In a letter to the Centers for Medicare & Medicaid Services, the National Association of Urban Hospitals has offered extensive comments on why the Medicare cost report’s S-10 worksheet is not an appropriate tool to use when calculating hospital Medicare disproportionate share (Medicare DSH) uncompensated care payments.

In support of this view and in response to the publication of CMS’s draft inpatient prospective payment system regulation detailing how it envisions paying acute-care hospitals in FY 2018, NAUH took advantage of the formal stakeholder comment period to offer documentation, including examples, of the shortcomings of the S-10.  In the letter, NAUH also commented on proposed changes in Medicare’s hospital readmission reduction program, hospital inpatient rates, the Medicare area wage index system, and quality reporting and advocated the preservation of states’ ability to make supplemental payments to hospitals through Medicaid managed care providers.

This week NAUH presents excerpts from this letter.  The schedule for this week is as follows:

  • Tuesday– Medicare DSH uncompensated care payments and the S-10
  • Wednesday – the Medicare hospital readmissions reduction program
  • today– Medicare inpatient rates, the area wage index, and quality reporting
  • Friday – the preservation of states’ ability to make supplemental payments to hospitals through Medicaid managed care organizations

Documentation and Coding Adjustment

Last year CMS reduced inpatient payments an additional 1.5 percent for a documentation and coding adjustment to fulfill the American Tax Relief Act of 2013 (ATRA) requirement that CMS recover $11 billion from federal fiscal years 2014 through 2017.  This came in addition to cuts of 0.8 percentage points in FY 2014, FY 2015, and FY 2016.  Hospitals expected another 0.8 percentage point cut in FY 2017 but CMS reduced the payments 1.5 percentage points because CMS’s Office of the Actuary concluded that an additional 0.7 percentage point reduction was needed to fulfill the ATRA mandate, citing growing decreases in inpatient admissions.

In NAUH’s view, the analysis that led to last year’s larger-than-expected document and coding adjustment failed to account for the increase in Medicare beneficiaries’ utilization of outpatient services while inpatient admissions declined and resulted in a much larger documentation and coding adjustment than circumstances warranted.  For this reason, NAUH urges CMS to return these payments to hospitals, minus adjustments mandated by the Medicare Access and CHIP Reauthorization Act of 2015 and the 21st Century Cures Act.

Area Wage Index

NAUH opposes CMS’s proposal to reduce the labor-related share of hospital payments that are adjusted by the Medicare area wage index from the current 69.6 percent to 68.3 percent.  Inasmuch as the wage index system already holds harmless from such a change hospitals with wage index adjustments lower than 1.0, we believe reducing the labor-related shared further undervalues the very real differences in hospital-specific costs.  In so doing, in NAUH’s view, such a change would specifically harm hospitals in higher-cost urban areas that already experience some of the highest labor costs in the country.  NAUH opposes reducing the sensitivity of the prospective payment system to the different circumstances of individual hospitals through the introduction of an approach that would foster the development of a reimbursement system that trends toward the mean despite unquestionable differences in hospital costs.

Those differences are a very real and legitimate concern, and for this reason NAUH urges CMS to withdraw its proposal to reduced the labor-related share of wage index adjustments of Medicare payments for FY 2018.

Quality Reporting

In the draft rule, CMS proposes revising the current pain management questions in the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey to focus on hospitals’ communication with patients about patients’ pain during their hospital stay.  Last year NAUH expressed concern about the pain question in the current survey and urged CMS to consider revising it and we wish to thank CMS for doing so and express our support for this proposed change.

See the full NAUH letter here.