THE FUTURE OF DSH UNCOMPENSATED CARE William D. Clark, CPA, FHFMA - PDF document

8/11/2016 THE FUTURE OF DSH UNCOMPENSATED CARE William D. Clark, CPA, FHFMA Director, BKD, LLP 1

8/11/2016 AGENDA • DSH changes mandated by Section 3133 of Affordable Care Act • Empirical DSH Payment • Uncompensated Care DSH • UC changes proposed in FY 2017 IPPS Proposed Rule • Issues with Worksheet S-10 • FY 2017 IPPS Final Rule – No Worksheet S-10 (yet) DSH CHANGES MANDATED BY SECTION 3133 OF ACA • 25% of DSH payment remains the same (Empirically Justified DSH) • Rescrambles 75% of DSH egg (Uncompensated Care Payment) 25% of 75% Of Uncomp Total New Original Original Change in Care Cost DSH DSH Uninsured DSH Ratio Payment Payment Payments 2

8/11/2016 EMPIRICAL DSH PAYMENT • Nothing changed except payments are now only made at 25% of the previous rate • Hospitals must meet the 15% threshold in order to qualify for these payments & “Uncompensated Care” payments 25% of Original DSH Pmt UNCOMPENSATED CARE DSH • Distribution of 75% pool based on 3 factors � Office of Actuary estimates $10.8 Billion Pool for FY17 � CMS must decrease pool by change in uninsured • Reduces pot by 45% • Remaining pool approximately $6 Billion � Decrease of $400 Million for FY 2016 amount � A hospital’s Uncompensated Care divided by aggregate amount of Uncompensated Care for all hospitals eligible for payment 3

8/11/2016 UNCOMPENSATED CARE DSH • FY 2014–FY 2016 Factor 3 � Inpatient Medicaid & Medicare SSI days as proxy � Numerator is hospital-specific � Denominator is aggregate � For SSI – latest SSI data on website � For Medicaid – March HCRIS data � CMS expressed intention of moving to S-10 – recognized concerns about accuracy & consistency of S-10 data UNCOMPENSATED CARE DSH • CMS proxy shortcomings � Ignores outpatient uncompensated care � Ignores cost of services provided � Does not recognize that different states have different Medicaid eligibility requirements � Punishes states choosing not to expand Medicaid • Lower Empirical DSH • Lower Uncompensated Care proxy (in future years) • Theoretically states choosing not to expand would see increased uncompensated care relative to states expanding 4

8/11/2016 FY 2017 IPPS PROPOSED RULE • Factor 3 based on 3-year average of data to limit yearly fluctuations � FY 2011–FY 2013 cost reports and FY 2012–FY 2014 SSI ratios • Begin using S-10 data for FY 2018 & subsequent years � Uncompensated Care = Charity Care + Non-Medicare Bad Debt � S-10 data for FY 2014 & days proxy for two earlier cost reporting periods � Transition to using S-10 data only by FY 2020 ISSUES WITH WORKSHEET S-10 • Partial charity can create negative costs of charity care in certain instances � Example • $20,000 total charges • $2,000 deductible • $800 charity write-off • $750 patient payment • $450 bad debt write-off Line Option 1 Option 2 Option 3 1 CC Ratio Flow from WS C 0.3500 0.3500 0.3500 20 Total Initial Obligation of Charity Care Patients input $2,000 $800 $800 21 Cost of Initial Obligation of Charity Care Patients calculated $700 $280 $280 22 Partial Payments by Charity Care Patients input $750 $750 $0 23 Cost of Charity Care calculated ($50) ($470) $280 28 Non-Medicare Bad Debt calculated $450 $450 $450 29 Cost of Non-Medicare Bad Debt calculated $158 $158 $158 30 Cost of Uncompensated Care calculated $108 ($313) $438 5

8/11/2016 ISSUES WITH WORKSHEET S-10 • Presumptive charity – inconsistent treatment by the MACs • Current instructions state to report write-offs & expected payments for services provided during the cost reporting period. Inconsistent with treatment of Medicare bad debt • Sample selection methodology is not shared during audit & is not verifiable by providers CMS TRANSMITTAL 1681 • Published by CMS on July 15, 2016 • Submit revised FY 2014 S-10 information by September 30, 2016 • Seemed to support FY 2014 S-10 data would be used for Uncompensated Care payments 6

8/11/2016 FY 2017 IPPS FINAL RULE • CMS backed away from using the FY 2014 S-10 • Recognized commenters’ suggestions to clarify & revise reporting instructions • Intends to issue revised instructions & engage in future rulemaking to begin using S-10 in Factor 3 computation by FY 2021 • FY 2017 S-10 used for FY 2021 Uncompensated Care payments? PROVIDER ACTION ITEMS • Review Factor 3 data in CMS table • Get ducks in a row on S-10 • Engage in rulemaking 7

8/11/2016 QUESTIONS? THANK YOU! FOR MORE INFORMATION William D. Clark, CPA, FHFMA Director | BKD, LLP 918.584.2900 x42917 918.878.9052 Direct 918.584.2931 Fax wdclark@bkd.com 8

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