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NASH Comments on Proposed Changes in Medicare Payments

NASH has submitted formal comments to the Centers for Medicare & Medicaid Services in response to CMS’s proposed FY 2021 Medicare inpatient prospective payment system regulation.

In its letter, NASH addressed six specific aspects of the proposed rule:

  • Medicare disproportionate share (Medicare DSH) proposals
  • The Medicare area wage index
  • Negotiated rate reporting
  • Medicare bad debt policy
  • Medicare graduate medical education policy
  • CAR-T cell therapy payments

Of particular note, NASH maintained that instead of decreasing the size of the pool of money for Medicare DSH uncompensated care payments, CMS should actually increase that pool in anticipation of increased hospital inpatient volume in FY 2021 – and increased hospital uncompensated care – as people return to hospitals for non-emergency procedures delayed by the COVID-19 emergency.

NASH also conveyed its opposition to the methodology CMS proposes using to calculate Medicare DSH uncompensated care payments, suggesting an alternative approach that makes better use of more current, more accurate data in that calculation.

Medicare DSH and Medicare DSH uncompensated care payments are especially important to private safety-net hospitals because those hospitals care for so many low-income, low-income elderly, and uninsured patients.

Read NASH’s comment letter to CMS here.

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.

CMS Proposes Changes in Inpatient Rates, Medicare DSH, and Wage Index

Last week the Centers for Medicare & Medicaid Services published a proposal detailing how it envisions paying for Medicare services in FY 2019 under its inpatient prospective payment system.

Yesterday this space features a summary of the proposed regulation, with an emphasis on aspects of the rule of greatest importance to private safety-net hospitals.

Today, we address Medicare inpatient rates, Medicare disproportionate share payments (Medicare DSH) and the Medicare cost report’s S-10 worksheet, and the Medicare area wage index.

Inpatient Rates

CMS proposes increasing Medicare inpatient rates 1.75 percent in FY 2019.  This reflects the projected hospital market basket update of 2.8 percent reduced by a 0.8 percentage point productivity adjustment, increased by a 0.5 percentage point adjustment required by legislation, and reduced 0.75 percentage points as required by the Affordable Care Act.

Medicare DSH Uncompensated Care Payments and the S-10

CMS proposes distributing $8.25 billion in Medicare DSH uncompensated care payments in FY 2019, a $1.5 billion increase from FY 2018, citing as its reason for this increase both an increase in the CMS Office of the Actuary’s estimate of payments that would otherwise be made for Medicare DSH and an updated estimate of the change in the percentage of uninsured individuals since 2014 based on the latest available data.

CMS also proposes continuing its phase-in of the use of S-10 data in the calculation of Medicare DSH uncompensated care payments.  FY 2019 would be year two of this phase-in, and CMS proposes using S-10 data from FY 2014 and FY 2015 cost reports, in combination with insured low-income days data from FY 2013 cost reports, to determine the distribution of Medicare DSH uncompensated care payments.

CMS is engaged in limited review of some of the uncompensated care data hospitals report on their S-10 form.  According to the proposed rule, these efforts have focused on three types of problems:  unreasonably high cost-to-charge ratios, significant increases in charity care from FY 2014 to FY 2015, and hospitals that report uncompensated care that exceeds 50 percent of their operating costs.

 Medicare Area Wage Index

Every three years CMS updates the wage index to reflect more recent data it collects from the occupational mix survey.  FY 2019 is the first year of a new three-year period for using updated data, and this will result in greater changes in wage indexes than might otherwise be expected from year to year.

CMS proposes changing the deadline for when a hospital that reclassifies from urban to rural will have that reclassification considered in the development of the wage index for a fiscal year.  This proposal would change the threshold from being based on the application’s date of submission to the application’s date of approval.

CMS also proposes changes that would address certain situations arising from lags between when wage index data is reported and when that data is evaluated for reclassification purposes.  These changes would address lag issues for new remote locations of hospitals located in counties participating in group reclassifications and for single-hospital MSAs where new hospitals have opened but that have no data in the wage index files for that MSA.

FY 2019 will mark the first year in which the imputed rural floor (which exists in states where there are no rural areas) will be eliminated.  CMS announced this in last year’s rule.  The only states to which the imputed rural floor applied were Delaware, New Jersey, and Rhode Island and this change will actually only affect hospitals in Rhode Island.

Wage Index Invitation to Comment

The proposed rule describes past efforts to revise the wage index, including past proposals from MedPAC and others.  It invites interested parties to submit comments on regulatory and policy improvements related to the wage index.

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Tomorrow we will look at multi-campus hospitals, the Medicare and Medicaid electronic health record (EHR) incentive programs, and the Medicare hospital readmissions reduction program.  On Thursday we will examine the Medicare value-based purchasing program, the hospital inpatient quality reporting program, electronic clinical quality measures, and price transparency.

You also can learn more by reviewing the entire proposed 1883-page rule here or reading the CMS fact sheet here.

 

CMS Publishes Proposed FY 2019 Inpatient PPS Regulation

Last week the Centers for Medicare & Medicaid Services published a proposal detailing how it envisions paying for Medicare services in FY 2019 under its inpatient prospective payment system.

The following are the proposed rule’s highlights:

  • A 1.75 percent proposed increase of inpatient rates.
  • A $1.5 billion increase in the Medicare DSH uncompensated care payment pool during year two of the three-year phase-in of the use of S-10 uncompensated care data to calculate those payments.
  • The renaming of CMS’s “meaningful use” program to “promoting interoperability,” accompanied by major cuts in the number of measures hospitals must report as part of Medicare’s various quality programs.
  • A greater emphasis on the exchange of health care data among providers.
  • Several changes involving the Medicare area wage index system.
  •  Several requests for information:  one on promoting the exchange of data among hospitals, one on how to foster greater transparency of hospital prices, and one seeking recommendations for regulatory and policy changes to the Medicare wage index.

In the next three days this site will present more details about aspects of the proposed regulation that are of greatest interest to private safety-net hospitals.  The following is a list of what will be covered:

  • Tuesday – inpatient rates, Medicare disproportionate share (Medicare DSH) and the Medicare cost report’s S-10 worksheet, and the Medicare area wage index
  • Wednesday – multi-campus hospitals, the Medicare and Meidcaid electronic health record (EHR) incentive programs, and the Medicare hospital readmissions reduction program
  • Thursday – the Medicare value-based purchasing program, the hospital inpatient quality reporting program, electronic clinical quality measures, and price transparency

You also can learn more by reviewing the proposed 1883-page rule here or reading the CMS fact sheet here.

NAUH Comments on Proposed Changes in Medicare Payments (Part 5 of 5)

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.

NAUH Comments on Proposed Changes in Medicare Payments (Part 4 of 5)

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.

NAUH Comments on Proposed Changes in Medicare Payments (Part 3 of 5)

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
  • today – the Medicare hospital readmissions reduction program
  • Thursday – 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

The Hospital Readmission Reduction Program

NAUH is pleased that CMS proposes adding risk adjustment to the Medicare hospital readmissions reduction program by assessing future penalties based on a given hospital’s performance in comparison to that of similar hospitals rather than in comparison to all hospitals, as the program currently does.  NAUH has called for such risk adjustment ever since the program was introduced, maintaining that certain hospitals – in our case, private, non-profit urban safety-net hospitals – face a degree of challenge in serving their patients that most hospitals do not and that judging all hospitals similarly was therefore unfair.

While NAUH supports this change in philosophy for the readmissions reduction program, we would like to know more about how this change would be implemented before commenting specifically on what CMS is proposing.  To do so, we request access to the data CMS proposes employing to determine how many dually eligible patients hospitals serve; an opportunity to thoroughly evaluate the different methodologies CMS has advanced for creating the peer groups to which individual hospitals would be assigned; and the specific formula CMS proposes using to adjust payments to hospitals.  Once NAUH has sufficient information about this data and the proposed methodologies we will be in a position to model the proposal for ourselves, test its projected impact on private, non-profit urban safety-net hospitals and other hospitals, and offer more detailed and specific comments on the proposal.

See the full letter here.

NAUH Comments on Proposed Changes in Medicare Payments (Part 2 of 5)

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:

  • today – 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
  • Friday – the preservation of states’ ability to make supplemental payments to hospitals through Medicaid managed care organizations

Medicare DSH and the S-10

A Proposed New Source of Data for Factor 2

One aspect of the proposed changes in the Medicare DSH uncompensated care payment program that NAUH supports is CMS’s call for using data from the U.S. Department of Health and Human Services Office of the Actuary’s National Health Expenditures Accounts instead of Congressional Budget Office estimates to determine the change in the rate of uninsured Americans since 2013 when calculating Factor 2.  NAUH supports this change because we believe the former more accurately captures changes in the rate at which uninsured individuals have obtained health insurance in recent years.

A Proposed New Source of Data for Factor 3

In the proposed FY 2018 rule, CMS calls for using uncompensated care data from the Medicare cost report’s S-10 worksheet to calculate each DSH-eligible hospital’s relative share of overall uncompensated care among all DSH-eligible hospitals (Factor 3) for the distribution of Medicare DSH uncompensated care payments in FY 2018.  NAUH opposes this proposal for a number of reasons, as detailed below.

Opposition to Using the S-10 in the Calculation of Medicare DSH Uncompensated Care Payments

CMS’s proposal to shift from using the current low-income proxy to the S-10 in the calculation of eligible hospitals’ Medicare DSH uncompensated care payments is not new:  CMS made a similar proposal last year and then withdrew it in the face of considerable opposition from stakeholders – and its own reconsideration of the proposal.  In withdrawing the proposal, CMS wrote in the final FY 2017 inpatient prospective payment system regulation that

We believe additional time may be needed to make certain modification and clarifications to the cost report instructions for Worksheet S-10, as well as explore suggestions made by commenters for ensuring universal submission of Worksheet S-10 by hospitals when filing their cost reports (such as software edits to flag negative, unusual, or missing data or a missing worksheet S-10).  As commenters recommended, we will consider issuance of FAQs and hosting of educational seminars for hospitals and MACs as appropriate, coinciding with the issuance of revised cost report instructions.  We also intend to explore development of more specific instructions and more uniform review protocols for Worksheet S-10 data.

In NAUH’s view, the situation today, with the exception of CMS’s issuance of Transmittal 10 in November of 2016, is unchanged.  The form and the cost reporting instructions remain the same; CMS has not developed a system for generating software edits to flag potential reporting problems (such as those described below); there have been no FAQs or seminars; and the instructions and review protocols for the S-10 remain the same, including the lack of auditing of the manner in which hospitals complete the form.

Instead of basing the decision to move forward with using the S-10 on improvements of the form, CMS instead decided that it was ready for this use based on a correlation analysis of charity care reported by non-profit hospitals on the S-10 and to the IRS on its Form 990 – an analysis that, NAUH believes is worth noting, excludes for-profit and government hospitals that together constitute a meaningful proportion of acute-care hospitals.  While this analysis found that consistency in charity care reporting between the two instruments has increased, it did not examine some of the remaining issues that had led both CMS and stakeholders to conclude that the S-10 was not suitable for use in calculating Medicare DSH uncompensated care payments.  Specifically, this review did not identify instances of data reporting that was defective on its face; anomalies, inconsistencies, and instances of implausible data reporting; underlying causes of inaccurate data reporting; and data that on its face simply defies reason.  For these reasons, NAUH does not believe this correlation analysis reveals a “tipping point” in hospitals’ S-10 reporting that suggests the S-10 is now suitable for use in Medicare reimbursement policy.  To the contrary, NAUH believes the S-10 data remains incomplete, inaccurate, and subject to gaming and therefore does not yield the kind of results needed to justify replacing the current approach with S-10 uncompensated care data.

S-10 Uncompensated Care Data Remains Seriously Flawed

Based on our own analysis, NAUH finds the uncompensated care data that hospitals report on their S-10 to be seriously flawed.

  1. Some Data Reporting is Defective on its Face

In NAUH’s analysis of the S-10 reports submitted by hospitals nationwide, we identified situations in which the data reporting was clearly defective on its face.  Examples include:

  • Six hospitals reported providing more Medicare bad debt than total hospital debt.
  • Fourteen hospitals reported insured charity care charges but no uninsured charity care charges.
  • Fifty-one hospitals reported negative insured charity care charges after subtracting charges for days that exceeded a Medicaid or indigent care program length-of-stay limit.

Such reporting is clearly incorrect but could be corrected, prior to the data’s use for payment purposes, if the Medicare Administrative Contractors applied simple edits upon the submission of data and alerted hospitals to such errors.  Such a system is not in place at this time, however, such obvious errors are not identified and corrected, and such seriously flawed data could go on, if the proposed rule is adopted, to be used in the calculation of Medicare DSH uncompensated care payments.

  1. Implausible Data Reporting

NAUH’s analysis of hospitals’ S-10 data reporting found trends in reporting anomalies and inconsistencies that are on one level troubling in and of themselves and on another level troubling because of the widespread data reporting problems they suggest.  Especially troubling are significant changes in data reported between 2014 and 2015 – troubling because CMS proposes using FY 2014 data from the S-10 as the basis of FY 2018 Medicare DSH uncompensated care payments.  It is difficult to accept that hospitals’ data reporting has improved significantly when some hospitals reported enormous changes in how much uncompensated care they provided in just one year, from 2014 to 2015.  These problems can be viewed from two perspectives:  from that of nation-wide reporting trends and on an individual hospital basis.

Nation-wide, for example, NAUH’s analysis of hospitals’ S-10 reporting in 2014 and 2015 found that:

  • 210 hospitals reported providing at least 50 percent less uncompensated care in FY 2015 than they did in FY 2014.
  • 150 hospitals reported providing at least 50 percent more uncompensated care in FY 2014 than they did in FY 2015.
  • 70 hospitals reported that their uncompensated care more than doubled between FY 2014 and FY 2015.

These broad trends emerged from the implausible uncompensated care data reported by many individual hospitals, such as:

  • Titus Regional Medical Center, in Texas, reported $534 million in uncompensated care in FY 2014 but only $9.8 million in FY 2015.
  • The University of Virginia Medical Center reported $17.5 million in uncompensated care in FY 2014 and $141 million in 2015.
  • Martin Medical Center, in Florida, reported $6.9 million in uncompensated care in FY 2014 and $44.1 million in FY 2015.
  • Swedish Covenant Hospital reported $8.7 million in uncompensated care in FY 2014 and $31.4 million in FY 2015 even though Illinois, where it is located, expanded its Medicaid program.

NAUH can provide many other examples of data reporting that simply defies plausible explanation.  Are they just cases of poor, inaccurate data reporting?  Of different interpretations of the S-10’s instructions from year to year?  Of different people preparing the S-10 in different years?  Of an attempt to fix a prior year’s errors?  Of deliberate attempts to game the system to receive larger Medicare DSH uncompensated care payments?  Of a decision to stop attempting to game the system?

The bigger problem is that there needs to be a means of identifying such clearly flawed data when it is reported and initiating a process for correcting it, yet no such system exists today – not when data is reported and not when it is audited, because it is not audited.  In the absence of such processes neither NAUH nor CMS can know the answer to this question, and while this is certainly worth exploring, it is almost irrelevant insofar as it points to the clear lack of readiness of hospitals’ uncompensated care data reporting on their S-10 for use as a tool for the calculation of Medicare payments to hospitals.

  1. Data Reporting That Defies Reason

All hospitals provide at least some uncompensated care; some provide more – much more – than others.  Hospitals are able to provide uncompensated care and still keep their doors open because they generate revenue in excess of expenses for the care for which they do receive payments.  Some hospitals, however, report on their S-10 providing so much uncompensated care that it is not reasonable to believe they can possibly manage to keep their doors open.  Consider:

  • Eight hospitals reported providing more than $500,000 worth of uncompensated care per bed in FY 2014.
  • One hospital reported charity care and bad debt costs that amounted to more than eight times its total operating expenses in 2014.
  • While the amount uncompensated care most hospitals provide typically accounts for about four to five percent of their operating expenses, 18 U.S. hospitals reported that their uncompensated care amounted to more than 25 percent of their operating expenses – and three hospitals said their uncompensated care amounted to more than 50 percent of their operating expenses.

Hospitals that absorb enormous losses like these cannot survive; their doors would have closed long ago.  This means one thing:  they are receiving compensation for costs they are reporting, and that this policy has defined, as uncompensated care.  Whether through failure to follow the S-10’s instructions, misinterpretation of those instructions, incompetence, an intentional effort to report as much uncompensated care as possible to enable them to receive larger Medicare DSH payments, or (most likely) the S-10 form instructing them to report payments made to offset this care in lines that are not used in the calculation of line 30, they reported far, far more uncompensated care than they actually could have provided if that care were, in fact, uncompensated.

Yet the uncompensated care reported by these and other hospitals would, under CMS’s proposal, be used to calculate their FY 2018 Medicare DSH uncompensated care payments.

It should not be, in NAUH’s view.  The data is simply not ready to be used in this manner.

Problems With the Current S-10

NAUH believes that in its current form, the S-10 poses two kinds of problems:  first, it is confusing and too subject to the interpretation of the individuals and hospitals completing it; and second, the form itself has limitations.

When completing the S-10, hospitals have difficulty identifying where they should report non-patient-specific payments they receive to offset their charity care and bad debt.  Typically, such payments come from the federal government or their state or local government.  Some hospitals interpret the S-10 to suggest that they should subtract these payments from their charity care and bad debt, leaving a figure that constitutes net charity care.  Others, however, appear not to report such revenue as offsetting their charity care costs as well.  The significant degree to which public hospitals report providing implausible amounts of uncompensated care suggests that they, in particular, choose not to report revenue they receive from their state or local government to help them care for uninsured patients.  Of 18 hospitals that reported charity care and bad debt costs exceeding 25 percent of their operating expenses in 2014, 12 were public hospitals – the continuation of a trend NAUH has observed ever since we began analyzing hospital uncompensated care data reporting more than eight years ago.  Of those 18 hospitals, moreover, ten are located in just two states:  Texas and Louisiana.  Both problems suggest systemic challenges that have never been satisfactorily addressed.

Another problem with the S-10 is that its instructions define overlapping categories for reporting charges that are not mutually exclusive, such as charity care for Medicaid cost-sharing.  Hospitals must decide for themselves how to avoid reporting charges in multiple categories, if they attempt to avoid it at all.

A bigger problem is that the uncompensated care costs to be reported on line 30 of the S-10 are driven largely by charity care, a measure that is both unique to every hospital and subject to change by every hospital as it wishes.

In addition, the S-10 itself, in its current form, has serious limitations.  The form applies a whole hospital cost-to-charge ratio to combined inpatient and outpatient charges even though costs differ considerably between those two settings and the proportions of outpatient and inpatient services hospitals provide are constantly shifting.  There are numerous problems associated with data reported by all-inclusive rate hospitals because they do not use charges to track patients’ resource consumption.  Finally, the S-10’s instructions do not define the reported data elements in a manner that enables them to be compared to any other reported data, making the S-10 extremely difficult to report, audit, and validate.

The result of all of these problems is that the S-10 cannot be relied upon to do one basic but essential thing:  report how much uncompensated care hospitals provide.  In its current form, it does not consistently report how much charity care hospitals provide and how much bad debt they incur and then it does not accurately report all of the revenue hospitals receive to offset that charity care and bad debt – in other words, their net uncompensated care.  If the purpose of Medicare DSH uncompensated care payments is to help offset some of the uncompensated care DSH-eligible hospitals provide, they cannot do so until policy-makers know, for certain, how much of that uncompensated care – that net uncompensated care – hospitals actually provide.  Today they do not, which makes the S-10 in its current form not suited for this use.

Why This Matters

With a finite pool of funds for Medicare DSH uncompensated care payments, the Medicare DSH uncompensated care payment program is a classic zero-sum game:  for every dollar one hospital gains in additional Medicare DSH uncompensated care payments, another hospital, or other hospitals, must lose a dollar.  This means that the amount of uncompensated care reported by one hospital affects the eventual payment to every other DSH-eligible hospital, with one hospital’s questionable or inaccurate reporting having a domino effect on every other hospital.

Under any circumstances the Medicare DSH uncompensated care program will be redistributive, but under current circumstances, that redistribution would have no basis in reality if the S-10 were to be used for this purpose and would not be redistributive in the manner Congress intended.  Congress directed CMS to make Medicare DSH uncompensated care payments based on hospitals’ uncompensated care, but CMS is currently employing a definition of uncompensated care that does not account for certain kinds of compensation.

NAUH’s analysis of how using the S-10 to calculate Medicare DSH uncompensated care payments found that under the approach CMS proposes, winners would gain $2.3 billion and losers would lose a collective $2.3 billion, with the top ten percent of winners seeing their share of the overall Medicare DSH uncompensated care pool rising from 18.8 percent to 44.5 percent of that pool, or 77 percent of that $2.3 billion in gains.  This, quite simply, defies reason.  In both cases – for winners and for losers – there is little reason to believe that their wins and their losses have any foundation in how much uncompensated care they – and other hospitals – actually provide to their patients.  In addition, the Secretary of Health and Human Services’ determinations in these matters are not subject to administrative or judicial review.

Auditing

All of these problems, both real and potential, point to the need for rigorous auditing to ensure the quality of hospitals’ data reporting – and to ensure, once the instructions for the S-10 are eventually improved, that hospitals understand those improved instructions and are able to follow them precisely.

The value of auditing data, in NAUH’s view, cannot be overstated.  When Medicaid DSH reporting standards were modified some years ago, audits uncovered significant problems in hospitals’ initial filings and many hospitals needed to revise their filings in keeping with the auditors’ findings.  This is a natural aspect of the evolution of data reporting:  even though the hospitals were being diligent, their understanding of the new requirements was incomplete and required the guidance of auditors.  The anomalies in S-10 data reporting presented above, as well as the many more that can be found, illustrate what can happen when unclear instructions are combined with lack of accountability.  This auditing, moreover, must be rigorous:  audits comparable in thoroughness to those CMS employs to review wage index data reporting, as opposed to the less rigorous HITECH audits.  That auditing might even be used as part of the kind of “probe and educate” approach CMS has used in the past, with the new policy to be implemented only when the agency is satisfied that hospitals are now ready to meet the challenge of providing the data CMS needs to implement this important public policy.  Again, this is similar to the policy CMS employed with the Medicaid DSH audits, allowing a grace period before the results of the audits had financial consequences.

For these reasons, NAUH disagrees with aspects of the proposed rule governing S-10 auditing.

First, we disagree with the proposal for CMS to engage in no S-10 auditing until 2020.  For data reporting to improve, hospitals need the guidance that auditing would give them.  In the absence of auditing, we fear reporting will not improve.

Second, we disagree with the proposal to employ only desk audits beginning in 2020.  Desk audits, in NAUH’s view, will not be sufficient in light of the size of the challenge CMS faces in working to prepare hospitals to report their uncompensated care data accurately and in a uniform manner nation-wide.

Third, we disagree with CMS’s intention not to share the audit criteria with hospitals.  If CMS wants hospitals to report their data accurately – an objective NAUH supports – then this process would best be served by making unmistakably and unambiguously clear to hospitals the standards they must meet.

Fourth, we disagree with CMS’s stated intention not to attempt to update the instructions for the S-10 or to clarify instructions until 2020.  If the problem is at least in part the instructions, then this problem will not go away, the situation will not improve, and S-10 data reporting will remain mistake-filled until CMS acts affirmatively both to improve instructions that are not clear and clarify those that years of history of data reporting suggest that hospitals are finding unclear.

And fifth, we believe that S-10 data should not be used in the calculation of Medicare DSH uncompensated care payments until that S-10 data is audited.

Rather than resolving confusion and increasing uniformity in reporting, the proposed audit policy simply leads to an additional layer of interpretation ­– that of the Medicare Administrative Contractors – in what data is supposed to be included on the S-10 and that only after the data is already in use.

For these reasons, NAUH urges CMS to create a stakeholder group to work with agency staff to review the S-10 and its instructions, consider the manner in which hospitals are currently interpreting those instructions, and identify possible improvements and clarification of those instructions that will enable hospitals to report their uncompensated care in a more accurate, uniform, and verifiable manner, thereby turning the results reported on the S-10 into an appropriate tool for Medicare DSH payment decisions that have profound implications for so many of the recipients of these payments.

Conclusion

For these many reasons, NAUH believes CMS made the right decision last year when it concluded that the uncompensated care data generated by hospitals’ S-10 reports is simply not up to the task of being used for Medicare payment purposes.  CMS’s rationale for withdrawing a similar proposal last year remains as valid now as it was then:  nothing has changed that suggests hospitals are better at reporting their uncompensated care on the S-10 now than they were a year ago and none of the changes CMS suggested last year that could improve this situation have been implemented.

Under these circumstances, NAUH urges CMS to continue using the current low-income days proxy for calculating Medicare DSH uncompensated care payments in FY 2018, using FY 2013 Medicaid days while continuing to update SSI days.  NAUH urges CMS not to use FY 2014 Medicaid days because this would be unfair to states that did not expand their Medicaid programs under the Affordable Care Act; we believe that law explicitly gives the Secretary the discretion to define the period from which data will be used to calculate Factor 3.

In the meantime, NAUH urges CMS to pursue the improvements it suggested in its explanation of last year for why it was not proceeding with this very same proposal:  issuing FAQs and hosting educational seminars for hospitals to help them better understand how to complete the S-10 and, more important,  revising and improving the S-10’s instructions to eliminate the uncertainty and ambiguity that has produced such wildly erratic and unacceptable data reporting.  Finally, NAUH again urges CMS to audit hospitals’ S-10 reporting to ensure that all of these improvements have their intended effect and not to use S-10 data in the calculation of Medicare DSH uncompensated care payments until this data is audited.

The time for the kind of approach CMS has proposed has not yet come.  The data is not yet ready and the results would be very unfair to many hospitals that provide a great deal of care to uninsured and underinsured patients.  The failure of the proposed approach to net compensation from uncompensated care costs also would result in the federal government supplanting with federal funds the state and local funds that many hospitals currently receive to help care for the uninsured and underinsured of their communities, and we know this is certainly not CMS’s or Congress’s intention.  It also could result in Medicare DSH uncompensated care payments supplementing state and/or local uncompensated care funds, such as uncompensated care pools – pools that in some states involve enormous amounts of money – funded with federal funds under waiver programs, essentially leaving the federal government double- or even triple-paying for uncompensated care in such situations.

Thus, NAUH believes that the right decision CMS made for FY 2017 is the right decision for FY 2018 as well.

NAUH would welcome an opportunity to meet with CMS officials to review the results of our analysis of S-10 data.  We also would gladly participate in stakeholder groups we urge CMS to create to help review the S-10’s instructions and improve those instructions so they can become the high-quality policy-making tool that the Medicare DSH uncompensated care program truly needs and deserves.

Changes in S-10 reporting described in this transmittal will first be seen in hospitals’ 2016 cost reports.

See the full NAUH letter here.

NAUH Comments on Proposed Changes in Medicare Payments (Part 1 of 5)

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
  • Friday – the preservation of states’ ability to make supplemental payments to hospitals through Medicaid managed care organizations

See the full NAUH letter here.

 

OIG Reveals 2016 Plans

The U.S. Department of Health and Human Services’ Office of the Inspector General (OIG) has published its work plan for the 2016 fiscal year.

In 2016, the OIG will continue to examine all aspects of HHS endeavor, including Medicare, Medicaid, hospital services, public health activities, and more. In the coming year it will continue a number of hospital-focused projects while also focusing more on health care delivery, health care reform, alternative payment methodologies, and value-based purchasing initiatives.

hhsOIGAmong the OIG’s planned Medicare projects in 2016 – some of them continued from the past and some of them new, quoted directly from the work plan – are:

  • Hospitals’ use of outpatient and inpatient stays under Medicare’s two-midnight rule. We will determine how hospitals’ use of outpatient and inpatient stays changed under Medicare’s two-midnight rule, as well as how Medicare and beneficiary payments for these stays changed, by comparing claims for hospital stays in the year prior to the effective date of the two-midnight rule to stays in the year following the effective date of that rule. We will also determine the extent to which the use of outpatient and inpatient stays varied among hospitals.
  • Analysis of salaries included in hospital cost reports. We will review data from Medicare cost reports and hospitals to identify salary amounts included in operating costs reported to and reimbursed by Medicare. Employee compensation may be included in allowable provider costs only to the extent that it represents reasonable remuneration for managerial, administrative, professional, and other services related to the operation of the facility and furnished in connection with patient care.
  • Medicare oversight of provider-based status. We will determine the number of provider-based facilities that hospitals own and the extent to which CMS has methods to oversee provider-based billing. We will also determine the extent to which provider-based facilities meet requirements described in 42 CFR Sec. 413.65 and CMS Transmittal A-03-030, and whether there were any challenges associated with the provider-based attestation review process. Provider-based status allows facilities owned and operated by hospitals to bill as hospital outpatient departments. Provider-based status can result in higher Medicare payments for services furnished at provider-based facilities and may increase beneficiaries’ coinsurance liabilities. The Medicare Payment Advisory Commission (MedPAC) has expressed concerns about the financial incentives presented by provider-based status and stated that Medicare should seek to pay similar amounts for similar services.
  • Comparison of provider-based and freestanding clinics. We will review and compare Medicare payments for physician office visits in provider-based clinics and freestanding clinics to determine the difference in payments made to the clinics for similar procedures and assess the potential impact on Medicare of hospitals’ claiming provider-based status for such facilities. Provider-based facilities often receive higher payments for some services than do freestanding clinics.
  • Review of hospital wage data used to calculate Medicare payments. We will review hospital controls over the reporting of wage data used to calculate wage indexes for Medicare payments. Prior OIG wage index work identified hundreds of millions of dollars in incorrectly reported wage data and resulted in policy changes by CMS with regard to how hospitals reported deferred compensation costs.
  • Inpatient rehabilitation facilities—adverse events in postacute care for Medicare beneficiaries. We will estimate the national incidence of adverse and temporary harm events for Medicare beneficiaries receiving postacute care in inpatient rehabilitation facilities (IRFs). We will also identify factors contributing to these events, determine the extent to which the events were preventable, and estimate the associated costs to Medicare.
  • CMS validation of hospital-submitted quality reporting data. We will determine the extent to which CMS validated hospital inpatient quality reporting data.
  • Ambulatory surgical centers—payment system. We will review the appropriateness of Medicare’s methodology for setting ambulatory surgical center (ASC) payment rates under the revised payment system. We will also determine whether a payment disparity exists between the ASC and hospital outpatient department payment rates for similar surgical procedures provided in both settings.
  • Use of electronic health records to support care coordination through ACOs. We will review the extent to which providers participating in ACOs in the Medicare Shared Savings Program use electronic health records (EHRs) to exchange health information to achieve their care coordination goals. We will also assess providers’ use of EHRs to identify best practices and possible challenges to the exchange and use of health data, such as degree of interoperability, financial barriers, or information blocking.
  • Accountable Care Organizations: Strategies and Promising Practices. We will review ACOs that participate in the Medicare Shared Savings Program (established by section 3022 of the Affordable Care Act). We will describe their performance on the quality measures and cost savings over the first three years of the program and describe the characteristics of those ACOs that performed well on measures and achieved savings. In addition, we will identify ACOs’ strategies for and challenges to achieving quality and cost savings.

Among the Medicaid projects the OIG will undertake, again presented in language taken directly from its work plan, are:

  • Transportation services—compliance with Federal and State requirements. We will determine the appropriateness of Medicaid payments by States to providers for transportation services.
  • Health-care-acquired conditions—prohibition on Federal reimbursements. We will determine whether selected States made Medicaid payments for hospital care associated with health-care-acquired conditions and provider-preventable conditions and quantify the amount of Medicaid payments for such conditions.
  • State use of provider taxes to generate Federal funding. We will review State health-care-related taxes imposed on various Medicaid providers to determine whether the taxes comply with applicable Federal requirements. Our work will focus on the mechanism States use to raise revenue through provider taxes and determine the amount of Federal funding generated.
  • State compliance with Federal Certified Public Expenditures regulations. We will determine whether States are complying with Federal regulations for claiming Certified Public Expenditures (CPEs), which are normally generated by local governments as part of their contribution to the coverage of Medicaid services.
  • Reviews of State Medicaid Fraud Control Units. We will continue to conduct in-depth onsite reviews of the management, operations, and performance of a sample of MFCUs. We will identify effective practices and areas for improvement in MFCU management and operations.
  • Medicaid managed care reimbursement. We will review States’ managed care plan reimbursements to determine whether MCOs are appropriately and correctly reimbursed for services provided.
  • Medicaid managed care entities’ identification of fraud and abuse. We will determine whether Medicaid MCOs identified and addressed incidents of potential fraud and abuse. We will also describe how States oversee MCOs’ efforts to identify and address fraud and abuse.
  • HRSA—duplicate discounts for 340B-purchased drugs. We will assess the risk of duplicate discounts for 340B-purchased drugs paid through Medicaid MCOs and describe States’ efforts to prevent them.

To learn more about the OIG’s plans in 2016, go here to see the document Work Plan Fiscal Year 2016.