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
  • Thursday – Medicare inpatient rates, the area wage index, and quality reporting
  • today– the preservation of states’ ability to make supplemental payments to hospitals through Medicaid managed care organizations

Preserve Medicaid Supplemental Payments Made Through Managed Care

 The Medicaid supplemental payment rule finalized on January 17, 2017 imposes new limits on states’ ability to increase or create new pass-through payments for hospitals, physicians, and nursing homes through Medicaid managed care contracts.  The rule calls for a ten-year phase-out of such pass-through payments.

NAUH urges CMS to withdraw the portion of the regulation that would prohibit states’ use of pass-through payments to hospitals through Medicaid managed care contracts.  At a time when federal policy-makers are looking to give states greater flexibility, not less, in how they operate their Medicaid programs, such a policy reduces that flexibility and creates a burdensome environment.  There are already a number of federal limits on state Medicaid programs, including state upper payment limits, statewide hospital DSH caps, and hospital-specific DSH caps, and another limit is unnecessary and will hinder the ability of states to operate their Medicaid programs effectively.  More important, from NAUH’s perspective, is that the harm of eliminating the ability of states to make pass-through payments through Medicaid managed care contracts will be felt most heavily by private, non-profit urban safety-net hospitals.  For these reasons, NAUH urges CMS to withdraw its regulation phasing out the ability of states to make these pass-through payments.

In addition, when the rule was proposed last year, that ten-year phase-out period was to begin in 2017 and end in 2027, but the final rule moved that phase-out period back a year, from 2016 through 2026.  Most states, including those in which many urban safety-net hospitals are located, employ such pass-through payments and the resources these payments provide are essential to the effective operation of these urban safety-net hospitals.  It was because of the clear importance of these payments to their recipients that CMS conceived of the ten-year phase-out period, so NAUH was disappointed to learn that in the final rule CMS effectively turned that ten-year phase-out-period into a nine-year phase-out period by moving the start date of that period to a time before the final rule was published.  NAUH urges CMS to reconsider this aspect of the proposed rule and – if it does not withdraw the rule – to restore the originally proposed start date to the ten-year phase out.

Finally, NAUH urges CMS to delay implementation of all aspects of the rule until it provides appropriate guidance to the states.  Currently, neither states nor hospitals understand what is expected of them and how they should proceed under the new requirements, and until they receive such guidance, they are not in a position to initiate the steps needed to come into compliance.  This poses a special burden for private, non-profit urban safety-net hospitals because in many states they are highly dependent on these pass-through payments.

See the full NAUH letter here.