medicaid Days as Proxy

• ACA Medicaid expansion• Current Medicaid eligibility/FPL• Redistribution of DSH reimbursement• Is Proxy a fair estimate of uncompensated

care?

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CMS Table FFY 2014Medicaid Days

+ Medicare SSI Days

Factor 3 – Top 30 Hospitals

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FY 2014 IPPS Proposed Rule: Implementation of Section 3133 of the Affordable Care Act- Medicare DSH - Supplemental Data

PROV NAME

Proposed Medicaid

Days

Proposed Medicare SSI Days

Proposed Insured

Low Income

DaysProposed Factor 3

Projected to Receive DSH for FY

2014

330059 MONTEFIORE MEDICAL CENTER 185096 41778 226874 0.632298% Y

100022 JACKSON HEALTH SYSTEM 195957 22070 218027 0.607642% Y

330101 NEW YORK-PRESBYTERIAN HOSPITAL 168017 39537 207554 0.578453% Y

100006 ORLANDO REGIONAL HEALTHCARE 138508 11874 150382 0.419115% Y

450015 PARKLAND HEALTH AND HOSPITAL SYSTEM 137560 4993 142553 0.397295% Y

150056 CLARIAN HEALTH PARTNERS INC D/B/A METHODIST IU RIL 127778 9467 137245 0.382502% Y

100007 FLORIDA HOSPITAL 114674 21787 136461 0.380317% Y

180088 NORTON HOSPITALS, INC 107995 10195 118190 0.329396% Y

330169 BETH ISRAEL MEDICAL CENTER 87384 30768 118152 0.329290% Y

450388 METHODIST HOSPITAL 98256 19482 117738 0.328136% Y

330024 MOUNT SINAI HOSPITAL 88121 25543 113664 0.316782% Y

330194 MAIMONIDES MEDICAL CENTER 82170 28792 110962 0.309251% Y

440049 METHODIST HEALTHCARE MEMPHIS HOSPITALS 91065 17590 108655 0.302822% Y

330009 BRONX-LEBANON HOSPITAL CENTER 92214 16438 108652 0.302813% Y

450289 HARRIS COUNTY HOSPITAL DISTRICT 105922 2720 108642 0.302785% Y

Factor 3 – Top 30 Hospitals

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PROV NAME

Proposed Medicaid

Days

Proposed Medicare SSI Days

Proposed Insured

Low Income

DaysProposed Factor 3

Projected to Receive DSH for FY

2014

050327 LOMA LINDA UNIVERSITY MEDICAL CENTER 93585 6291 99876 0.278355% Y

250001 UNIVERSITY OF MISSISSIPPI MED CENTER 92913 6719 99632 0.277675% Y

340113 CAROLINAS MEDICAL CENTER/BEHAV HEALTH 89969 6245 96214 0.268149% Y

070022 YALE-NEW HAVEN HOSPITAL 86993 6628 93621 0.260922% Y

440039 VANDERBILT UNIVERSITY HOSPITAL 87921 5600 93521 0.260643% Y

050060 COMMUNITY REGIONAL MEDICAL CENTER 80001 12864 92865 0.258815% Y

100128 TAMPA GENERAL HOSPITAL 81459 10721 92180 0.256906% Y

330046 ST LUKE'S ROOSEVELT HOSPITAL 75644 15642 91286 0.254414% Y

100075 ST JOSEPH'S HOSPITAL 77858 11692 89550 0.249576% Y

370093 O U MEDICAL CENTER 84276 4359 88635 0.247026% Y

010033 UNIVERSITY OF ALABAMA HOSPITAL 77590 10026 87616 0.244186% Y

230038 SPECTRUM HEALTH - BUTTERWORTH CAMPUS 80680 6693 87373 0.243509% Y

450068 MEMORIAL HERMANN TEXAS MEDICAL CENTER 78339 8159 86498 0.241070% Y

030024 ST JOSEPH'S HOSPITAL AND MEDICAL CENTER 80860 4264 85124 0.237241% Y

100113 SHANDS HOSPITAL AT THE UNIVERSITY OF FLORIDA 76629 7071 83700 0.233272% Y

• Generally, winners appear to be those hospitals with high Medicaid + low Medicare.

• Generally, losers appear to be those hospitals with low Medicaid + high Medicare.

• Examples

Case Study

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State Winners & Losers

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States with Largest Gains

Amount

Colorado $18,461,948Oklahoma 18,877,227Georgia 20,148,140Texas 22,202,688Arizona 43,282,332Ohio 47,773,119Puerto Rico 70,695,747Pennsylvania 73,933,895Florida 76,699,258New York 103,760,260

States with Largest Losses

Amount

California $(244,974,547)

Massachusetts (35,389,238)

North Carolina (24,106,298)

Washington (19,941,617)

Michigan (17,523,696)

Illinois (16,538,395)

Kentucky (14,823,012)

Mississippi (13,431,717)

Arkansas (7,984,187)

D.C. (7,981,369)

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PROV NAMEProposed

Medicaid Days

Proposed Medicare SSI

Days

Proposed Insured Low Income Days

Proposed Factor 3

Projected to Receive DSH for FY 2014

Pool amount per Proposed

Rule

100022 JACKSON HEALTH SYSTEM 195957 22070 218027 0.607642% Y 49,929,907

2011 Medicare DSH Amount 41,320,844x 25%

10,330,211UCC portion of DSH based on CMS table 49,929,907Total DSH Estimate for 2014 60,260,118Total DSH for 2011 41,320,844Increase 18,939,274

Days Utilization – 2011 Cost Report

Medicare 22%Medicaid 52%All Others 26%

100%

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PROV NAMEProposed

Medicaid Days


Days


Proposed Factor 3



Rule

140124 JOHN H STROGER HOSPITAL 51400 1756 53156 0.148146% Y 12,173,144


1,469,332UCC portion of DSH based on CMS table 12,173,144Total DSH Estimate for 2014 13,642,476Total DSH for 2011 5,877,328Increase 7,765,148



100%

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PROV NAMEProposed

Medicaid Days


Days


Proposed Factor 3



Rule

010092 D C H REGIONAL MEDICAL CTR 28516 8465 36981 .103066% Y 8,468,941


3,638,995UCC portion of DSH based on CMS table 8,468,941Total DSH Estimate for 2014 12,107,936Total DSH for 2011 14,555,978Decrease (2,448,042)



100%

FY 2014 IPPS Proposed Rule: Implementation of Section 3133 of the Affordable Care Act - Medicare DSH - Supplemental Data

PROV NAME

Proposed Medicaid

Days


Days


Proposed Factor 3

Projected to Receive DSHfor FY 2014


Rule

050739 CENTINELA HOSPITAL MED CTR 24784 8839 33623 0.093707% Y 7,699,933


6,716,272UCC portion of DSH based on CMS table 7,699,933Total DSH Estimate for 2014 14,416,205Total DSH for 2011 26,865,088Decrease (12,448,883)



100%

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Potential Comments to Rule • Factor 1 (Total DSH amount) understatement.• Factor 2 (Decrease in uninsured) estimates. • Reconciliation of all factors once information is

available.• MA days eligible for Medicaid should be in

Medicaid fraction.• Hospitals that meet DSH threshold should be

only hospitals eligible for UCC portion.• SCH comparison to Hospital Specific Rate.

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Recommendations• Verify numbers used in Proposed Rule

Table. May be worth commenting on if there are systematic problems.

• Verify status of qualifying for DSH in Table.• Include all appropriate Medicaid days in

future filed cost reports. Depending on timing, amendments may not be included in the allocation.


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Recommendations• Amended Cost Report Example - we found

$800,000 understatement in Factor 3 allocation because provider did not do Medicaid days analysis before cost report was filed.

• Comment on the proposed rule or provide comments to us.

• Comments due to CMS by June 25, 2013.


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Recommendations• Watch for final rule which should be

published in August. Final rule will include comments on proposed rule.


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DSH Appeal/Litigation Update

• DSH regulation – exclude days from Medicaid fraction that are “entitled to benefits under Part A.”

• If MA days meet this criteria, they should be in SSI fraction. If MA days do not meet this definition, they should be in the Medicaid fraction.

Medicare Advantage (MA) Days

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• Northeast case – related to discharges prior to 2004 rule. D.C. Circuit invalidated CMS application rule to periods prior to rule change.

• Allina – related to discharges after 2004 rule. District Court vacated 2004 rule dealing with MA days. CMA has appealed to D.C. Circuit.

• CMS stated their position again in IP PPS proposed rule. Encourage comments.

Medicare Advantage (MA) Days

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• Days where a patient is participating in Medicaid and Medicare Part A but no payments are made under Medicare Part A

• Common Examples– Part A exhausted benefits (90 days per spell of

illness + 60 lifetime reserve days)– Medicare Secondary Payor– Medical or technical denials

• The legal question –– Are individuals “entitled to benefits under Part A” for

all of their inpatient days?

Other Dual Eligible Days

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• Legal question is same as MA• Catholic Health – relates to discharges prior

to 2004. Provider won in District Court. CMS appealed, arguments currently in process in D.C. Circuit.

• Metropolitan Health – relates to discharges after 2004. Providers won in District Court. CMS appealed and won in Michigan Circuit Court.


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• NPRs are being issued again. They include SSI fractions that include MA days.

• MACs issuing simultaneous re-openings with NPR, pending outcome of Allina.

• Recommendation – Continue to appeal based on Allina.


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SSI Fraction• Matching allegedly corrected but without

detail, no way to document. Continue to appeal. (Baystate)

• Request SSI detail in Data Use Agreement (DUA). Long delays reported in receiving data.

• Allina Impact – Impact of removing MA days should be appealed.

DSH Appeal Update

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Questions / Comments

ContactsHal GuthrieSenior ManagerDixon Hughes Goodman LLP225 Peachtree Street, NE, Ste 600Atlanta, GA [email protected]

Kathe HootsDirector

Dixon Hughes Goodman LLP1620 Asheville Highway

Hendersonville, NC 28791 828-393-1059

[email protected]

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