NASH Comments on Proposed Medicare Regulation (Part 2 of 3)

The National Alliance of Safety-Net Hospitals has submitted formal comments to the Centers for Medicare & Medicaid Services in response to the latter’s proposed hospital payment plan for FY 2020.

Responding to the proposed inpatient prospective payment system published by CMS in April, NASH primarily addressed a CMS proposal to change how it calculates Medicare disproportionate share (Medicare DSH) uncompensated care payments and proposed changes in the Medicare area wage index system.

Yesterday, the NASH blog presented the alliance’s written comments about proposed changes in Medicare DSH uncompensated care payments.  Today, it presents a detailed alternative proposal to CMS’s April 2019 recommendation for calculating those payments.  On Thursday the blog presents NASH’s response to proposed changes in the Medicare area wage index system.  The complete NASH response to the proposed CMS regulation can be found here.

Calculation of Medicare DSH Uncompensated Care Payments for FY 2020

Factor 3 represents a hospital’s share (as estimated by the Secretary) of the total uncompensated care provided by all hospitals eligible to receive DSH payments.  CMS has, in recent years, calculated UCC DSH payments using an average of three factor 3 calculations subject to a budget neutrality adjustment that modifies the average factor 3 for each hospital to spend the appropriate amount of money (i.e., factor 1 times factor 2) for the fiscal year.

For the reasons stated in the accompanying comment letter, NASH recommends that for FY 2020, CMS implement year one of a three-year transition to using a three-year average of audited post-transmittal 11 data.  The schedule for this transition would be as follows:

  • Year one (FY 2020) would consist of a blend of 2/3 of a hospital’s 2019 UCC DSH payment with 1/3 of the hospital’s UCC DSH payment based on unaudited 2017 S-10 data. During FY 2020, CMS could engage in audits of the 2017 data.
  • Year two (FY 2021) would consist of a blend of 1/3 of a hospital’s 2019 UCC DSH payment with 2/3 of the hospital’s UCC DSH payment based on the average factor 3 derived from the hospital’s audited 2017 data and unaudited 2018 data. During FY 2021, CMS could engage in audits of the 2018 data.
  • Year three (FY 2022) would consist of an equally weighted blend of the hospital’s audited 2017 and 2018 data and unaudited 2019 data.

Each year thereafter, CMS could continue to engage in audits while rolling forward the three-year average, adding a new year of data to the calculation and dropping the oldest year of data.  The result balances timeliness and accuracy while also maintaining year-over-year stability.

Specifically, for FY 2020, a hospital’s final factor 3 would be calculated by:

  • Calculating for each hospital a preliminary 2017 factor 3 by dividing the hospital’s reported line 30 uncompensated care (subject to any adjustments or trims) by the total reported line 30 uncompensated care (subject to any adjustments or trims) reported by all hospitals expected to receive DSH in FY 2020 on their 2017 cost reports.
  • Calculating for each hospital a blended FY 2020 factor 3 by summing the hospital’s preliminary 2017 factor 3 plus its FY 2019 final factor 3 plus its FY 2019 final factor 3 and dividing by 3 if the hospital received a payment in 2019 and 1 if the hospital received no payment in 2019.
  • Deriving a standardization factor by calculating the average factor 3 for all hospitals projected to receive DSH and dividing the result by 1.0.
  • Calculating each hospital’s final FY 2020 factor 3 by multiplying its blended FY 2020 factor 3 by the standardization factor.

Puerto Rico hospitals, Indian Health Service and Tribal hospitals would continue receive a factor 3 based on low-income insured days from FY 2013.

For 2021, each hospital’s factor three would be based on the three-year average of its 2019 final factor 3, its 2017 factor 3 and its 2018 factor 3.

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Tomorrow, see NASH’s comments on CMS’s proposal for changes in the Medicare geographic wage classification system.

See NASH’s entire response to the proposed Medicare regulation here.

NASH Comments on Proposed Medicare Regulation (Part 1 of 3)

The National Alliance of Safety-Net Hospitals has submitted formal comments to the Centers for Medicare & Medicaid Services in response to the latter’s proposed hospital payment plan for FY 2020.

Responding to the proposed inpatient prospective payment system published by CMS in April, NASH primarily addressed a CMS proposal to change how it calculates Medicare disproportionate share (Medicare DSH) uncompensated care payments and proposed changes in the Medicare area wage index system.

In this first of three parts, the NASH blog presents the alliance’s written comments about proposed changes in Medicare DSH uncompensated care payments. Tomorrow the blog presents a more detailed look at NASH’s alternative proposal for calculating Medicare DSH uncompensated care payments. On Thursday the blog presents NASH’s response to proposed changes in the Medicare area wage index system. The complete NASH response to the proposed CMS regulation can be found here.

The Calculation of Medicare DSH Uncompensated Care Payments

The Present Challenge

When the Affordable Care Act divided Medicare DSH payments into two components, one of which was a Medicare DSH uncompensated care payment that was to be based entirely on how much uncompensated care hospitals provide, it created a major challenge for policy-makers: how to determine how much uncompensated care hospitals provide. Lacking a clear, credible source of uncompensated care data to use for this purpose, CMS for three years – from 2014 through 2016 – used a proxy for hospital uncompensated care based on two low-income variables: eligible hospitals’ Medicaid patients and their SSI patients.

In 2017, CMS announced that it would move away from this proxy and begin a three-year transition into a different source of data for hospital uncompensated care: line 30 of the S-10 worksheet of the Medicare cost report, where hospitals report their uncompensated care. At that time CMS also announced that it would begin calculating hospitals’ Medicare DSH uncompensated care payments based on three years worth of data. The purpose of using three years of data was to reduce undue fluctuations in hospitals’ Medicare DSH uncompensated care payments from one year to the next.

For years, NASH (previously the National Association of Urban Hospitals) and others have urged CMS to prepare for future use of S-10 data for this purpose in two ways:

  • By improving the instructions for completing the form, which have widely been viewed as confusing and have led to hospitals reporting their uncompensated care in many different ways – including ways it is virtually inconceivable that CMS ever intended. Representatives of NASH met with CMS officials on several occasions in recent years to share examples of hospitals reporting uncompensated care data that totally lacked credibility and to discuss specific aspects of the S-10’s instructions that give rise to inconsistent and inaccurate data reporting.
  • By auditing hospitals’ reported S-10 data to ensure that they are reporting this data accurately and in compliance with the S-10’s instructions. NASH has been urging CMS to audit S-10 data for nine years – ever since passage of the Affordable Care Act created the new Medicare DSH uncompensated care payment and it appeared inevitable that the S-10 would eventually be used in the calculation of that payment. Auditing is necessary because NASH’s reviews of the uncompensated care data hospitals reported on their S-10 in recent years revealed that some hospitals are reporting enormous amounts of uncompensated care that simply cannot be believed in the context of their size, their operating expenses, and their other patient revenue. NASH has shared these reviews with CMS officials on a number of occasions. If left unaddressed, this inaccurate reporting would greatly skew the distribution of the limited pool of Medicare DSH uncompensated care money, inappropriately rewarding some hospitals for their inaccurate data and unfairly penalizing others.

Now, NASH is concerned that while work on both of these tasks is under way, that work remains incomplete at this time. CMS has made progress in improving the S-10’s instructions, as can be seen by what NASH believes are improvements in the quality of the data hospitals are reporting. Despite this, further improvements may still be needed. The auditing is not nearly as far along: as described below, the very limited auditing that has been undertaken so far has been troubled and insufficient.

CMS Proposes Using Flawed Data for FY 2020

In its proposed FY 2020 Medicare inpatient prospective payment system regulation, CMS calls for using uncompensated care data from hospitals’ FY 2015 S-10 forms when calculating FY 2020 Medicare DSH uncompensated care and also asks interested parties to share their view on the possibility of using FY 2017 S-10 data instead of the 2015 data. NASH believes that neither FY 2015 data nor FY 2017 data is suitable for this purpose.

NASH opposes the use of hospitals’ FY 2015 data as the single source of data in the calculation of FY 2020 Medicare DSH uncompensated care reports because while this was the first such uncompensated care data CMS audited, that auditing so far has been not sufficient to give hospitals – and taxpayers – confidence that federal Medicare DSH uncompensated care funds will find their way to the hospitals providing the greatest verified amount of uncompensated care. Among the problems that arose during the first round of auditing were inadequate time frames for hospitals to submit data to auditors; rushed auditing; the use of different auditing methodologies in different parts of the country, between the different Medicare Administrative Contractors (MACs), and even within individual MAC regions; and the lack of comprehensive auditing, with only about 20 percent of affected hospitals actually audited. In its proposed FY 2020 Medicare inpatient prospective payment system regulation, CMS revealed that “approximately 10 percent of audited hospitals have more than a $20 million difference between their audited FY 2015 data and their unaudited FY 2016 data.” CMS also observed that some hospitals have suggested that had the S-10 instructions developed for FY 2017 – instructions that clearly represented an improvement over past instructions – been in place when they completed their FY 2015 S-10 reports, those 2015 reports would have had fewer errors and been more accurate. Together, these problems lead NASH to oppose the use of S-10 data from hospitals’ FY 2015 Medicare cost reports in calculating hospitals’ FY 2020 Medicare DSH payments, even when that data has been audited, because auditing was only undertaken for a relatively small proportion of hospitals.

NASH also opposes CMS’s suggested alternative to using FY 2015: using FY 2017 data as the single source of data in the calculation of Medicare DSH uncompensated care payments. That data remains entirely unaudited, and while the instructions that guided hospitals during completion of their S-10 forms for FY 2017 are generally thought to be clearer and better than those used in FY 2015, there is, at least at this time, little reason to believe this unaudited data as a whole is any more accurate and any more credible than FY 2015 data. Upon reviewing this data, NASH found evidence of some improved data but also numerous examples of reported uncompensated care data that simply lack credibility – generally, hospitals reporting so much uncompensated care that it seems inconceivable that their doors could remain open. In addition, while hospitals that did undergo auditing of their FY 2015 data undoubtedly learned lessons that will improve their ability to complete future S-10 reports, 80 percent of DSH-eligible hospitals have not yet undergone those audits and therefore are not better prepared to complete future S-10s worksheets.

One Year of Data is Insufficient

The proposed FY 2020 regulation also calls for another change: calculating FY 2020 payments based on one year of data instead of three, as has been the case in recent years. NASH opposes this shift in approach. With so little auditing completed and the auditing that has been done of questionable value, NASH opposes any methodology for calculating hospitals’ Medicare DSH uncompensated care payments that relies on data from just a single year. In addition to the problems specific to 2015 and 2017 data, outlined above, NASH objects to using data from just one year because the possibility of aberrant data from any one year skewing the distribution of Medicare DSH uncompensated care payments is too great.

CMS is on record expressing this same view, writing in the final FY 2017 regulation that

…because the data used to make uncompensated care payment determinations are not subject to reconciliation after the end of the fiscal year, we believe that it would be appropriate to expand the time period for the data used to calculate Factor 3 from one cost reporting period to three cost reporting periods. We stated that using data from more than one cost reporting period would mitigate undue fluctuations in the amount of uncompensated care payments to hospitals from year to year and smooth over anomalies between cost reporting periods.

Also,

We stated that we believe that computing Factor 3 using data from three cost reporting periods would best stabilize hospitals’ uncompensated care payments while maintaining the recency of the data used in the Factor 3 calculation. We indicated that we believe using data from two cost reporting periods would not be as stable while using data from more than three cost reporting periods could result in using overly dated information.

Until now, CMS had insisted on basing these payments on three years of data even after it shifted from basing payments on the low-income proxy to uncompensated care data as reported on the S-10. Now, however, it proposes changing its approach and basing the payments’ calculation on just a single year of data, leaving hospitals potentially vulnerable to precipitous declines in their Medicare DSH uncompensated care payments because of either one unusual year of their own activity or questionable reporting by other hospitals.

Accuracy in S-10 reporting is so important because Medicare DSH payments are made out of a single pool of federal funds, with hospitals drawing from that pool based on the amount of uncompensated care they provide in comparison to other DSH-eligible hospitals. As a result, every hospital’s reporting affects how much Medicare DSH uncompensated care money every other DSH-eligible hospital receives. Whether the result of misinterpreting the S-10’s instructions, placing the wrong data on the wrong line on the form, an accounting or mathematical error, or an attempt to maximize their potential Medicare DSH uncompensated care revenue, some hospitals could unfairly receive a windfall of Medicare DSH uncompensated care money – and they would do so at the expense of other hospitals, including those that reported their data exactly as CMS intended. Conversely, the same reporting mistakes could result in aberrant data in which some hospitals’ uncompensated care is under-reported, resulting in such hospitals not receiving the Medicare DSH uncompensated care payments to which they should reasonably be entitled.

An Alternative Approach: NASH’s Proposal

NASH proposes an alternative to CMS’s plan for calculating hospitals’ FY 2020 Medicare DSH uncompensated care payments: a three-year proposal that would cover FY 2020, FY 2021, and FY 2022. At the heart of this proposal is NASH’s belief – a belief CMS in the past made very clear that it shares – that these payments should be made based on more than one year of hospitals’ S-10 data. Using more than one year of data would help smooth the overall data and ensure that no single year’s aberrant data, whether the result of reporting error or just an unusual year in the life of a hospital, inappropriately skews calculations in ways that unfairly benefit or harm any hospitals or has wide-ranging effects that can be felt throughout the universe of the approximately 2,430 hospitals that will be eligible for Medicare DSH uncompensated care payments in FY 2020.

NASH has concluded that the more recent the data is, the more likely it will be reliable – or at least closer to reliable – for three reasons: first, CMS has improved the S-10’s instructions since 2015, suggesting that data reported after 2015 should be more reliable than it was that year or prior to that year; second, future auditing should uncover flaws in hospitals’ data reporting practices that hospitals will correct in the future, leading to more accurate reporting as time passes; and third, improved auditing will enable CMS to adjust hospitals’ reported uncompensated care totals, which also should make future data more accurate.

With this in mind – using more recent data, including audited data, and the value of using data from more than one year – NASH suggests that instead of adopting its proposed methodology, CMS instead use the following methodology for calculating Medicare DSH uncompensated care payments over the next three years:

For FY 2020 (year one of three):

Calculate Medicare DSH uncompensated care payments based on a blend that consists two-thirds of the Medicare DSH uncompensated care payments hospitals receive in FY 2019 and one-third on hospitals’ calculated share of the overall Medicare DSH uncompensated care pool for FY 2017.

For FY 2021 (year two of three):

Calculate Medicare DSH uncompensated care payments based on a blend that consists one-third of the Medicare DSH uncompensated care payments hospitals receive in FY 2019 and two-thirds on the average of hospitals’ calculated share of the overall Medicare DSH uncompensated care pool for FY 2017 and FY 2018.

For FY 2022 (year three of three):

Calculate Medicare DSH uncompensated care payments based on the average of hospitals’ calculated share of the overall Medicare DSH uncompensated care pool for FY 2017, FY 2018, and FY 2019.

By using this approach, CMS would reduce the importance of unreliable 2015 data in the calculation of Medicare DSH uncompensated care payments and instead use the most credible data available at the time of the calculation for each of the three years. Most important, adopting NASH’s alternative proposal would buy CMS time: time to improve its auditing, time to do more auditing, time to engage in additional provider education to ensure that hospitals understand how to comply with Medicare’s uncompensated care data reporting requirements, and time to refine the S-10’s instructions still further if the outcome of future auditing suggests that improvements are still needed. NASH’s proposed alternative also would eliminate the need for any auditing of hospitals’ FY 2016 S-10 data, which is not needed to implement this alternative approach. NASH’s proposed approach also takes advantage of the two major advances CMS has implemented in recent years: better S-10 instructions and a commitment to auditing. Together, these steps can help ensure that future uncompensated care data reporting is more accurate and can constitute an appropriate foundation for the calculation of Medicare DSH uncompensated care payments during the next three years and do so without the volatility inherent in potentially significant swings in hospitals’ annual Medicare DSH uncompensated care payments – swings that CMS made a point of expressing its concern about in the past. Until then, NASH believes our alternative approach to that calculation for the next three years would produce more appropriate payments to hospitals

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See NASH’s entire response to the proposed Medicare regulation here.

Tomorrow:  more details about NASH’s alternative Medicare DSH uncompensated care proposal.

CMS Posts Proposed FY 2020 Inpatient Regulation

Medicare would change its wage index system, raise inpatient fees, increase funding for Medicare disproportionate share hospital payments (Medicare DSH), enhance payments for new technologies, and make minor modifications in its hospital readmissions reduction, value-based purchasing, and hospital-acquired condition program if a proposed regulation published this week is ultimately adopted.

The Centers for Medicare & Medicaid Services has published its proposed FY 2020 Medicare inpatient prospective payment system regulation:  its plan for paying acute-care hospitals for Medicare-covered inpatient services in FY 2020.  The 1800-page regulation calls for major changes in Medicare’s wage index system – changes CMS says would “…address the disparities between high and low wage index hospitals…”  It would do so by increasing the wage indexes of many rural hospitals, regardless of their actual wage costs, and pay for those increases by reducing the wage indexes of high-index hospitals, again regardless of their actual wage costs.

The proposed regulation also would raise inpatient payments to hospitals 3.2 percent in the coming year.  In addition, it would add $216 million to its pool of money for Medicare DSH uncompensated care payments – an increase necessitated by this year’s increase in the number of uninsured Americans – while modifying the methodology for calculating those payments.

Learn more about what CMS proposes for Medicare inpatient payments in the coming year by reviewing the proposed regulation itself or reading the fact sheet CMS published to outline the regulation’s highlights.

Stakeholder comments are invited and due to CMS by June 24; NASH expects to take advantage of this opportunity to convey its concerns about selected aspects of the proposed regulation.

MACPAC Recommends Changes in Medicaid Shortfall Definition

Hospitals’ calculation of their Medicaid shortfall would change under a recommendation that MACPAC voted to make to Congress.  That change, in turn, could affect hospitals’ future Medicaid disproportionate share payments.

Last week the Medicaid and CHIP Payment and Access Commission voted overwhelmingly to change how hospitals calculate their Medicaid shortfall:  the difference between what they spend caring for their Medicaid patients and what Medicaid pays them for that care.  Under MACPAC’s proposal, hospitals would need to deduct from their shortfall total all third-party payments they receive for the care they provide to their Medicaid patients.

If this proposal were to be adopted, it has the potential of changing Medicaid DSH allocations among the states and change the distribution of Medicaid DSH funds within individual states, although the Congressional Budget Office estimates that it would have little impact on either measure.

Complicating the MACPAC recommendation is last year’s federal court ruling that third-party payments could not be deducted from hospitals’ Medicaid shortfall totals because the Centers for Medicare & Medicaid Services lacks the authority to implement such a policy.  Making such a change therefore would require action by Congress.

Learn more about the MACPAC recommendation and its potential implications for hospitals and their Medicaid DSH payments in the Fierce Healthcare article “’Medicaid shortfall’ definition should change when tallying DSH payments, MACPAC says.”

 

More Potential Budget Obstacles for Private Safety-Net Hospitals

Part two of the Trump administration’s proposed FY 2020 budget brought more potential bad news for private safety-net hospitals.

 

Last week’s “lean budget” released by the White House included a number of challenges for private safety-net hospitals and this week’s release, intended to fill in some of the blanks that last week’s document left, brought more of the same.

Proposed Medicare challenges include:

  • a call for establishing a new process for calculating Medicare disproportionate share (Medicare DSH) uncompensated care payments
  • slashing Medicare bad debt reimbursement from 65 percent to 25 percent
  • continued movement toward site-neutral payments for outpatient services provided at hospital outpatient facilities

Newly proposed Medicaid challenges include:

  • extending Medicaid disproportionate share (Medicaid DSH) cuts beyond the currently planned six years
  • redesigning the formula for allocating Medicaid DSH funds to the states
  • authorizing states to verify beneficiaries’ Medicaid eligibility more than once a year
  • permitting states to apply means tests to Medicaid eligibility

The latest FY 2020 budget proposal also calls for:

  • consolidating Medicare, Medicaid, and children’s hospital medical education payments into single new capped medical education grant program
  • reduced 340B prescription drug discount program payments for some hospitals
  • reducing the grace period for payment of premiums for health insurance purchased on an insurance exchange
  • income-based increases in premiums for low-cost insurance purchased on those exchanges

All of these changes, if implemented, would pose problems for NASH members and most private safety-net hospitals.

Learn more from this week’s White House budget document.

Trump Budget Brings Bad News for Private Safety-Net Hospitals

The FY 2020 federal budget proposed by the Trump administration this week would bring pain for private safety-net hospitals if adopted.

Highlights of the proposed spending plan include:

  • More than $135 billion in cuts in Medicare uncompensated care payments (Medicare DSH) and Medicare bad debt reimbursement over the next 10 years.
  • Continued extension of Medicare site-neutral payment outpatient policies.
  • $48 billion in cuts in graduate medical education spending over the next 10 years.
  • $26 billion in new Medicaid disproportionate share (Medicaid DSH) cuts.
  • Repeal of the Affordable Care Act’s Medicaid expansion and all funding to pay for that expansion.
  • Support for legislation to introduce Medicaid block grants and limits on spending per recipient.
  • New restrictions on the 340B program.

Responsibility for adopting a budget rests with Congress, not the president, and this proposed budget is considered unlikely to gain much support in Congress.

As appropriate, NASH will engage in advocacy in support of the needs of the nation’s private safety-net hospitals.

Learn more about the administration’s proposed budget from numerous media reports or by going directly to the source:  fact sheets the White House has prepared offering budget highlights and the budget document itself.

 

NASH Registers Concerns Over Uncompensated Care Audits

The process the federal government is employing to audit the uncompensated care costs that hospitals report to Medicare is plagued with problems, the National Alliance of Safety-Net Hospitals has written in a letter to the Centers for Medicare & Medicaid Services.

Those problems could result in reduced Medicare disproportionate share hospital payments (Medicare DSH) to private safety-net hospitals in the future, NASH warned in the letter.

According to NASH, problems with the audits of hospitals’ Medicare cost report S-10 worksheets, where they report their uncompensated care, include inconsistencies in the methods auditors are using and the data they demand and unreasonable deadlines for submitting requested supplemental data.

To address these problems, NASH asked CMS to standardize the auditing process and to convey decisions about auditing standards, methodologies, and time frames to hospitals.

In light of these problems, NASH also asked CMS not to use audited data to calculate Medicare DSH uncompensated care payments for FY 2020.

The S-10 audits are so important to private safety-net hospitals because the uncompensated care reported on the S-10 is used in the calculation of participating hospitals’ Medicare DSH uncompensated care payments.  When auditors reduce eligible hospitals’ uncompensated care data, that will result in future reductions of the Medicare DSH payments hospitals receive.  Those Medicare DSH payments play a vital role in helping to underwrite the cost of the care private safety-net hospitals provide to uninsured patients, so any undeserved reduction in those payments could hurt those hospitals and result in reduced access to care in the communities they serve.

Learn more by reading NASH’s letter to CMS about current challenges with uncompensated care audits.

Medicare Announces FY 2019 Inpatient Payments

The Centers for Medicare & Medicaid Services has released its FY 2019 payment schedule for Medicare inpatient services.

Highlights of the FY 2019 inpatient prospective payment system regulation include:

  • A 1.75 percent increase in fee-for-service rates.
  • A $1.5 billion increase in Medicare disproportionate share hospital payments (Medicare DSH).
  • Major reductions of the quality measures hospitals must report for Medicare’s inpatient quality reporting and value-based purchasing programs.
  • A requirement that hospitals post their standard charges on the internet.

Learn about these and other aspects of Medicare’s FY 2019 inpatient prospective payment system regulation by seeing this Medicare fact sheet or go here to see the 2593-page (!) regulation itself.

NAUH Comments on Proposed Changes in Medicare Payments (Part 3 of 3)

In a letter to the Centers for Medicare & Medicaid Services, the National Association of Urban Hospitals has offered extensive comments on CMS’s proposed regulation describing how it intends to pay hospitals for Medicare-covered services in FY 2019.  NAUH offered these comments in response to CMS’s request for stakeholder input.

In this space yesterday NAUH presented its comments on the Medicare Hospital Readmissions Reduction Program, quality reporting, multi-campus hospitals, and documentation required for Medicare cost reports.  On Wednesday NAUH presented its comments to CMS regarding how the agency proposes calculating Medicare disproportionate share (Medicare DSH) payments in the coming fiscal year.  Today, NAUH shares its views on aspects of the proposed regulation that address the Medicare hospital readmissions reduction program, Medicare’s quality reporting program, multi-campus hospitals, and documentation required when filing Medicare cost reports.

Today, NAUH shares its response to CMS’s request for comments on the Medicare area wage index system.

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Medicare Area Wage Index:   Response to Request for Comment

While acknowledging the challenges that the current Medicare area wage index poses at times, in general NAUH supports the current Medicare area wage index system and believes it superior to any alternative that has been proposed in recent years.  We believe wage adjustments based on the cost of labor in different parts of this country are absolutely essential for Medicare because those costs vary so greatly in different geographic areas.  The concerns periodically expressed by some that certain parts of the country are ill-served by the current wage index system are, in our view, based on sentiment and emotion rather than on fact; the data does not support their assertions, and when circumstances change, the current system gives those who feel ill-served by that system ample and fair opportunities to address what they perceive to be inappropriate treatment.

We are especially concerned about a proposal that appears to resurface every few years:  that the wage data upon which wage adjustments are made should come from the Bureau of Labor Statistics (BLS) rather than from actual, real-time hospital wage data.  NAUH believes this is a bad idea.  We do not see the value of using broad categories of data that fail to reflect real employment markets and conditions when actual hospital wage data that does reflect actual hospital wage costs is available and verifiable.

One of the most important factors in wage index calculations, for example, is wages paid to nurses.  BLS data, however, does not capture important differences within the nursing profession, inappropriately lumping nurses who work in different settings into a single category.  In so doing, BLS data ignores the sometimes considerable differences in skill and education levels required of nurses in different settings – hospitals, nursing homes, doctors’ offices, public health facilities, and others – and the considerable differences in wages required to recruit nurses to these different settings and then retain them.  Hospital nurses, for example, require a different, higher level of skill and education than nurses in other settings.  They also work in a more stressful environment and work less desirable hours, including evening and overnight shifts.  As a result, hospitals must offer nurses more money than nursing homes, doctors’ offices, and others.  Some states, moreover, have legal nurse staffing requirements that increase the demand for hospital nurses, which in turn increases how much money hospitals must pay to ensure that they can meet their nurse staffing requirements.  BLS data reflects none of these distinctions and therefore would offer a poor foundation upon which to make broad policy decisions that would have a major impact on hospitals and, no less important, on the communities hospitals serve.  In addition, reporting wage data to BLS is voluntary, and in any geographic areas where BLS concludes that it did not receive enough responses to calculate average wage costs, it infers such data.  NAUH disapproves of this approach and again believes it is better to use actual hospital wage data than incomplete and possibly even inferred data.

NAUH strongly encourages CMS to reject any shift to the use of BLS data in the calculation of Medicare wage adjustments and instead urges CMS to continue to base hospital wage adjustments on real hospital wage costs as reported by hospitals and as audited periodically by CMS.  In addition, if CMS wishes to pursue possible changes in the wage index system, NAUH urges it subject the process to fresh analysis – many of the reviews that call attention to the system’s challenges are outdated – and to convene a broad-based group of providers and other stakeholders to evaluate the challenges and explore potential improvements or alternatives.

Helping Safety-Net Hospitals Help Their Patients

A new report published on the Health Affairs Blog describes the continuing challenges safety-net hospitals face and offers suggestions for helping them meet those challenges.

The challenges, according to the report, are the virtual elimination of the Affordable Care Act’s individual health insurance mandate; the continued decline in the amount of Medicare disproportionate share hospital money (Medicare DSH) provided to safety-net hospitals; and hospital closures that shift more of the burden for caring for uninsured patients onto a smaller pool of safety-net hospitals.  The result is under-served patients and new financial risks for the hospitals that remain after some safety-net hospitals close because of the large amounts of uncompensated care those hospitals continue to provide.

To address these challenges, the report offers three potential solutions:

  • Congress should revisit the Medicare DSH cuts.
  • States should target their DSH money to the hospitals providing the most uncompensated care.
  • Non-profit non-safety-net hospitals that stabilize uninsured emergency patients and then direct them to safety-net hospitals should be required to play a longer-term role in the care of such patients as part of their required community benefit or risk losing their tax-exempt status.

Learn more about the challenges safety-net hospitals continue to face and some of the possible solutions to those problems by going here, to the Health Affairs Blog, to see the report “Safety-Net Health Systems at Risk:  Who Bears The Burden Of Uncompensated Care?”