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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.

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.

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.

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.

 

NAUH Asks House to Block S-10 Data in Medicare DSH Calculation

In response to a request from the House Ways and Means Committee’s Health Subcommittee for suggestions from stakeholders on ways to improve the delivery of Medicare services and eliminate statutory and regulatory obstacles to more effective care delivery, NAUH has asked the committee to require the Centers for Medicare & Medicaid Services to continue using the low-income days proxy for 2013 in the calculation of Medicare disproportionate share payments (Medicare DSH) and not use S-10 uncompensated care data in that calculation until the S-10 form’s instructions have been improved and until the quality of the data hospitals report on an improved S-10 can be verified through audits.

After years of considering such an approach, Medicare adopted the use of the S-10 in the calculation of Medicare DSH payments in its final FY 2017 inpatient prospective payment system regulation, which was published earlier this month.

NAUH has long opposed the use of S-10 data for this purpose, maintaining that it is inaccurate, lacks uniformity, is subject to manipulation, and is not verified through auditing.  All private safety-net hospitals qualify for Medicare DSH payments and those payments help ensure access to care for the many low-income residents of the communities these hospitals serve.

See NAUH’s message to the House Ways and Means Committee 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.