In April the Centers for Medicare & Medicaid Services published its proposed rule governing how it plans to pay hospitals for Medicare-covered inpatient services in FY 2017. The rulemaking process includes an invitation to stakeholders to submit comments on what CMS has proposed.

NAUH LogoNAUH submitted extensive comments in response to the proposed rule, addressing six aspects of what CMS proposed:

  • Medicare disproportionate share (Medicare DSH) payments
  • the Medicare hospital readmissions reduction program
  • inpatient rates
  • observation status/the two-midnight rule
  • the outlier threshold
  • reporting data for the Medicare area wage index

This week the NAUH blog presents NAUH’s comments. Our schedule is as follows:

  • Monday – objections to the proposed new methodology for calculating Medicare DSH uncompensated care payments
  • Tuesday – NAUH’s own proposed alternative methodology for calculating Medicare DSH uncompensated care payments
  • Wednesday – NAUH’s concern about the size of the proposed Medicare DSH uncompensated care pool
  • Thursday – the Medicare hospital readmissions reduction program
  • Friday – inpatient rates, observation status/the two-midnight rule, and the outlier threshold

Find NAUH’s complete comment letter here.

Medicare DSH Issue 3:  The Size of the Medicare DSH Uncompensated Care Pool

NAUH is concerned about the large decrease in the Medicare DSH pool proposed for FY 2017. Part of this pool is predicated on a calculation of how much CMS would have paid in Medicare DSH absent the enactment of the Affordable Care Act and is then based on adjusting that figure in a number of areas, including to adjust the standardized amount, the number of Medicare discharges, and changes in case mix. The final category for which an inflation factor is applied is labeled “other” and is a catch-all category for considerations such as capturing changes in Medicare payment policy since 2012, the impact of court decisions, Medicaid expansion, and others.

NAUH believes this last category also is the appropriate place to implement much-needed adjustments in the size of the Medicare DSH pool to reflect the growing number of hospitals becoming eligible for DSH as they serve more Medicaid patients. This year, we understand this will be at least 38 new hospitals.

This is a continuing concern for NAUH. After all, Medicare DSH was created to help non-profit urban safety-net hospitals and others like them that face distinct challenges serving the especially large numbers of low-income residents of their communities. Those challenges may be declining in number but unquestionably remain – including significant reductions of Medicaid DSH payments such hospitals face in the coming year. The dilution of the Medicare DSH pool we can expect in the coming years – the need to divide a shrinking pool of resources among a growing number of hospitals – could detract from the ability of many long-time recipients of Medicare DSH, providers like urban safety-net hospitals for which the program was created, to continue meeting the needs of their communities. We believe it is essential for us to prevent unwarranted erosion of these resources.

Our concern, then, in addition to the technical updates noted above, is whether the proposed FY 2017 pool has been adjusted to reflect the addition of these 38 hospitals. NAUH hopes CMS has included this consideration in determining the size of the FY 2017 pool and that the final rule will reflect appropriate transparency in this matter by presenting the individual assumptions and update factors, including adjustments made to assure adequate funding for the newly eligible DSH hospitals.

NAUH LogoNAUH urges CMS to provide more information to stakeholders about how it determined the size of the proposed FY 2017 Medicare DSH uncompensated care pool, including specific information about where and how those calculations included additional resources for hospitals that will be newly eligible these payments in FY 2017.

Find NAUH’s complete comment letter here.